20-F

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TABLE OF CONTENTS
PART III
NOVARTIS GROUP INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on January 27, 2016

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 20-F

o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2015
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-15024

NOVARTIS AG
(Exact name of Registrant as specified in its charter)

NOVARTIS Inc.
(Translation of Registrant's name into English)

Switzerland
(Jurisdiction of incorporation or organization)

Lichtstrasse 35
4056 Basel, Switzerland

(Address of principal executive offices)

Felix R. Ehrat
Group General Counsel
Novartis AG
CH-4056 Basel
Switzerland
Tel.: 011-41-61-324-1111
Fax: 011-41-61-324-7826
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered pursuant to Section 12(b) of the Act:

Title of class	Name of each exchange on which registered
American Depositary Shares each representing 1 share Ordinary shares, nominal value CHF 0.50 per share*	New York Stock Exchange New York Stock Exchange*

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

2,373,894,817 shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ý    No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o    No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ý                        Accelerated filer o                        Non-accelerated filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

o U.S. GAAP ý International Financial Reporting Standards as issued by the International Accounting Standards Board o Other

If "Other" has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o         Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o    No ý

*

Not for trading but only in connection with the registration of American Depositary Shares representing such ordinary shares.

TABLE OF CONTENTS

INTRODUCTION AND USE OF CERTAIN TERMS				4
FORWARD-LOOKING STATEMENTS				4
PART I				6
	Item	1.	Identity of Directors, Senior Management and Advisers	6
	Item	2.	Offer Statistics and Expected Timetable	6
	Item	3.	Key Information	6
		3.A	Selected Financial Data	6
		3.B	Capitalization and Indebtedness	8
		3.C	Reasons for the offer and use of proceeds	8
		3.D	Risk Factors	8
	Item	4.	Information on the Company	27
		4.A	History and Development of Novartis	27
		4.B	Business Overview	31
			Pharmaceuticals	34
			Alcon	80
			Sandoz	90
		4.C	Organizational Structure	98
		4.D	Property, Plants and Equipment	98
	Item	4A.	Unresolved Staff Comments	103
	Item	5.	Operating and Financial Review and Prospects	103
		5.A	Operating Results	103
		5.B	Liquidity and Capital Resources	178
		5.C	Research & Development, Patents and Licenses	192
		5.D	Trend Information	192
		5.E	Off-Balance Sheet Arrangements	192
		5.F	Tabular Disclosure of Contractual Obligations	193
	Item	6.	Directors, Senior Management and Employees	193
		6.A	Directors and Senior Management	193
		6.B	Compensation	202
		6.C	Board Practices	245
		6.D	Employees	277
		6.E	Share Ownership	278
	Item	7.	Major Shareholders and Related Party Transactions	279
		7.A	Major Shareholders	279
		7.B	Related Party Transactions	281
		7.C	Interests of Experts and Counsel	281
	Item	8.	Financial Information	282
		8.A	Consolidated Statements and Other Financial Information	282
		8.B	Significant Changes	283
	Item	9.	The Offer and Listing	283
		9.A	Offer and Listing Details	283
		9.B	Plan of Distribution	284
		9.C	Markets	285

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		9.D	Selling Shareholders	285
		9.E	Dilution	285
		9.F	Expenses of the Issue	285
	Item	10.	Additional Information	285
		10.A	Share Capital	285
		10.B	Memorandum and Articles of Association	285
		10.C	Material Contracts	290
		10.D	Exchange Controls	291
		10.E	Taxation	291
		10.F	Dividends and Paying Agents	296
		10.G	Statement by Experts	296
		10.H	Documents on Display	297
		10.I	Subsidiary Information	297
	Item	11.	Quantitative and Qualitative Disclosures about Market Risk	297
	Item	12.	Description of Securities Other than Equity Securities	297
		12.A	Debt Securities	297
		12.B	Warrants and Rights	297
		12.C	Other Securities	297
		12.D	American Depositary Shares	298
PART II				300
	Item	13.	Defaults, Dividend Arrearages and Delinquencies	300
	Item	14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	300
	Item	15.	Controls and Procedures	300
	Item	16A.	Audit Committee Financial Expert	300
	Item	16B.	Code of Ethics	301
	Item	16C.	Principal Accountant Fees and Services	301
	Item	16D.	Exemptions from the Listing Standards for Audit Committees	301
	Item	16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	302
	Item	16F.	Change in Registrant's Certifying Accountant	302
	Item	16G.	Corporate Governance	302
	Item	16H.	Mine Safety Disclosure	302
PART III				303
	Item	17.	Financial Statements	303
	Item	18.	Financial Statements	303
	Item	19.	Exhibits	304

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INTRODUCTION AND USE OF CERTAIN TERMS

        Novartis AG and its consolidated affiliates publish consolidated financial statements expressed in US dollars. Our consolidated financial statements found in Item 18 of this annual report on Form 20-F (Form 20-F) are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

        Unless the context requires otherwise, the words "we," "our," "us," "Novartis," "Group," "Company," and similar words or phrases in this Form 20-F refer to Novartis AG and its consolidated affiliates. However, each Group company is legally separate from all other Group companies and manages its business independently through its respective board of directors or other top local management body. No Group company operates the business of another Group company. Each executive identified in this Form 20-F reports directly to other executives of the Group company which employs the executive, or to that Group company's board of directors.

        In this Form 20-F, references to "US dollars" or "$" are to the lawful currency of the United States of America, and references to "CHF" are to Swiss francs; references to the "United States" or to "US" are to the United States of America, references to the "European Union" or to "EU" are to the European Union and its 28 member states, references to "Latin America" are to Central and South America, including the Caribbean, and references to "Australasia" are to Australia, New Zealand, Melanesia, Micronesia and Polynesia, unless the context otherwise requires; references to the "EC" are to the European Commission; references to "associates" are to employees of our affiliates; references to the "FDA" are to the US Food and Drug Administration, references to "EMA" are to the European Medicines Agency, an agency of the EU, and references to the "CHMP" are to the Committee for Medicinal Products for Human Use of the EMA; references to "ADR" or "ADRs" are to Novartis American Depositary Receipts, and references to "ADS" or "ADSs" are to Novartis American Depositary Shares; references to the "NYSE" are to the New York Stock Exchange, and references to the "SIX" are to the SIX Swiss Exchange; references to "GSK" are to GlaxoSmithKline plc, references to "Lilly" are to Eli Lilly and Company, and references to "CSL" are to CSL Limited.

        All product names appearing in italics are trademarks owned by or licensed to Group companies. Product names identified by a "®" or a "™" are trademarks that are not owned by or licensed to Group companies.

FORWARD-LOOKING STATEMENTS

        This Form 20-F contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Other written materials filed with or furnished to the US Securities and Exchange Commission (SEC) by Novartis, as well as other written and oral statements made to the public, may also contain forward-looking statements. Forward-looking statements can be identified by words such as "potential," "expected," "will," "planned," "pipeline," "outlook," or similar terms, or by express or implied discussions regarding potential new products, potential new indications for existing products, or regarding potential future revenues from any such products; potential shareholder returns or credit ratings; or regarding the potential financial or other impact on Novartis or any of our divisions of the strategic actions announced in January 2016 to focus our divisions, integrate certain functions and leverage our scale; or regarding any potential financial or other impact on Novartis as a result of the creation and operation of NBS; or regarding the potential financial or other impact on Novartis of the transactions with GSK, Lilly or CSL; or regarding potential future sales or earnings of the Novartis Group or any of its divisions; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements.

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        Such forward-looking statements are based on the current beliefs and expectations of management regarding future events, and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee that any new products will be approved for sale in any market, or that any new indications will be approved for any existing products in any market, or that any approvals which are obtained will be obtained at any particular time, or that any such products will achieve any particular revenue levels. Nor can there be any guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of the strategic actions announced in January 2016, the creation and operation of NBS, or the transactions with GSK, Lilly or CSL. Neither can there be any guarantee that Novartis will achieve any particular financial results in the future. Nor can there be any guarantee that shareholders will achieve any particular level of shareholder returns. Neither can there be any guarantee that the Group, or any of its divisions, will be commercially successful in the future, or achieve any particular credit rating.

        In particular, management's expectations could be affected by, among other things:

•

unexpected regulatory actions or delays or government regulation generally;

•

the potential that the strategic benefits, synergies or opportunities expected from the strategic actions announced in January 2016, the creation and operation of NBS, or the transactions with GSK, Lilly or CSL may not be realized or may take longer to realize than expected;

•

the inherent uncertainties involved in predicting shareholder returns or credit ratings;

•

the uncertainties inherent in research and development, including unexpected clinical trial results and additional analysis of existing clinical data;

•

our ability to obtain or maintain proprietary intellectual property protection, including the ultimate extent of the impact on Novartis of the loss of patent protection and exclusivity on key products which commenced in prior years and will continue this year;

•

unexpected safety, quality or manufacturing issues;

•

global trends toward health care cost containment, including ongoing pricing pressures, in particular from increased publicity on pharmaceuticals pricing;

•

uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, government investigations and intellectual property disputes;

•

general economic and industry conditions, including uncertainties regarding the effects of the persistently weak economic and financial environment in many countries;

•

uncertainties regarding future global exchange rates, including the continued significant increase in value of the US dollar, our reporting currency, against a number of currencies;

•

uncertainties regarding future demand for our products;

•

uncertainties involved in the development of new healthcare products; and

•

uncertainties regarding potential significant breaches of data security or disruptions of our information technology systems.

        Some of these factors are discussed in more detail in this Form 20-F, including under "Item 3. Key Information—3.D. Risk factors," "Item 4. Information on the Company," and "Item 5. Operating and Financial Review and Prospects." Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Form 20-F as anticipated, believed, estimated or expected. We provide the information in this Form 20-F as of the date of its filing. We do not intend, and do not assume any obligation, to update any information or forward-looking statements set out in this Form 20-F as a result of new information, future events or otherwise.

5

PART I

Item 1.    Identity of Directors, Senior Management and Advisers

        Not applicable.

Item 2.    Offer Statistics and Expected Timetable

        Not applicable.

Item 3.    Key Information

3.A    Selected Financial Data

        The selected financial information set out below has been extracted from our consolidated financial statements prepared in accordance with IFRS as issued by the IASB. Our consolidated financial statements for the years ended December 31, 2015, 2014 and 2013 are included in "Item 18. Financial Statements" in this Form 20-F.

        All financial data should be read in conjunction with "Item 5. Operating and Financial Review and Prospects". All financial data presented in this Form 20-F are qualified in their entirety by reference to the consolidated financial statements and their notes.

	Year Ended December 31,
	2015			2014			2013			2012			2011
	($ millions, except per share information)
INCOME STATEMENT DATA
Net sales to third parties from continuing operations		49,414			52,180			51,869			51,080			51,939
Operating income from continuing operations		8,977			11,089			10,983			11,507			10,293
Income from associated companies		266			1,918			599			549			526
Interest expense		(655	)		(704	)		(683	)		(724	)		(751	)
Other financial income and expense		(454	)		(31	)		(92	)		(96	)		(2	)
Income before taxes from continuing operations		8,134			12,272			10,807			11,236			10,066
Taxes		(1,106	)		(1,545	)		(1,498	)		(1,706	)		(1,381	)
Net income from continuing operations		7,028			10,727			9,309			9,530			8,685
Net income/(loss) from discontinued operations		10,766			(447	)		(17	)		(147	)		387
Group net income		17,794			10,280			9,292			9,383			9,072
Attributable to:
Shareholders of Novartis AG		17,783			10,210			9,175			9,270			8,940
Non-controlling interests		11			70			117			113			132
Basic earnings per share ($)
Continuing operations		2.92			4.39			3.76			3.89			3.59
Discontinued operations		4.48			(0.18	)		0.00			(0.06	)		0.16
Total		7.40			4.21			3.76			3.83			3.75
Diluted earnings per share ($)
Continuing operations		2.88			4.31			3.70			3.85			3.54
Discontinued operations		4.41			(0.18	)		0.00			(0.06	)		0.16
Total		7.29			4.13			3.70			3.79			3.70
Cash dividends(1)		6,643			6,810			6,100			6,030			5,368
Cash dividends per share in CHF(2)		2.70			2.60			2.45			2.30			2.25

⁽¹⁾

Cash dividends represent cash payments in the applicable year that generally relates to earnings of the previous year.

⁽²⁾

Cash dividends per share represent dividends proposed that relate to earnings of the current year. Dividends for 2011 through 2014 were approved at the respective AGMs and dividends for 2015 will be proposed to the Annual General Meeting on February 23, 2016 for approval.

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	Year Ended December 31,
	2015		2014		2013		2012		2011
	($ millions)
BALANCE SHEET DATA
Cash, cash equivalents and marketable securities & derivative financial instruments		5,447		13,862		9,222		8,119		5,075
Inventories		6,226		6,093		7,267		6,744		5,930
Other current assets		11,172		10,805		13,294		13,141		13,079
Non-current assets		108,711		87,826		95,712		96,187		93,384
Assets related to discontinued operations				6,801		759
Total assets		131,556		125,387		126,254		124,191		117,468
Trade accounts payable		5,668		5,419		6,148		5,593		4,989
Other current liabilities		18,040		19,136		20,170		18,458		18,159
Non-current liabilities		30,726		27,570		25,414		30,877		28,331
Liabilities related to discontinued operations				2,418		50
Total liabilities		54,434		54,543		51,782		54,928		51,479
Issued share capital and reserves attributable to shareholders of Novartis AG		77,046		70,766		74,343		69,137		65,893
Non-controlling interests		76		78		129		126		96
Total equity		77,122		70,844		74,472		69,263		65,989
Total liabilities and equity		131,556		125,387		126,254		124,191		117,468
Net assets		77,122		70,844		74,472		69,263		65,989
Outstanding share capital		890		898		912		909		895
Total outstanding shares (millions)		2,374		2,399		2,426		2,421		2,407

Cash Dividends per Share

        Cash dividends are translated into US dollars at the Bloomberg Market System Rate on the payment date. Because we pay dividends in Swiss francs, exchange rate fluctuations will affect the US dollar amounts received by holders of ADRs.

Year Earned	Month and Year Paid	Total Dividend per share (CHF)		Total Dividend per share ($)
2011	March 2012		2.25		2.48
2012	March 2013		2.30		2.44
2013	March 2014		2.45		2.76
2014	March 2015		2.60		2.67
2015(1)	March 2016		2.70		2.73	(2)

⁽¹⁾

Dividend to be proposed by the Board of Directors to the Annual General Meeting on February 23, 2016 and to be distributed February 29, 2016

⁽²⁾

Translated into US dollars at the Bloomberg Market System December 31, 2015 rate of $1.011 to the Swiss franc. This translation is an example only, and should not be construed as a representation that the Swiss franc amount represents, or has been or could be converted into US dollars at that or any other rate.

7

Exchange Rates

        The following table shows, for the years and dates indicated, certain information concerning the rate of exchange of US dollar per Swiss franc based on exchange rate information found on Bloomberg Market System. The exchange rate in effect on January 20, 2016, as found on Bloomberg Market System, was CHF 1.00 = $0.998.

Year ended December 31, ($ per CHF)	Period End		Average(1)		Low(2)		High(2)
2011		1.06		1.13		1.06		1.25
2012		1.09		1.07		1.02		1.12
2013		1.12		1.08		1.05		1.12
2014		1.01		1.09		1.01		1.13
2015		1.01		1.04		0.97		1.08
Month
August 2015						1.02		1.07
September 2015						1.02		1.04
October 2015						1.01		1.05
November 2015						0.97		1.01
December 2015						0.97		1.02
January 2016 (through January 20, 2016)						0.99		1.01

⁽¹⁾

Represents the average of the exchange rates on the last day of each month during the year.

⁽²⁾

Represents the lowest, respectively highest, of the exchange rates on the last day of each month during the year.

3.B    Capitalization and Indebtedness

        Not applicable.

3.C    Reasons for the offer and use of proceeds

        Not applicable.

3.D    Risk Factors

        Our businesses face significant risks and uncertainties. You should carefully consider all of the information set forth in this annual report on Form 20-F and in other documents we file with or furnish to the SEC, including the following risk factors, before deciding to invest in or to maintain an investment in any Novartis securities. Our business, as well as our financial condition or results of operations could be materially adversely affected by any of these risks, as well as other risks and uncertainties not currently known to us or not currently considered material.

Risks Facing Our Business

Our products face important patent expirations and significant competition.

        The products of our Pharmaceuticals and Alcon Divisions, as well as certain key products of our Sandoz Division, are generally protected by patent and other intellectual property rights, which are intended to provide us with exclusive rights to market the products. However, those intellectual property rights have varying strengths and durations. Loss of market exclusivity for one or more important products has had, and can be expected to continue to have a material adverse effect on our results of operations.

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        The introduction of generic competition for a patented medicine typically results in a significant and rapid reduction in net sales and net income for the patented product because generic manufacturers typically offer their unpatented versions at sharply lower prices. Such competition can occur after successful challenges to intellectual property rights or the regular expiration of the term of the patent or other intellectual property rights. Such competition can also result from the entry of generic versions of another medicine in the same therapeutic class as one of our drugs, or in another competing therapeutic class, from the compulsory licensing of our drugs by governments, or from a general weakening of intellectual property laws in certain countries around the world. In addition, generic manufacturers sometimes take an aggressive approach to challenging patents, conducting so-called "launches at risk" of products that are still under legal challenge for patent infringement, before final resolution of legal proceedings.

        We also rely in all aspects of our businesses on unpatented proprietary technology, know-how, trade secrets and other confidential information, which we seek to protect through various measures including confidentiality agreements with licensees, employees, third-party collaborators, and consultants who may have access to such information. If these agreements are breached, our contractual or other remedies may not be adequate to cover our losses.

        Some of our best-selling products have begun or are about to face significant competition due to the end of market exclusivity resulting from the expiry of patent or other intellectual property protection.

•

We already face generic competition in Japan and some EU countries for our best-selling product Gleevec/Glivec (cancer). In the US, we have resolved patent litigation with certain generic manufacturers. We have licensed one generic manufacturer to market a generic version of Gleevec in the US as of February 1, 2016. In the EU, our Glivec intellectual property rights also are being challenged by generic manufacturers.

•

Diovan and Co-Diovan/Diovan HCT (high blood pressure), which had long been our best-selling product, has generic competitors for Diovan in the US, EU and Japan and for Co-Diovan/Diovan HCT in the US and EU. In Japan, Novartis has resolved patent litigation with a generic manufacturer. Patent protection for Co-Diovan will expire in Japan in 2016. In addition, valsartan, the active ingredient in Diovan, is also used in the single-pill combination therapies Exforge/Exforge HCT (high blood pressure), and despite the existence of separate patents covering the product, Exforge faces generic competition in the US. Our Exforge patents also face challenges in the EU.

•

Patent protection for octreotide acetate, the active ingredient in Sandostatin, has expired. Generic versions of Sandostatin SC are available in the US, EU and Japan. A US patent protects Sandostatin LAR, the long-acting version of Sandostatin which represents a majority of our Sandostatin US sales. This patent is expected to expire in 2017. Patents protecting the Sandostatin LAR formulation in the EU and Japan have expired. There is currently no generic competition for Sandostatin LAR in the US, EU or Japan.

•

Patent protection on rivastigmine, the active ingredient in Exelon, has expired and Exelon capsules are subject to generic competition in major markets, including the US, Japan and all of Europe. We hold additional patents with respect to Exelon Patch, which makes up a substantial portion of our Exelon sales, but generic versions of Exelon Patch are on the market in the US and most EU countries.

•

Certain patents and extensions protecting our top-selling products, Afinitor and Gilenya will begin to expire in 2018 and 2019, and some of the patents protecting these products are being challenged in the US.

        For more information on the patent status of our Pharmaceuticals Division's products see "Item 4. Information on the Company—Item 4.B Business Overview—Pharmaceuticals—Intellectual Property" and "Item 18. Financial Statements—Note 20".

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        In 2016, we expect an impact on our net sales of approximately $3.2 billion as a result of the loss of intellectual property protection for our products, including Gleevec/Glivec. Because we typically have substantially reduced marketing and research and development expenses related to products that are in their final year of exclusivity, we expect that this loss of intellectual property protection also will have an impact on our 2016 operating income in an amount corresponding to a significant portion of the products' lost sales. The magnitude of the impact of generic competition could depend on a number of factors, including the time of year at which such exclusivity would be lost; the ease or difficulty of manufacturing a competitor product and obtaining regulatory approval to market it; the number of generic competitor products approved, including whether, in the US, a single competitor is granted an exclusive marketing period, and whether an authorized generic is launched; and the geographies in which generic competitor products are approved, including the strength of the market for generic pharmaceutical products in such geographies and the comparative profitability of branded pharmaceutical products in such geographies.

        Clearly, with respect to major products for which the patent terms are expiring, the loss of exclusivity of these products can be expected to have a material adverse effect on our business, financial condition and results of operations. In addition, should we unexpectedly lose exclusivity on additional products as a result of patent litigation or other reasons, this could also have a material adverse effect on our business, financial condition and results of operations, both due to the loss of revenue and earnings, and the difficulties in planning for such losses.

        Similarly, all of our businesses are faced with intense competition from new products and technological advances from competitors, including new competitors from other industries such as Google and IBM that are entering the healthcare field. Physicians, patients and third-party payors may choose our competitors' products instead of ours if they perceive them to be safer, more effective, easier to administer, less expensive, more convenient, or more cost-effective.

        Products that compete with ours, including products competing against some of our best-selling products, are launched from time to time. We cannot predict with accuracy the timing of the introduction of such competitive products or their possible effect on our sales. However, products significantly competitive to our major products Lucentis, Gilenya and Afinitor have been launched. Such products, and other competitive products, could significantly affect the revenues from our products and our results of operations.

        Similarly, our Alcon Division, a leader in the eye care industry, has recently suffered declining growth rates due in part to increased competition for its products, across all of its business franchises. To counter this, we are taking steps to accelerate growth to improve the division's sales and profits. Our efforts under this plan are expected to take time to succeed. As a result, such competition and other factors can be expected to affect Alcon's business, financial condition or results of operations in the near term. In addition, despite the implementation of the growth acceleration plan, our efforts to improve Alcon's performance may prove insufficient. Should our growth acceleration efforts fail to accomplish its goals, or fail to do so in a timely manner, it could have a material adverse impact on our business, financial condition or results of operations beyond the near term, as well. See also the discussion of Alcon's new product development efforts in "—Our research and development efforts may not succeed in bringing new products to market, or may fail to do so cost efficiently enough, or in a manner sufficient to grow our business, replace lost revenues and income and take advantage of new technologies" below.

Our research and development efforts may not succeed in bringing new products to market, or may fail to do so in a cost-efficient manner, or in a manner sufficient to grow our business, replace lost revenues and income and take advantage of new technologies.

        Our ability to continue to maintain and grow our business, to replace sales lost due to competition, entry of generics or other reasons, and to bring to market products and medical advances that take advantage of new, and potentially disruptive technologies depends in significant part upon the success of our research and development activities in identifying, and successfully and cost-effectively developing

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new products that address unmet medical needs, are accepted by patients and physicians, and are reimbursed by payors. To accomplish this, we commit substantial effort, funds and other resources across our divisions to research and development, both through our own dedicated resources and through collaborations with third parties. Developing new healthcare products and bringing them to market, however, is a highly costly, lengthy and uncertain process. In spite of our significant investments, there can be no guarantee that our research and development activities will produce commercially viable new products that will enable us to grow our business and replace revenues and income lost to generic and other competition.

        Using the products of our Pharmaceuticals Division as an example, the research and development process for a new product can take up to 15 years, or even longer, from discovery to commercial product launch—and with limited available intellectual property protections, the longer it takes to develop a product, the less time there will be for us to recoup our research and development costs. New products must undergo intensive preclinical and clinical testing, and must be approved by means of highly complex, lengthy and expensive approval processes which can vary from country to country. During each stage, there is a substantial risk that we will encounter serious obstacles that will further delay us and add substantial expense, that we will develop a product with limited potential for commercial success, or that we will be forced to abandon a product in which we have invested substantial amounts of time and money. These risks may include failure of the product candidate in preclinical studies, difficulty enrolling patients in clinical trials, clinical trial holds or other delays in completing clinical trials, delays in completing formulation and other testing and work necessary to support an application for regulatory approval, adverse reactions to the product candidate or other safety concerns, insufficient clinical trial data to support the safety or efficacy of the product candidate, an inability to manufacture sufficient quantities of the product candidate for development or commercialization activities in a timely and cost-effective manner, and failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate or the facilities in which it is manufactured.

        In addition, following a series of widely publicized issues, health regulators have increased their focus on product safety. Governmental authorities and payors around the world have also paid increased attention to whether new products offer a significant benefit over other products in the same therapeutic class. These developments have led to requests for more clinical trial data, for the inclusion of a significantly higher number of patients in clinical trials, and for more detailed analyses of the trials. As a result, the already lengthy and expensive process of obtaining regulatory approvals and reimbursement for pharmaceutical products has become even more challenging.

        For the same reason, the post-approval regulatory burden has also increased. Approved drugs are subject to various requirements such as risk evaluation and mitigation strategies (REMS), risk management plans, comparative effectiveness studies, health technology assessments and requirements to conduct post-approval Phase IV clinical trials to gather additional safety and other data on products. These requirements have the effect of making the maintenance of regulatory approvals and of achieving reimbursement for our products increasingly expensive, and further heightening the risk of recalls, product withdrawals, loss of revenues or loss of market share.

        Our Alcon Division faces similar challenges in developing new products and bringing them to market. Alcon's Ophthalmic Pharmaceuticals products must be developed and approved in accordance with essentially the same processes as our Pharmaceuticals Division. Alcon's Surgical and Vision Care products face medical device development and approval processes that are often similarly difficult. Alcon is taking steps to accelerate its growth, and this can be expected to be costly and to require extensive efforts over time. There can be no certainty that Alcon will be successful in these efforts, in either the short- or the long-term, and if Alcon is not successful, there could be a material adverse effect on the success of the Alcon Division, and on the Group as a whole. See also the discussion of Alcon in "—Our products face important patent expirations and significant competition" above.

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        In addition, our Sandoz Division has made, and expects to continue to make, significant investments in the development of differentiated, "difficult-to-make" generic products, including biotechnology-based, "biologic" medicines intended for sale as bioequivalent or "biosimilar" generic versions of currently-marketed biotechnology products. While the development of such products typically is significantly less costly and complex than the development of the equivalent originator medicines, it is nonetheless significantly more costly and complex than for non-differentiated generic products. In addition, despite significant efforts by us and others, to date many countries do not yet have a fully-developed legislative or regulatory pathway which would facilitate the development of biosimilars and permit biosimilars to be sold in a manner in which the biosimilar product would be readily substitutable for the originator product. Further delays in the development and completion of such regulatory pathways, or any significant impediments that may ultimately be built into such pathways, or any other significant difficulties that may arise in the development or marketing of biosimilars or other differentiated products, could put at risk the significant investments that Sandoz has made, and will continue to make, in the development of differentiated products in general, and in its biopharmaceuticals business in particular, and could have a material adverse effect on the long-term success of the Sandoz Division and the Group as a whole.

        Further, in all of our divisions, our research and development activities must be conducted in an ethical and compliant manner. Among other things, we must be concerned with patient safety, Good Clinical Practices requirements, data integrity requirements, the fair treatment of patients in developing countries, and animal welfare requirements. Should we fail to properly manage such issues, we risk injury to third parties, damage to our reputation, negative financial consequences as a result of potential claims for damages, sanctions and fines, and the potential that our investments in research and development activities could have no benefit to the Group.

        If we are unable to cost-effectively maintain an adequate flow of successful new products and new indications for existing products sufficient to maintain and grow our business, cover our substantial research and development costs and the decline in sales of older products that become subject to generic or other competition, and take advantage of technological and medical advances, then this could have a material adverse effect on our business, financial condition or results of operations. For a description of the approval processes which must be followed to market our products, see the sections headed "Regulation" included in the descriptions of our operating divisions under "Item 4. Information on the Company—Item 4.B Business Overview."

Our business is affected by pressures on pricing for our products.

        The growth of overall healthcare costs as a percentage of gross domestic product in many countries means that governments and payors are under intense pressure to control healthcare spending even more tightly. These pressures are particularly strong given the persistently weak economic and financial environment in many countries and the increasing demand for healthcare resulting from the aging of the global population and the prevalence of behaviors that increase the risk of obesity and other chronic diseases. In addition, in certain countries, governments, patients, healthcare providers and the media are increasingly raising questions about healthcare pricing issues. As a result, our businesses and the healthcare industry in general are operating in an ever more challenging environment with very significant pricing pressures. These ongoing pressures affect all of our divisions, and involve a number of cost-containment measures, such as government-imposed industry-wide price reductions, mandatory pricing systems, reference pricing systems, payors limiting access to treatments based on cost-benefit analyses, an increase in imports of drugs from lower-cost countries to higher-cost countries, shifting of the payment burden to patients through higher co-payments, limiting physicians' ability to choose among competing medicines, mandatory substitution of generic drugs for the patented equivalent, and growing pressure on physicians to reduce the prescribing of patented prescription medicines. For more information on such price controls see "Item 4. Information on the Company—Item 4.B Business Overview—Pharmaceuticals—Price Controls."

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        As a result of such measures, we faced downward pricing pressures on our patented and generic drugs in countries around the world in 2015. These pressures ranged from efforts by many governments and proposals by politicians to reduce the amounts we would be paid for our medicines, intense publicity regarding the pricing of pharmaceuticals, including publicity and pressure resulting from prices charged by competitors and peer companies for new products as well as price increases by competitors and peer companies on older products that the public deemed excessive, and government investigations into pharmaceutical pricing practices.

        We expect these challenges to continue and possibly increase in 2016 as political pressures mount, and healthcare payors around the globe, including government-controlled health authorities, insurance companies and managed care organizations, step up initiatives to reduce the overall cost of healthcare, restrict access to higher-priced new medicines, increase the use of generics and impose overall price cuts. Such pressures could have a material adverse impact on our business, financial condition or results of operations, as well as on our reputation.

Failure to comply with law, legal proceedings and government investigations may have a significant negative effect on our results of operations.

        We are obligated to comply with the laws of all of the countries around the world in which we operate and sell products with respect to an extremely wide and growing range of activities. Such legal requirements can vary from country to country and new requirements may be imposed on us from time to time as government and public expectations regarding acceptable corporate behavior change. For example, there are new laws in the US and in other countries around the world that require us to be more transparent with respect to our interactions with healthcare professionals. To help us in our efforts to comply with the many requirements that impact us, we have a significant global ethics and compliance program in place, and we devote substantial time and resources to efforts to ensure that our business is conducted in a lawful and publicly acceptable manner. Nonetheless, despite our efforts, any actual or alleged failure to comply with law or with heightened public expectations could lead to substantial liabilities that may not be covered by insurance, or to other significant losses, and could affect our business and reputation.

        In particular, in recent years, there has been a trend of increasing civil and criminal government investigations, litigations and law enforcement activities against companies operating in our industry, both in the US and in an increasing number of countries around the world. A number of our subsidiaries across each of our divisions are, or may in the future be subject to various investigations and legal proceedings that arise or may arise from time to time, such as proceedings regarding sales and marketing practices, pricing, corruption, trade regulation and embargo legislation, product liability, commercial disputes, employment and wrongful discharge, antitrust, securities, insider trading, health and safety, environmental, tax, cybersecurity and data privacy, and intellectual property matters, and are increasingly challenging practices previously considered to be legal.

        Such proceedings are inherently unpredictable, and large judgments sometimes occur. As a consequence, we may in the future incur judgments or enter into settlements of claims that could involve large cash payments, including the potential repayment of amounts allegedly obtained improperly, and other penalties, including treble damages. In addition, such proceedings may affect our reputation, create a risk of potential exclusion from government reimbursement programs in the US and other countries, may lead to civil litigation and otherwise subject us to monetary penalties. Further, judgments and settlements sometimes require companies to enter into corporate integrity or similar agreements, which are intended to regulate company behavior for a period of years. Any such resolutions could have a material adverse impact on our business, financial condition or results of operations, as well as on our reputation.

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        Our businesses are and have been subject to a number of these types of cases and governmental investigations, including the following:

•

In 2014, the Tokyo District Public Prosecutor Office indicted our Japanese affiliate, Novartis Pharma K.K. (NPKK), as well as a former NPKK employee on certain charges relating to the alleged manipulation of data in certain clinical trials. The charges against NPKK are subject to a maximum total fine of JPY 4 million. Trial in this matter commenced in December 2015. In addition, in February 2015, the Japanese Ministry of Health, Labor and Welfare (MHLW) issued a business suspension order for failure to report adverse events, which required NPKK to halt manufacturing and sales in Japan for the period from March 5 to 19, 2015. NPKK is implementing a corrective and preventive action plan in response to a business improvement order and instruction issued by the MHLW in the fourth quarter of 2015 regarding additional instances of delayed adverse events reporting.

•

In 2013 and 2014, the US government and certain states filed civil charges against our US affiliate, Novartis Pharmaceuticals Corporation (NPC) in federal court in the Southern District of New York, asserting federal False Claims Act and state law claims related to alleged unlawful contractual discounts and rebates to specialty pharmacies in connection with certain of our products. The US government alleged substantial damages, including treble damages and civil penalties of up to $11,000 per claim, which according to the government could exceed $2 billion. In the second half of 2015, NPC reached a settlement with all plaintiffs, including the United States Department of Justice, 45 states (made up of the eleven intervening states, as well as all the other states which were either part of the relator's complaint, or which reimbursed prescriptions of Myfortic and Exjade during the relevant time period), the District of Columbia and the qui tam relator. This resolves all the above-described claims related to Myfortic, Exjade, Tasigna, Gleevec and TOBI. As part of the settlement, NPC agreed to pay $390 million plus additional legal expenses to plaintiffs, and agreed with the Office of Inspector General of the US Department of Health & Human Services on an amendment and extension of its current Corporate Integrity Agreement until 2020.

A number of significant legal matters remain pending against us. For more detail see "Item 18. Financial Statements—Note 20." See also "—Our reliance on outsourcing and third parties for the performance of key business functions heightens the risks faced by our businesses" below.

        In addition, our Sandoz Division may from time to time seek approval to market a generic version of a product before the expiration of patents claimed by the marketer of the patented product. We do this in cases where we believe that the relevant patents are invalid, unenforceable, or would not be infringed by our generic product. As a result, affiliates of our Sandoz Division frequently face patent litigation, and in certain circumstances, we may elect to market a generic product even though patent infringement actions are still pending. Should we elect to proceed in this manner and conduct a "launch at risk," we could face substantial damages if the final court decision is adverse to us.

        Adverse judgments or settlements in any of the significant investigations or cases against us could have a material adverse effect on our business, financial condition, results of operations and reputation.

The manufacture of our products is highly regulated and complex, and may result in a variety of issues that could lead to extended supply disruptions and significant liability.

        The manufacture of our products is heavily regulated by governmental health authorities around the world, including the FDA. Whether our products are manufactured at our own dedicated manufacturing facilities or by third parties, we must ensure that all manufacturing processes comply with current Good Manufacturing Practices (cGMP) and other applicable regulations, as well as with our own high quality standards. In recent years, health authorities have substantially intensified their scrutiny of manufacturers' compliance with such requirements. If we or our third-party suppliers fail to comply fully with these

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requirements and the health authorities' expectations, then we could be required to shut down our production facilities or production lines, or could be prevented from importing our products from one country to another. This could lead to product shortages, or to our being entirely unable to supply products to patients for an extended period of time. And such shortages or shut downs have led to and could continue to lead to significant losses of sales revenue and to potential third-party litigation. In addition, health authorities have in some cases imposed significant penalties for such failures to comply with cGMP. A failure to comply fully with cGMP could also lead to a delay in the approval of new products to be manufactured at the impacted site.

        Like many of our competitors, we have faced significant manufacturing issues in recent years. As a result of such issues, we were unable to supply certain products to the market for significant periods of time, and suffered significant losses in sales and market share. In October 2015, the FDA issued a warning letter to our Sandoz Division concerning their sites in Kalwe and Turbhe, India, relating to documentation practices in Kalwe and sterile manufacturing practices in Turbhe that were identified during an inspection in August 2014. Though we have taken steps to respond to the warning letter, there can be no guarantee that FDA's concerns will be met.

        In order to meet increasing health authority expectations and our own high quality standards, we are devoting substantial time and resources to remediate issues, improve quality and assure consistency of product supply at our manufacturing sites around the world. Ultimately, there can be no guarantee of the outcome of these efforts. Nor can there be any guarantee that we will not again face significant manufacturing issues, or that we will successfully manage such issues when they arise.

        In addition to regulatory requirements, many of our products involve technically complex manufacturing processes or require a supply of highly specialized raw materials. For some products and raw materials, we may rely on a single source of supply. In particular, a significant portion of our portfolio are "biologic" products. Unlike traditional "small-molecule" drugs, biologic drugs or other biologic-based products cannot be manufactured synthetically, but typically must be produced from living plant or animal micro-organisms. As a result, the production of biologic-based products which meet all regulatory requirements is especially complex. Even slight deviations at any point in the production process may lead to production failures or recalls. In addition, because the production process is based on living plant or animal micro-organisms, the process could be affected by contaminants that could impact those micro-organisms. As a result, the inherent fragility of certain of our raw material supplies and production processes may cause the production of one or more of our products to be disrupted, potentially for extended periods of time.

        Also as part of the Group's portfolio of products, we have a number of sterile products, including oncology products, which are technically complex to manufacture, and require sophisticated environmental controls. Because the production process for such products is so complex and sensitive, the chance of production failures and lengthy supply interruptions is increased.

        Finally, in addition to potential liability for government penalties, because our products are intended to promote the health of patients, for some of our products, any supply disruption or other production issue could endanger our reputation and subject us to lawsuits or to allegations that the public health, or the health of individuals, has been harmed.

        In sum, a disruption in the supply of certain key products—whether as a result of a failure to comply with applicable regulations or health authority expectations, the fragility of the production process, inability to obtain product or raw materials from a sole source of supply, natural or man-made disasters at one of our facilities or at a critical supplier or vendor, or our failure to accurately predict demand—could have a material adverse effect on our business, financial condition or results of operations, as well as our reputation. See also "—Earthquakes and other natural disasters could adversely affect our business," below.

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The persistently weak global economic and financial environment in many countries and increasing political and social instability may have a material adverse effect on our results.

        Many of the world's largest economies and financial institutions continue to be impacted by a weak ongoing global economic and financial environment, with some continuing to face financial difficulty, liquidity problems and limited availability of credit. In addition, we continue to see weak economic growth or a slowing of economic growth rates in certain emerging growth markets, such as China, Russia, Brazil and India. It is uncertain how long these effects will last, or whether economic and financial trends will worsen or improve. In addition, these issues may be further impacted by the unsettled political conditions currently existing in the US and Europe, as well as the difficult conditions existing in parts of the Middle East and places such as Ukraine, as well as the ongoing refugee crisis, anti-immigrant activities, social unrest and fears of terrorism that have followed in many countries. Such uncertain times may have a material adverse effect on our revenues, results of operations, financial condition and, if circumstances worsen, our ability to raise capital at reasonable rates. For example, financial weakness in certain countries has increased pressures on those countries, and on payors in those countries, to force healthcare companies to decrease the prices at which we may sell them our products. See also "Item 4. Information on the Company—Item 4.B Business Overview—Pharmaceuticals—Price Controls."

        Concerns continue that payors in some countries, including Greece, Italy, Portugal and Spain, may not be able to pay us in a timely manner. Certain other countries are experiencing high inflation rates and have taken steps to introduce exchange controls and limit companies from distributing retained earnings or paying intercompany payables due from those countries. The most significant country in this respect is Venezuela, where we are exposed to a potential devaluation loss in the income statement on our total intercompany balances with our subsidiaries there, which at December 31, 2015 amounted to $0.3 billion. In November 2015, one of our Venezuelan subsidiaries agreed with Venezuelan authorities to settle a substantial part of our existing intercompany trade payables dated on or before December 31, 2014 in a transaction that, in turn, required us to use a significantly devalued US dollar/Venezuela bolivar exchange rate for consolidation of the financial statements of our Venezuela subsidiaries. The use of the new exchange rate resulted in a $211 million loss from the re-measurement of the intra-Group and third party liabilities. Ongoing conditions in Venezuela and other such countries could continue to lead to further devaluations of their currencies, which could in turn result in significant additional financial losses to the Group in the future. See also "Item 5. Operating and Financial Review and Prospects—Item 5.B Liquidity and Capital Resources—Effects of Currency Fluctuations" and "—Condensed Consolidated Balance Sheets," and "Item 18. Financial Statements—Notes 15 and 29."

        Current economic conditions may adversely affect the ability of our distributors, customers, suppliers and service providers to obtain the liquidity required to pay for our products, or otherwise to buy necessary inventory or raw materials, and to perform their obligations under agreements with us, which could disrupt our operations, and could negatively impact our business and cash flow. Although we make efforts to monitor these third parties' financial condition and their liquidity, our ability to do so is limited, and some of them may become unable to pay their bills in a timely manner, or may even become insolvent, which could negatively impact our business and results of operations. These risks may be elevated with respect to our interactions with third parties with substantial operations in countries where current economic conditions are the most severe, particularly where such third parties are themselves exposed to payment risks from business interactions directly with fiscally-challenged government payers. See also "—Our reliance on outsourcing and third parties for the performance of key business functions heightens the risks faced by our businesses" below.

        In addition, the varying effects of difficult economic times on the economies, currencies and financial markets of different countries has impacted, and may continue to unpredictably impact, our business and results of operations including the conversion of our operating results into our reporting currency, the US dollar, as well as the value of our investments in our pension plans. See "—Foreign exchange fluctuations may adversely affect our earnings and the value of some of our assets," below, and "—If any of numerous

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key assumptions and estimates in calculating our pension plan obligations turn out to be different from our actual experience, we may be required to increase substantially our contributions to pension plans as well as our pension-related costs in the future," below. In addition, the financial situation may also result in a lower return on our financial investments, and a lower value on some of our assets. Alternately, inflation could accelerate, which could lead to higher interest rates, which would increase our costs of raising capital.

        To the extent that the economic and financial conditions directly affect consumers, some of our businesses, including the elective surgical business of our Alcon Division, may be particularly sensitive to declines in consumer spending. In addition, our Pharmaceuticals and Sandoz Divisions, and the remaining businesses of our Alcon Division, may not be immune to consumer cutbacks, particularly given the increasing requirements in certain countries that patients pay a larger contribution toward their own healthcare costs. As a result, there is a risk that consumers may cut back on prescription drugs and medical devices to help cope with rising costs and difficult economic times.

        At the same time, significant changes and volatility in the financial markets, in the consumer and business environment, in the competitive landscape and in the global political and security landscape make it increasingly difficult for us to predict our revenues and earnings into the future. As a result, any revenue or earnings guidance or outlook which we have given or might give may be overtaken by events, or may otherwise turn out to be inaccurate. Though we endeavor to give reasonable estimates of future revenues and earnings at the time we give such guidance, based on then-current knowledge and conditions, there is a significant risk that such guidance or outlook will turn out to be, or to have been, incorrect.

        Similarly, increased scrutiny of corporate taxes and executive pay may lead to significant business disruptions or other adverse business conditions, and may interfere with our ability to attract and retain qualified personnel. See "—Changes in tax laws or their application could adversely affect our results of operation" and "—An inability to attract and retain qualified personnel could adversely affect our business" below.

Foreign exchange fluctuations may adversely affect our earnings and the value of some of our assets.

        Changes in exchange rates between the US dollar, our reporting currency, and other currencies can result in significant increases or decreases in our reported sales, costs and earnings as expressed in US dollars, and in the reported value of our assets, liabilities and cash flows.

        In 2015, the US dollar continued its significant increase in value against most currencies. In particular, the average value of the euro, the Japanese yen and emerging market currencies (especially the ruble) decreased in 2015 against the US dollar. However, in January 2015, following an announcement by the Swiss National Bank that it was discontinuing its minimum exchange rate with the euro, the value of the Swiss franc increased substantially. In addition, in 2015, China took steps to devalue its currency, and the value of its currency against the US dollar has continued to decline.

        There is a risk that other countries could also take steps that could significantly impact the value of their currencies. Such steps could include "quantitative easing" measures and potential withdrawals by countries from common currencies. In addition, certain countries are or may experience periods of high inflation. This could lead these countries to devalue their currencies, and to set exchange controls, as, for example, Venezuela has done. Such steps taken by Venezuela have impacted our financial results. See "—The persistently weak global economic and financial environment in many countries and increasing political and social instability may have a material adverse effect on our results" above. Ongoing conditions in Venezuela and other such countries could continue to lead to further devaluations of their currencies, which could in turn result in significant additional financial losses to the Group in the future.

        Despite measures undertaken to reduce, or hedge against, foreign currency exchange risks, because a significant portion of our earnings and expenditures are in currencies other than the US dollar, including

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expenditures in Swiss francs that are significantly higher than our revenues in Swiss francs, such exchange rate volatility may negatively and materially impact the Group's business, results of operations and financial condition, and may impact the reported value of our net sales, earnings, assets and liabilities. In addition, the timing and extent of such volatility can be difficult to predict. Further, depending on the movements of particular foreign exchange rates, the Group may be materially adversely affected at a time when the same currency movements are benefiting some of our competitors.

        For more information on the effects of currency fluctuations on our consolidated financial statements and on how we manage currency risk, see "Item 5. Operating and Financial Review and Prospects—Item 5.B Liquidity and Capital Resources—Effects of Currency Fluctuations" "Item 11. Quantitative and Qualitative Disclosures about Market Risk", and "Item 18. Financial Statements—Note 29."

We may not successfully achieve our goals in strategic transactions or reorganizations, including the portfolio transformation transactions, the strategic reorganizations we announced in January 2016, and the formation of Novartis Business Services.

        As part of our strategy, from time to time we evaluate and pursue potential strategic business acquisitions and divestitures to expand or complement our existing businesses, or to enable us to focus more sharply on our strategic businesses. We cannot ensure that suitable acquisition candidates will be identified. Acquisition activities can be thwarted by overtures from competitors for the targeted assets, potentially increasing prices demanded by sellers, governmental regulation (including market concentration limitations) and replacement product developments in our industry. Once an acquisition is agreed upon with a third party, we may not be able to complete the acquisition in the expected form or within the expected time frame, or at all, due to a failure to obtain required regulatory approvals or a failure to achieve contractual or other required closing conditions. Further, after an acquisition, efforts to integrate the business may not meet expectations, or may otherwise not be successful, as a result of corporate cultural differences, difficulties in retention of key personnel, customers and suppliers, coordination with other products and processes, or other reasons. Also, acquisitions and divestments could divert management's attention from our existing businesses, and could result in the existing businesses failing to achieve expected results, or in liabilities being incurred that were not known at the time of acquisition, or the creation of tax or accounting issues.

        Similarly, we cannot ensure that suitable buyers will be identified for businesses or other assets that we might want to divest. Neither can we ensure that we will correctly select businesses or assets as candidates for divestiture, that we will be able to successfully complete any agreed upon divestments, or that any expected strategic benefits, synergies or opportunities will arise as a result of any divestiture.

        In 2015, we completed a series of transactions intended to transform our portfolio of businesses. In these transactions, we acquired GSK oncology products and certain related assets; created a joint venture with GSK in consumer healthcare of which Novartis owns 36.5%; divested our vaccines business (excluding the influenza vaccines business) to GSK; divested our Animal Health business to Lilly; and divested our influenza vaccines business to CSL. In 2014, we had also divested the blood transfusion diagnostics unit to Grifols S.A. that had been part of our former Vaccines and Diagnostics Division. In agreeing to these transactions, we expect to achieve certain strategic benefits, synergies and opportunities, including certain financial results, but there can be no certainty that such expected benefits will be fully realized or that they will be realized at any particular time.

        In addition, as part of our strategy, from time to time we reassess the optimal organization of our business, including the allocation of products by division and the level of centralization and simplification of certain functions across the Group, to better align those products and functions with the capabilities and expertise required for competitive advantage. As an example of this, in January 2016 we announced a series of strategic actions intended to further focus our divisions, including focusing our Alcon Division on its Surgical and Vision Care franchises, strengthening our ophthalmic medicines business by transferring Alcon's Ophthalmic Pharmaceuticals products to our Pharmaceuticals Division, and shifting selected

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mature pharmaceutical products from our Pharmaceuticals Division into Sandoz. We also announced steps to increase Group-wide coordination of drug development, and to improve efficiency with an integrated manufacturing operation and more shared commercial and medical services at the country level. We expect these actions to further strengthen our competitive position, enable us to maintain our leading position in research and development, and free resources for our growth priorities. But the expected benefits of this reorganization may never be fully realized or may take longer to realize than expected. There can be no certainty that the numerous businesses and functions involved will be successfully integrated into the new organizations and that key personnel will be retained. Disruption from the reorganizations may make it more difficult to maintain relationships with customers, employees or suppliers, and may result in the Group not achieving the expected productivity and financial benefits, including potential sales declines and lost profits.

        Similarly, in 2014 we created a shared services organization, Novartis Business Services (NBS). NBS consolidates a number of business support services previously spread across divisions, including Information Technology, Financial Reporting and Accounting Operations, Real Estate & Facility Services, Procurement, Payroll and Personnel Administration and the Pharmaceuticals Global Business Services. This reorganization was designed to improve profitability and free up resources that could be reinvested in growth and innovation, and to allow our divisions to focus more on customer-facing activities. But the expected benefits of this reorganization may never be fully realized or may take longer to realize than expected. There can be no certainty that the numerous business functions involved will be successfully integrated into a single organization and that key personnel will be retained. Disruption from the reorganization may make it more difficult to maintain relationships with customers, employees or suppliers, and may result in the Group not achieving the expected productivity and financial benefits.

        Both with respect to the transactions and reorganizations previously announced, and to potential future transactions and reorganizations, if we fail to timely recognize or address these risks, or to devote adequate resources to them, we may fail to achieve our strategic objectives, including our growth strategy, or otherwise may not realize the intended benefits of the acquisition, divestiture or reorganization.

Intangible assets and goodwill on our books may lead to significant impairment charges in the future.

        We carry a significant amount of goodwill and other intangible assets on our consolidated balance sheet, primarily due to acquisitions. As a result, significant impairment charges may result in the future if the expected fair value of the goodwill and other intangible assets would be less than their carrying value on the Group's consolidated balance sheet at any point in time.

        We regularly review our long-lived intangible and tangible assets, including identifiable intangible assets, investments in associated companies and goodwill, for impairment. Goodwill, acquired research and development, and acquired development projects not yet ready for use are subject to impairment review at least annually. Other long-lived assets are reviewed for impairment when there is an indication that an impairment may have occurred. Impairment testing under IFRS may lead to impairment charges in the future. Any significant impairment charges could have a material adverse effect on our results of operations and financial condition. In 2015, for example, we recorded intangible asset impairment charges of $347 million. For a detailed discussion of how we determine whether an impairment has occurred, what factors could result in an impairment and the increasing impact of impairment charges on our results of operations, see "Item 5. Operating and Financial Review and Prospects—Item 5.A Operating Results—Critical Accounting Policies and Estimates—Impairment of Goodwill, Intangible Assets and Property, Plant and Equipment" and "Item 18. Financial Statements—Notes 1 and 11."

Our indebtedness could adversely affect our operations.

        As of December 31, 2015 we had $16.3 billion of non-current financial debt and $5.6 billion of current financial debt. Our current and long-term debt requires us to dedicate a portion of our cash flow to service interest and principal payments and, if interest rates rise, this amount may increase. In addition, our

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existing debt may limit our ability to engage in transactions or otherwise may place us at a competitive disadvantage relative to competitors that have less debt. We may also have difficulty refinancing our existing debt or incurring new debt on terms that we would consider to be commercially reasonable, if at all.

Our reliance on outsourcing and third parties for the performance of key business functions heightens the risks faced by our businesses.

        We invest a significant amount of effort and resources into outsourcing and offshoring certain key business functions with third parties, including research and development collaborations, manufacturing operations, warehousing, distribution activities, certain finance functions, marketing activities, data management and others. Our reliance on outsourcing and third parties for certain functions, such as the research and development or manufacturing of products, may limit the potential profitability of such products. In addition, despite contractual relationships with the third parties to whom we outsource these functions, we cannot ultimately control how they perform their contracts. Nonetheless, we depend on these third parties to achieve results which may be significant to us. If the third parties fail to meet their obligations or to comply with the law, we may lose our investment in the collaborations and fail to receive the expected benefits. In addition, should any of these third parties fail to comply with the law in the course of their performance of services for us, there is a risk that we could be held responsible for such violations of law, as well and that our reputation may suffer. Any such failures by third parties could have a material adverse effect on our business, financial condition, results of operations or reputation.

        In particular, in many countries, including many developing markets, we rely heavily on third party distributors and other agents for the marketing and distribution of our products. Many of these third parties do not have internal compliance resources comparable to those within our organization. Some of these countries are plagued by corruption. If our efforts to screen our third party agents and detect cases of potential misconduct fail, we could be held responsible for the noncompliance of these third parties with applicable laws and regulations, which may have a material adverse effect on our reputation and on our business, financial condition or results of operations.

We may not be able to realize the expected benefits of our significant investments in Emerging Growth Markets.

        At a time of slowing growth in sales of healthcare products in industrialized countries, many emerging markets have in recent years experienced proportionately higher sales growth and an increasing contribution to the industry's global performance. In 2015, our Continuing Operations generated $12.4 billion, or approximately 25% (2014: 26%) of our net sales from Emerging Growth Markets—which comprise all markets other than the Established Markets of the US, Canada, Western Europe, Japan, Australia and New Zealand—as compared with $37.0 billion, or approximately 75% (2014: 74%) of our net sales, in the Established Markets. However, combined net sales in the Emerging Growth Markets grew 7% in constant currencies in 2015, compared to 4% sales growth in constant currencies in the Established Markets during the same period. As a result of this trend, we continue to take steps to increase our activities in the Emerging Growth Markets, and have been making significant investments in our businesses in those countries.

        In the past year, however, certain of these Emerging Growth Market countries, including Brazil, India, China and Russia, have experienced economic slowdowns. As a result, there can be no guarantee that our efforts to expand our sales in these countries will succeed, or that these countries will once again experience growth rates significantly in excess of the world's largest markets. In particular, some Emerging Growth Market countries may be especially vulnerable to the effects of the persistently weak global financial environment, may have very limited resources to spend on healthcare or may be susceptible to political and social instability. See "—The persistently weak global economic and financial environment in many countries and increasing political and social instability may have a material adverse effect on our results" above. Many of these countries are subject to increasing political and social pressures, including

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from a growing middle class seeking increased access to healthcare. Such pressures on local government may in turn result in an increased focus by the governments on our pricing, and may put at risk our intellectual property. See "—Our business is increasingly affected by pressures on pricing for our products," and "Our products face important patent expirations and significant competition" above.

        These countries also may have a relatively limited number of persons with the skills and training suitable for employment at an enterprise such as ours. See "—An inability to attract and retain qualified personnel could adversely affect our business" below. In some Emerging Growth Market countries, a culture of compliance with law may not be as fully developed as in the Established Markets—China's investigations of the activities of multinational healthcare companies, for example, have been well publicized—standards of acceptable behavior may be lower than such standards in Established Markets, or we may be required to rely on third-party agents, in each case putting us at risk of liability and reputational damage. See "—Failure to comply with law, and resulting investigations and legal proceedings may have a significant negative effect on our results of operations," and "—Our reliance on outsourcing and third parties for the performance of key business functions heightens the risks faced by our businesses," above.

        In addition, many of these countries have currencies that may fluctuate substantially. If these currencies devalue significantly against the US dollar—as happened in China and Russia, among others, in the past year—and we cannot offset the devaluations with price increases, then our products may become less profitable, or may otherwise impact our reported financial results. Currency devaluation risk may also exist in countries with high inflation economies. Should these countries take steps that cause their currencies to be devalued, we may realize a significant financial loss. See "—The persistently weak global economic and financial environment in many countries and increasing political and social instability may have a material adverse effect on our results" and "—Foreign exchange fluctuations may adversely affect our earnings and the value of some of our assets," above. Ongoing conditions in such high inflation countries could continue to lead to further devaluations of their currencies, which could in turn result in significant additional financial losses to the Group in the future.

        For all these reasons, our sales to Emerging Growth Markets carry significant risks. A failure to continue to expand our business in Emerging Growth Markets could have a material adverse effect on our business, financial condition or results of operations.

Failure to obtain marketing exclusivity periods for new generic products, or to develop biosimilars and other differentiated products, as well as intense competition from patented and generic pharmaceuticals companies, may have an adverse effect on the success of our Sandoz Division.

        Our Sandoz Division achieves significant revenue opportunities when it secures and maintains exclusivity periods granted for generic products in certain markets—particularly the 180-day exclusivity period granted in the US by the Hatch-Waxman Act for first-to-file generics—and when it is able to develop biosimilars and other differentiated products with few, if any, generic competitors. Failure to obtain and maintain these market opportunities could have an adverse effect on the success of Sandoz.

        In addition, the division faces intense competition from companies that market patented pharmaceutical products, which sometimes take aggressive steps to prevent or delay the introduction of generic medicines, to limit the availability of exclusivity periods or to reduce their value, and from other generic pharmaceuticals companies, which aggressively compete for exclusivity periods and for market share of generic products that may be identical to certain of our generic products. These activities may increase the costs and risks associated with our efforts to introduce generic products and may delay or entirely prevent their introduction.

        Sandoz has also invested heavily in the development of biosimilar drugs, despite the fact that regulations concerning their marketing and sale in certain countries, including in the US, are still under development or not entirely clear. If, despite ongoing efforts by us and others to encourage the

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development of such regulations, such regulations do not ultimately favor the development and sale of biosimilar products, then we may fail to achieve expected returns on the investments by Sandoz in the development of biosimilars. See also "—Our research and development efforts may not succeed in bringing new products to market, or may fail to do so cost-efficiently enough, or in a manner sufficient to grow our business and replace lost revenues and income" above, with regard to the risks involved in our efforts to develop differentiated generic products.

If any of numerous key assumptions and estimates in calculating our pension plan obligations turn out to be different from our actual experience, we may be required to increase substantially our contributions to pension plans as well as the amount we pay toward pension-related expenses in the future.

        We sponsor pension and other post-employment benefit plans in various forms. These plans cover a significant portion of our current and former associates. While most of our plans are now defined contribution plans, certain of our associates remain under defined benefits plans. For these defined benefits plans, we are required to make significant assumptions and estimates about future events in calculating the present value of expected future expenses and liabilities related to these plans. These include assumptions used to determine the discount rates we apply to estimated future liabilities and rates of future compensation increases. In addition, our actuarial consultants provide our management with historical statistical information such as withdrawal and mortality rates in connection with these estimates. Assumptions and estimates used by Novartis may differ materially from the actual results we experience due to changing market and economic conditions (including the effects of the persistently weak global financial environment, which, to date, have resulted in extremely low or negative interest rates in many countries), higher or lower withdrawal rates, or longer or shorter life spans of participants, among other variables. For example, a decrease in the interest rate we apply in determining the present value of expected future defined benefit obligations of one-quarter of one percent would have increased our year-end defined benefit pension obligation for plans in Switzerland, US, UK, Germany and Japan, which represent about 95% of the Group total defined benefit pension obligation, by $0.8 billion. Any differences between our assumptions and estimates and our actual experience could have a material effect on our results of operations and financial condition. Further, additional employer contributions might be required if plan funding falls below the levels required by local rules. For more information on obligations under retirement and other post-employment benefit plans and underlying actuarial assumptions, see "Item 5. Operating and Financial Review and Prospects—Item 5.A Operating Results—Critical Accounting Policies and Estimates—Retirement and other post-employment benefit plans" and "Item 18. Financial Statements—Note 25". See also "—The persistently weak global economic and financial environment in many countries and increasing political and social instability may have a material adverse effect on our results" above.

Changes in tax laws or their application could adversely affect our results of operations.

        The integrated nature of our worldwide operations enables us to achieve an attractive effective tax rate on our earnings because a portion of our earnings are earned in jurisdictions that tax profits at more favorable rates. In recent years, tax authorities around the world have increased their scrutiny of company tax structures, and have become more rigid in exercising any discretion they may have. As a result, companies' flexibility to optimally structure their organizations for business and tax purposes may be significantly reduced. In addition, the public is increasingly taking an interest in what the tax burden of multinational companies should be. Any changes in tax laws or in the laws' application that may result from this, including with respect to tax base or rate, transfer pricing, intercompany dividends and cross-border transactions, controlled corporations, and limitations on tax relief allowed on the interest on intercompany debt, could increase our effective tax rate and adversely affect our financial results.

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Counterfeit versions of our products could harm our patients and reputation.

        Our industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Counterfeit products are frequently unsafe or ineffective, and can potentially be life-threatening. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product, and harm the business of companies such as ours or lead to litigation. In addition, it is possible that adverse events caused by unsafe counterfeit products could mistakenly be attributed to the authentic product. If a product of ours was the subject of counterfeits, we could incur substantial reputational and financial harm.

Ongoing consolidation among our distributors and retailers is increasing both the purchasing leverage of key customers and the concentration of credit risk.

        Increasingly, a significant portion of our global sales are made to a relatively small number of drug wholesalers, retail chains and other purchasing organizations. For example, our three most important customers globally are all in the US, and accounted for approximately 14%, 11% and 5%, respectively, of Group net sales in 2015. The largest trade receivables outstanding were for these three customers, amounting to 13%, 9% and 6%, respectively, of the Group's trade receivables at December 31, 2015. The trend has been toward further consolidation among distributors and retailers, both in the US and internationally. As a result, our customers are gaining additional purchasing leverage, which increases the pricing pressures facing our businesses. Moreover, we are exposed to a concentration of credit risk as a result of this concentration among our customers. If one or more of our major customers experienced financial difficulties, the effect on us would be substantially greater than in the past. This could have a material adverse effect on our business, financial condition and results of operations.

An inability to attract and retain qualified personnel could adversely affect our business.

        We highly depend upon skilled personnel in key parts of our organization, and we invest heavily in recruiting, training and retaining qualified individuals. The loss of the service of key members of our organization—including senior members of our scientific and management teams, high-quality researchers and development specialists, and skilled personnel in emerging markets—could delay or prevent the achievement of major business objectives.

        Future economic growth will demand talented associates and leaders, yet the market for talent has become increasingly competitive. In particular, emerging markets are expected to be a driving force in global growth, but in countries like Russia and China there is a limited pool of executives with the training and international experience needed to work successfully in a global organization like Novartis.

        In addition, shifting demographic trends are expected to result in fewer students, fewer graduates and fewer people entering the workforce in the Western world in the next 10 years. Moreover, many members of younger generations around the world have changing expectations toward careers, engagement and the integration of work in their overall lifestyles.

        The supply of talent for certain key functional and leadership positions is decreasing, and a talent gap is visible for some professions and geographies—engineers in Germany, for example. Recruitment is increasingly regional or global in specialized fields such as clinical development, biosciences, chemistry and information technology. In addition, the geographic mobility of talent is expected to decrease in the future, with talented individuals in developed and emerging countries anticipating ample career opportunities closer to home than in the past. This decrease in mobility may be worsened by anti-immigrant sentiments in many countries, and laws discouraging immigration.

        In addition, our ability to hire qualified personnel also depends on the flexibility to reward superior performance and to pay competitive compensation. Laws and regulations on executive compensation,

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including legislation in our home country, Switzerland, may restrict our ability to attract, motivate and retain the required level of qualified personnel.

        We face intense competition for an increasingly limited pool of qualified individuals from numerous pharmaceutical and biotechnology companies, universities, governmental entities, other research institutions, other companies seeking to enter the healthcare space, and companies in other industries. As a result, despite significant efforts on our part, we may be unable to attract and retain qualified individuals in sufficient numbers, which could have an adverse effect on our business, financial condition and results of operations.

Significant breaches of data security or disruptions of information technology systems, including by cyber-attack or other security breach, and breaches of the privacy rights of third parties could adversely affect our business.

        Our business is heavily dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support business processes. In addition, Novartis and our employees rely on internet and social media tools and mobile technologies as a means of communications, and to gather information. We are also increasingly seeking to develop technology-based products such as mobile applications that go "beyond the pill" to improve patient welfare in a variety of ways, which could result in us gathering information about patients and others electronically.

        The size and complexity of our information technology systems, and, in some instances, their age, make them potentially vulnerable to external or internal security breaches, breakdowns, malicious intrusions malware, misplaced or lost data, programming or human errors, or other similar events. Although we have devoted and continue to devote significant resources and management attention to the protection of our data and information technology, like many companies, we have experienced such events and expect to continue to experience them in the future. We believe that the data security breaches we have experienced to date have not resulted in significant disruptions to our operations, and will not have a significant adverse effect on our current or future results of operations. However, we may not be able to prevent breakdowns or breaches in our systems that could have a material adverse effect on our business, financial condition, results of operation or reputation.

        Any such events could negatively impact important business processes, such as the conduct of scientific research and clinical trials, the submission of the results of such efforts to health authorities in support of requests for product approvals, the functioning of our manufacturing and supply chain processes, our compliance with legal obligations and other key business activities. Such potential information technology issues could lead to the loss of important information such as trade secrets or other intellectual property and could accelerate development or manufacturing of competing products by third parties. In addition, malfunctions in software or devices that make significant use of information technology, including our Alcon surgical equipment, could lead to a risk of harm to patients.

        Our use of information technologies, including internet, social media, mobile technologies, and technology-based medical devices, as well as other routine business operations, sometimes involve our gathering personal information (including sensitive personal information) regarding our patients, vendors, customers, employees, collaborators and others. Breaches of our systems or other failures to protect such information could expose the personal information of third parties to unauthorized persons. Any such information or other privacy breaches could give rise to significant potential liability and reputational harm. In addition, we make substantial efforts to ensure that any international transfers of personal data are done in compliance with applicable law. Any restrictions that may be placed on our ability to transfer such data could have a material adverse effect on our business, financial condition, results of operations and reputation.

        In addition, to the extent that we seek as a company to use internet, social media and mobile tools as a means to communicate with the public about our products or about the diseases our products are intended to treat, there continue to be significant uncertainties as to the rules that apply to such

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communications, and as to the interpretations that health authorities will apply in this context to the rules that do exist. As a result, despite our efforts to comply with applicable rules, there is a significant risk that our use of social media and mobile technologies for such purposes may cause us to nonetheless be found in violation of them.

        Any such breaches of data security or information technology disruptions or privacy violations could give rise to the loss of trade secrets or other intellectual property, to the public exposure of personal information, and to interruptions to our operations, and could result in liability or enforcement actions, which could require us to expend significant resources to continue to modify or enhance our protective measures and to remediate any damage. Such events could have a material adverse effect on our business, financial condition, results of operations and reputation.

Environmental liabilities may adversely impact our results of operations.

        The environmental laws of various jurisdictions impose actual and potential obligations on us to remediate contaminated sites, in some cases over many years. While we have set aside substantial provisions for worldwide environmental liabilities, there is no guarantee that additional costs will not be incurred beyond the amounts for which we have provided in the Group consolidated financial statements. If environmental contamination caused by us adversely impact third parties, if we fail to properly manage the safety of our facilities and the environmental risks, or if we are required to further increase our provisions for environmental liabilities in the future, this could have a material adverse effect on our business, financial condition, results of operations, and on our reputation. See also "Item 4.D Property, Plants and Equipment—Environmental Matters" and "Item 18. Financial Statements—Note 20."

Extreme weather events, earthquakes and other natural disasters could adversely affect our business.

        In recent years, extreme weather events and changing weather patterns such as storms, flooding, drought, and temperature changes, appear to have become more common. We operate in countries around the world. As a result, we are potentially exposed to varying natural disaster or extreme weather risks like hurricanes, tornadoes or floods, or other events that may result from the impact of climate change on the environment. As a result of such events, we could experience business interruptions, destruction of facilities and loss of life, all of which could have a material adverse effect on our business, financial condition and results of operations.

        In addition, our corporate headquarters, the headquarters of our Pharmaceuticals Division, and certain of our major Pharmaceuticals Division production and research facilities are located near earthquake fault lines in Basel, Switzerland. Other major facilities are located near major earthquake fault lines in various locations around the world. In the event of a major earthquake, we could experience business interruptions, destruction of facilities and loss of life, all of which could have a material adverse effect on our business, financial condition and results of operations. See also "—The manufacture of our products is highly regulated and complex, and may result in a variety of issues that could lead to extended supply disruptions and significant liability," above.

Risks Related To Our ADRs

The price of our ADRs and the US dollar value of any dividends may be negatively affected by fluctuations in the US dollar/Swiss franc exchange rate.

        Our American Depositary Shares (ADSs) each representing one Novartis share and evidenced by American Depositary Receipts (ADRs) trade on the NYSE in US dollars. Since the shares underlying the ADRs are listed in Switzerland on the SIX Swiss Exchange (SIX) and trade in Swiss francs, the value of the ADRs may be affected by fluctuations in the US dollar/Swiss franc exchange rate. In addition, since dividends that we may declare will be denominated in Swiss francs, exchange rate fluctuations will affect the US dollar equivalent of dividends received by holders of ADRs. If the value of the Swiss franc

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decreases against the US dollar, the price at which our ADRs trade may—and the value of the US dollar equivalent of any dividend will—decrease accordingly.

Holders of ADRs may not be able to exercise preemptive rights attached to shares underlying ADRs.

        Under Swiss law, shareholders have preemptive rights to subscribe for issuances of new shares on a pro rata basis. Shareholders may waive their preemptive rights in respect of any offering at a general meeting of shareholders. Preemptive rights, if not previously waived, are transferable during the subscription period relating to a particular offering of shares and may be quoted on the SIX. US holders of ADRs may not be able to exercise the preemptive rights attached to the shares underlying their ADRs unless a registration statement under the US Securities Act of 1933 is effective with respect to such rights and the related shares, or an exemption from this registration requirement is available. In deciding whether to file such a registration statement, we would evaluate the related costs and potential liabilities, as well as the benefits of enabling the exercise by ADR holders of the preemptive rights associated with the shares underlying their ADRs. We cannot guarantee that a registration statement would be filed, or, if filed, that it would be declared effective. If preemptive rights could not be exercised by an ADR holder, JPMorgan Chase Bank, N.A., as depositary, would, if possible, sell the holder's preemptive rights and distribute the net proceeds of the sale to the holder. If the depositary determines, in its discretion, that the rights could not be sold, the depositary might allow such rights to lapse. In either case, the interest of ADR holders in Novartis would be diluted and, if the depositary allowed rights to lapse, holders of ADRs would not realize any value from the preemptive rights.

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Item 4.    Information on the Company

4.A History and Development of Novartis

Novartis AG

        Novartis AG was incorporated on February 29, 1996 under the laws of Switzerland as a stock corporation (Aktiengesellschaft) with an indefinite duration. On December 20, 1996, our predecessor companies, Ciba-Geigy AG and Sandoz AG, merged into this new entity, creating Novartis. We are domiciled in and governed by the laws of Switzerland. Our registered office is located at the following address:

Novartis AG
Lichtstrasse 35
CH-4056 Basel, Switzerland
Telephone: 011-41-61-324-1111
Web: www.novartis.com

        Novartis is a multinational group of companies specializing in the research, development, manufacturing and marketing of a broad range of healthcare products led by innovative pharmaceuticals. Novartis AG, our Swiss holding company, owns, directly or indirectly, all of our significant operating companies. For a list of our significant operating subsidiaries, see "Item 18. Financial Statements—Note 32."

Important Corporate Developments 2013-January 2016

2016
January	Novartis announces leadership changes effective February 1, 2016. Mike Ball has been appointed Division Head and CEO Alcon, succeeding Jeff George; Dr. Vas Narasimhan has been appointed Global Head Drug Development and Chief Medical Officer; and André Wyss has been appointed President, Novartis Operations.
	Novartis announces that it is taking a number of steps to further build on its strategy, including focusing the Alcon Division on its Surgical and Vision Care franchises, with specific actions identified to accelerate growth, and strengthening the ophthalmic medicines business by transferring Alcon's Ophthalmic Pharmaceuticals products to the Pharmaceuticals Division; centralizing manufacturing operations across divisions within a single technical operations unit; increasing Group-wide coordination of drug development by establishing a single Global Head of Drug Development and centralizing certain common functions such as the Chief Medical Office; and shifting selected mature, non-promoted pharmaceutical products from the Pharmaceuticals Division into the Sandoz Division.
	Novartis announces a collaboration and licensing agreement with Surface Oncology, which gives Novartis access to four pre-clinical programs in immuno-oncology.
2015
November	Novartis completes a $3 billion bond offering under its US SEC Registration Statement on Form F-3.
October	Novartis announces the acquisition of Admune Therapeutics to broaden its portfolio of cancer immunotherapies.

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September	Novartis announces the appointment of Dr. James E. Bradner as President of the Novartis Institutes for BioMedical Research and a member of the Executive Committee of Novartis, to be effective March 1, 2016, concurrent with the retirement of Dr. Mark C. Fishman, who will reach his contractual retirement age in March 2016.
	Novartis announces the launch of Novartis Access, a portfolio of affordable medicines to treat chronic diseases in lower-income countries offered to governments, non-governmental organizations and other public-sector healthcare providers for $1 per treatment, per month.
	Novartis announces that it has entered into a global collaboration with Amgen to commercialize and develop neuroscience treatments.
August	Novartis announces an agreement to acquire all remaining rights to GSK's ofatumumab to develop treatments for multiple sclerosis and other autoimmune indications. This transaction was completed on December 21, 2015.
July	Novartis announces a swap of three mid-stage clinical assets for equity and a share of milestones and royalties on future commercial sales with Mereo BioPharma Group Limited.
June	Novartis announces that it has entered into an agreement to acquire Spinifex Pharmaceuticals, Inc., a US and Australian-based, privately held development stage company focused on developing a peripheral approach to treat neuropathic pain such as EMA401, a novel angiotensin II Type 2 receptor (AT2R) antagonist. This acquisition was completed on July 24, 2015.
March	Novartis announces entry into an alliance with Aduro Biotech focused on discovery and development of next-generation cancer immunotherapies targeting the STING signaling pathway, and the launch of a new immuno-oncology research group.
February	Novartis completes a CHF 1.375 billion bond offering listed on the SIX Swiss Exchange.
2014
October	Novartis announces a definitive agreement with CSL of Australia to divest its influenza vaccines business for $275 million. This divestment was completed effective July 31, 2015.
	Novartis announces changes to the Novartis Executive Committee. Three members of the Executive Committee of Novartis, George Gunn, Brian MacNamara and Andrin Oswald, would leave the Company following the completion of the relevant portfolio transactions announced in April 2014.
	Novartis announces that it has entered into a collaboration with Bristol-Myers Squibb Company to evaluate three molecularly targeted compounds in combination with Bristol-Myers Squibb's investigational PD-1 immune checkpoint inhibitor, Opdivo® (nivolumab), in Phase I/II trials of patients with non-small cell lung cancer.
August	Novartis appoints a Chief Ethics, Compliance and Policy Officer reporting directly to the CEO.
July	Novartis announces that its Alcon Division has entered into an agreement with a division of Google Inc., to in-license its "smart lens" technology for all ocular medical uses.
June	Novartis announces that the FDA licensed its manufacturing facility in Holly Springs, North Carolina for the commercial production of cell-culture influenza vaccines, with the capacity to significantly increase production in the event of an influenza pandemic.

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May	Novartis enters into a licensing and commercialization agreement with Ophthotech Corporation for the exclusive rights to market Fovista (pegpleranib; OAP030, anti-PDGF aptamer) outside the US. In November 2015, Genentech entered into an agreement with Novartis to participate in certain rights related to the Novartis licensing and commercialization agreement with Ophthotech Corporation for OAP030.
April	Novartis announces a set of definitive inter-conditional agreements with GSK. Under these agreements, Novartis would acquire GSK oncology products and certain related assets, would be granted a right of first negotiation over the co-development or commercialization of GSK's current and future oncology R&D pipeline (excluding oncology vaccines) and would divest the Vaccines Division (excluding its influenza vaccines business) to GSK. The two companies would also create a joint venture in consumer healthcare, of which Novartis would own 36.5%. These transactions were completed on March 2, 2015.
	Novartis also announces a definitive agreement with Lilly to divest the Company's Animal Health Division. This divestment was completed on January 1, 2015.
	Novartis announces the creation of a shared services organization, Novartis Business Services (NBS). NBS consolidates a number of business support services previously spread across divisions, including Information Technology, Financial Reporting and Accounting Operations, Real Estate & Facility Services, Procurement, Payroll and Personnel Administration and the Pharmaceuticals Global Business Services. This reorganization was designed to improve profitability and free up resources that could be reinvested in growth and innovation, and to allow our divisions to focus more on customer-facing activities. NBS became effective on July 1, 2014.
February	Novartis announces the acquisition of CoStim Pharmaceuticals Inc., a Cambridge, Massachusetts-based, privately held biotechnology company focused on cancer immunotherapy. The acquisition brings to Novartis late discovery stage immunotherapy programs directed to several targets, including PD-1.
	Novartis appoints a Global Head, Corporate Responsibility reporting directly to the CEO.
January	Novartis implements several changes to its governance structure. These include elimination of the Chairman's Committee of the Novartis AG Board of Directors; transfer of operational responsibilities that previously rested with the Chairman or the Chairman's Committee, such as approval authority for management compensation, to the CEO or the Executive Committee; and establishment of the Research and Development Committee of the Novartis AG Board of Directors to oversee Novartis research and development strategy and advise the Board on scientific trends and activities.
2013
November	Novartis announces a $5.0 billion share buyback. The buyback begins on the date of the announcement and will be executed over two years on the second trading line.
	Novartis announces a definitive agreement to divest its blood transfusion diagnostics unit to Grifols S.A. of Spain, for $1.7 billion. This transaction was completed on January 9, 2014.
	Novartis announces that it will co-locate certain scientific resources in order to improve the efficiency and effectiveness of its global research organization. Changes include establishing a respiratory research group in Cambridge, Massachusetts, a proposal to close the Horsham, UK, research site, a plan to exit from the Vienna, Austria research site, consolidation of the US-based component of oncology research from Emeryville, California to Cambridge, Massachusetts, closure of the biotherapeutics development unit in La Jolla, California, and a plan to exit research in topical applications for dermatology.

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September	Novartis announces that it has entered into an exclusive global licensing and research collaboration agreement with Regenerex LLC, a biopharmaceutical company based in Louisville, Kentucky, for use of the company's novel Facilitating Cell Therapy (FCRx) platform.
August	Joerg Reinhardt, Ph.D., assumes role of Chairman of the Board of Directors of Novartis AG on August 1.
July	The Novartis Board of Directors announces a final agreement with its former Chairman, Dr. Daniel Vasella. From the date of the Annual General Meeting held on February 22, 2013, until October 31, 2013, Dr. Vasella was to provide certain transitional services, including select Board mandates with subsidiaries of Novartis and support of the ad-interim Chairman and the new Chairman. For his transitional services during such period, Dr. Vasella would receive cash of CHF 2.7 million, and 31,724 unrestricted shares as of October 31, 2013 (the market value of the shares as of the date of the announcement was approximately CHF 2.2 million). In addition, from November 1, 2013, to December 31, 2016, Dr. Vasella will receive a minimum of $250,000 per annum in exchange for making himself available to Novartis, at Novartis' request and discretion, to provide specific consulting services, such as the coaching of high-potential associates of Novartis and speeches at key Novartis events at a daily fee rate of $25,000, which will be offset against the $250,000 minimum annual payment. During November and December 2013, Dr. Vasella did not provide any coaching to associates and did not receive any compensation for this period.
	Novartis announces that it has entered into a development and licensing agreement with Biological E Limited (BioE), a biopharmaceutical company based in India, for two vaccines to protect against typhoid and paratyphoid fevers. The agreement advances the Novartis goal to deliver accessible and affordable vaccines that address unmet medical need in endemic regions.
April	Novartis and Malaria No More, a leading global charity determined to end malaria deaths, announce that they are joining forces on the Power of One campaign to help close the treatment gap and accelerate progress in the fight against malaria. Over the next three years, Novartis will support the campaign financially and also donate up to three million full courses of its pediatric antimalarial drug to match the treatments donated by the public, doubling the impact of these donations.
February	Novartis announces that the Novartis AG Board of Directors and Dr. Vasella agreed to cancel his non-competition agreement and all related conditional compensation. The agreement was to take effect after Dr. Vasella stepped down as Chairman of the Board at the Novartis Annual General Meeting on February 22, 2013.
January	Novartis announces that, at his own wish, Novartis AG Chairman of the Board of Directors Dr. Daniel Vasella will not stand for re-election as a member of the Board of Directors at the Annual General Meeting to be held on February 22, 2013. The Board of Directors proposed the election of, among others, Joerg Reinhardt, Ph.D., as a member of the Board for a term of office beginning on August 1, 2013, and ending on the day of the Annual General Meeting in 2016. The Board announced its intention to elect Joerg Reinhardt as Chairman of the Board of Directors as from August 1, 2013. The Board of Directors further announced its intention to elect its current Vice-Chairman, Ulrich Lehner, Ph.D., as Chairman of the Board of Directors for the period from February 22, 2013, until the new Chairman took office.

        For information on our principal expenditures on property, plants and equipment, see "Item 4. Information on the Company—4.D Property, Plants and Equipment." For information on our significant expenditures in research and development, see the sections headed "Research and Development" included in the descriptions of our Pharmaceuticals Division and Alcon Division, and the section headed "Development and Registration" included in the description of our Sandoz Division under "Item 4.

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Information on the Company—4.B Business Overview." For information on other principal capital expenditures and divestitures, see "Item 5. Operating and Financial Review and Prospects—Item 5.A Operating Results—Factors Affecting Comparability of the Year-On-Year Results of Operations." For more information on the transactions with GSK, Lilly or CSL, see "Item 4.B Business Overview—Overview" and "Item 10.C Material Contracts."

4.B Business Overview

OVERVIEW

        Novartis provides healthcare solutions that address the evolving needs of patients and societies worldwide. Our broad portfolio includes innovative medicines, eye care products and cost-saving generic pharmaceuticals.

        Following the completion of a series of transactions in 2014 and 2015, the Group's portfolio is organized into three global operating divisions. In addition, we separately report the results of Corporate activities. The disclosure in this Item focuses on these continuing operations, which are made up of Pharmaceuticals, Alcon, Sandoz and Corporate activities. In addition, from March 2, 2015, the date of the completion of a series of transactions with GSK, continuing operations also includes the results from the oncology assets acquired from GSK and the 36.5% interest in the GSK consumer healthcare joint venture (the latter reported as an investment in associated companies). We sold our Vaccines Division, excluding our influenza business, to GSK. Our influenza vaccines business was sold to CSL and our Animal Health Division was sold to Lilly. For more detail on these transactions see, "Item 10.C Material Contracts."

Continuing Operations:

•

Pharmaceuticals: Innovative patent-protected prescription medicines

•

Alcon: Surgical, ophthalmic pharmaceutical and vision care products

•

Sandoz: Generic pharmaceuticals and biosimilars

•

Corporate activities

Discontinued Operations:

•

Vaccines and Diagnostics: Preventive human vaccines and blood-testing diagnostics

•

Consumer Health: OTC (over-the-counter medicines) and Animal Health

•

Corporate: certain transactional and other expenses related to the portfolio transformation

        Novartis has leading positions globally in each of the three areas of our continuing operations. To maintain our competitive positioning across these growing segments of the healthcare industry, we place a strong focus on innovating to meet the evolving needs of patients around the world, growing our presence in new and emerging markets, and enhancing our productivity to invest for the future and increase returns to shareholders.

        We separately report the financial results of our Corporate activities as part of our continuing operations. Income and expenses from Corporate activities include the costs of the Group headquarters and those of corporate coordination functions in major countries. In addition, Corporate includes other items of income and expense which are not attributable to specific segments such as certain expenses related to post-employment benefits, environmental remediation liabilities, charitable activities, donations and sponsorships.

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        Our continuing operations are supported by the Novartis Institutes for BioMedical Research and Novartis Business Services.

•

The Novartis Institutes for BioMedical Research (NIBR) is the innovation engine of Novartis, and is headquartered in Cambridge, Massachusetts. More than 6,000 scientists and associates at NIBR conduct research into various disease areas at sites located in the US, Switzerland, Singapore and China. For more information about NIBR, see "—Pharmaceuticals—Research and Development—Research program," below.

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Novartis Business Services (NBS), our shared services organization, consolidates support services across Novartis divisions, helping to drive efficiency, standardization and simplification. NBS includes six service domains: human resources services, real estate and facility management, procurement, information technology, product lifecycle services and financial reporting and accounting operations. NBS has approximately 9,500 associates. Moving from division-specific services to a cross-divisional model, NBS continues to scale up the offshoring of transactional services to its five selected Global Service Centers in Mexico City, Mexico; Kuala Lumpur, Malaysia; Prague, Czech Republic; Hyderabad, India; and Dublin, Ireland.

        Our continuing operations achieved net sales of $49.4 billion in 2015, while net income from continuing operations amounted to $7.0 billion. Research & Development expenditure in 2015 amounted to $8.9 billion ($8.7 billion excluding impairment and amortization charges). Of total net sales from continuing operations, $12.4 billion, or 25%, came from Emerging Growth Markets, and $37.0 billion, or 75%, came from Established Markets. Emerging Growth Markets comprise all markets other than the Established Markets of the US, Canada, Western Europe, Japan, Australia and New Zealand.

        Headquartered in Basel, Switzerland, our Group companies employed 118,700 full-time equivalent associates as of December 31, 2015. Our products are available in approximately 180 countries around the world.

        In September 2015, Novartis announced the launch of Novartis Access, a portfolio of 15 medicines to treat chronic diseases in low- and middle-income countries. The portfolio addresses cardiovascular diseases, diabetes, respiratory illnesses, and breast cancer and will be offered to governments, non-governmental organizations (NGOs) and other public-sector healthcare providers for $1 per treatment, per month.

        In 2016, having completed our portfolio transformation and operationalized NBS, we are taking further steps to build on our strategy. We are focusing our Alcon Division on its Surgical and Vision Care franchises. Within these franchises, we have identified key actions to accelerate growth in 2016 and beyond. These include optimizing intraocular lens (IOL) innovation and commercial execution; prioritizing and investing in promising pipeline opportunities; ensuring best-in-class service, training and education for eye care professionals; improving sales force effectiveness; and investing in direct to consumer activities for key brands.

        We are strengthening our ophthalmic medicines business by transferring Alcon's Ophthalmic Pharmaceuticals products to our Pharmaceuticals Division. This is expected to simplify our ophthalmic medicines business, leverage Alcon's strong brand with Pharmaceuticals Division development and marketing capabilities, and help us accelerate innovation and growth in eye care.

        At the same time, we are shifting selected mature, non-promoted pharmaceutical products from our Pharmaceuticals Division into Sandoz, which has proven experience in managing mature products successfully.

        To increase innovation even further, we are increasing Group-wide coordination of drug development. We are establishing a single Global Head of Drug Development to improve resource allocation and standards across our divisions. We are also centralizing certain common functions, such as the Chief Medical Office, which will cover safety and pharmacovigilance policy for the Group.

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        To further improve efficiency, we are centralizing our manufacturing operations across our divisions within a single technical operations unit. The new unit is expected to optimize capacity planning and lower costs through simplification, standardization and external spend optimization. Centralization is also expected to improve our ability to develop next-generation technologies, implement continuous manufacturing and share best practices across divisions.

        We expect these changes to generate over $1.0 billion in annual cost savings from 2020, with the ramp-up starting in 2016. Associated with these changes we expect one-time restructuring costs of approximately $1.4 billion spread over five years. We plan to use the net savings to fund innovation and improve our profit margins.

        In addition, we announced leadership changes effective February 1, 2016. Mike Ball has been appointed Division Head and CEO Alcon, and will be a member of the Executive Committee of Novartis (ECN). Mr. Ball joins Novartis from Hospira, where he was CEO from 2011 until recently. Mr. Ball succeeds Jeff George, who has decided to leave Novartis. Dr. Vas Narasimhan has been appointed Global Head Drug Development and Chief Medical Officer, a new position in the ECN. André Wyss, already a member of the ECN, Head NBS and Country President for Switzerland, has been appointed President, Novartis Operations. In his new role, he will assume responsibility for the integrated Technical Operations organization as well as for Global Public & Government Affairs, in addition to his current responsibilities.

        Except as described above and as briefly described in "—Alcon" below, and "Item 5. Operating and Financial Review and Prospects—Item 5.A Operating Results—Results of Operations—Alcon," this Form 20-F reflects the organization of the Group prior to the changes described above.

Continuing Operations:

Pharmaceuticals Division

        Pharmaceuticals researches, develops, manufactures, distributes and sells patented prescription medicines and is organized in the following franchises: Oncology, Cardio-metabolic, Immunology and Dermatology, Retina, Respiratory, Neuroscience and Established Medicines. Our Pharmaceuticals Division also includes a franchise focused on the development and commercialization of Cell and Gene Therapies.

        On March 2, 2015, we completed the acquisition of the oncology products of GSK, together with certain related assets. In addition, we acquired a right of first negotiation over the co-development or commercialization of GSK's current and future oncology R&D pipeline, excluding oncology vaccines. The right of first negotiation is for a period of twelve and one half years from the acquisition closing date.

        In 2015, the Pharmaceuticals Division accounted for $30.4 billion, or 62%, of Group net sales, and for $7.6 billion, or 81%, of Group operating income (excluding Corporate income and expense, net).

Alcon Division

        Our Alcon Division researches, develops, manufactures, distributes and sells eye care products and technologies to serve the full life cycle of eye care needs. Alcon offers a broad range of products to treat many eye diseases and conditions, and is organized into three franchises: Surgical, Ophthalmic Pharmaceuticals and Vision Care. The Surgical portfolio includes technologies and devices for cataract, retinal, glaucoma and refractive surgery, as well as intraocular lenses to treat cataracts and refractive errors, like presbyopia and astigmatism. Alcon also provides viscoelastics, surgical solutions, surgical packs, and other disposable products for cataract and vitreoretinal surgery. In Ophthalmic Pharmaceuticals, the portfolio includes treatment options for elevated intraocular pressure caused by glaucoma, anti-infectives to aid in the treatment of bacterial infections and bacterial conjunctivitis, and ophthalmic solutions to treat inflammation and pain associated with ocular surgery, as well as an intravitreal injection for vitreomacular traction including macular hole. The Ophthalmic Pharmaceuticals

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portfolio also includes eye and nasal allergy treatments, as well as over-the-counter dry eye relief and ocular vitamins. The Vision Care portfolio comprises daily disposable, monthly replacement, and color-enhancing contact lenses, as well as a complete line of contact lens care products including multi-purpose and hydrogen-peroxide based solutions, rewetting drops and daily protein removers.

        In 2015, Alcon accounted for $9.8 billion, or 20%, of Group net sales, and for $0.8 billion, or 9%, of Group operating income (excluding Corporate income and expense, net).

Sandoz Division

        Our Sandoz Division focuses primarily on developing, manufacturing, distributing and selling prescription medicines that are not protected by valid and enforceable third-party patents, and intermediary products including active pharmaceutical ingredients. Sandoz is organized globally in three franchises: Retail Generics, Anti-Infectives, and Biopharmaceuticals & Oncology Injectables. In Retail Generics, Sandoz develops, manufactures and markets active ingredients and finished dosage forms of pharmaceuticals to third parties. Retail Generics includes the areas of dermatology, respiratory and ophthalmics, as well as the areas of cardiovascular, metabolism, central nervous system, pain, gastrointestinal, and hormonal therapies. Finished dosage form anti-infectives sold to third parties are also part of Retail Generics. In Anti-Infectives, Sandoz supplies generic antibiotics to a broad range of customers, as well as active pharmaceutical ingredients and intermediates to the pharmaceutical industry worldwide. In Biopharmaceuticals, Sandoz develops, manufactures and markets protein or other biotechnology based products known as biosimilars and provides biotechnology manufacturing services to other companies, and in Oncology Injectables, Sandoz develops, manufactures and markets cytotoxic products for the hospital market.

        In 2015, Sandoz accounted for $9.2 billion, or 18%, of Group net sales, and for $1.0 billion, or 11%, of Group operating income (excluding Corporate income and expense, net).

Discontinued Operations:

Vaccines and Diagnostics Division

        Prior to the completion of certain transactions in 2014 and 2015, our Vaccines and Diagnostics Division researched, developed, manufactured, distributed and sold human vaccines and blood-testing products worldwide. On January 9, 2014, we completed the divestment of our blood transfusion diagnostics unit to Grifols S.A. On March 2, 2015, we completed the divestment of our Vaccines Division (excluding its influenza vaccines business) to GSK. On July 31, 2015, we completed the divestment of our influenza vaccines business to CSL Limited.

Consumer Health

        Prior to the completion of certain transactions in 2015, Consumer Health consisted of our OTC (Over-the-Counter) and Animal Health Divisions. On January 1, 2015 we completed the divestment of our Animal Health Division to Lilly. On March 2, 2015, we completed the divestment of our OTC Division, which we contributed to a new consumer healthcare joint venture with GSK, of which we own 36.5%.

PHARMACEUTICALS

Overview

        Our Pharmaceuticals Division is a world leader in offering innovation-driven, patent-protected medicines to patients and physicians.

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        The Pharmaceuticals Division researches, develops, manufactures, distributes and sells patented pharmaceuticals in the following therapeutic areas:

•

Oncology

•

Cardio-Metabolic

•

Immunology and Dermatology

•

Retina

•

Respiratory

•

Neuroscience

•

Established Medicines

        The Pharmaceuticals Division is organized into global business franchises responsible for the commercialization of various products. Our Pharmaceuticals Division also includes a franchise focused on the development and commercialization of Cell and Gene Therapies.

        On March 2, 2015, we completed the acquisition of the oncology products of GSK, together with certain related assets. In addition, we acquired a right of first negotiation over the co-development or commercialization of GSK's current and future oncology R&D pipeline, excluding oncology vaccines. The right of first negotiation is for a period of twelve and one half years from the acquisition closing date.

        The Pharmaceuticals Division is the largest contributor among the divisions of Novartis and reported consolidated net sales of $30.4 billion in 2015, which represented 62% of the Group's net sales.

        The product portfolio of the Pharmaceuticals Division includes more than 60 key marketed products, many of which are leaders in their respective therapeutic areas. In addition, the division's portfolio of development projects includes 135 potential new products and new indications or new formulations for existing products in various stages of clinical development.

Pharmaceuticals Division Products

        The following table and summaries describe certain key marketed products in our Pharmaceuticals Division. While we intend to sell our marketed products throughout the world, not all products and indications are currently available in every country. Compounds and new indications in development are subject to required regulatory approvals and, in certain instances, contractual limitations. These compounds and indications are in various stages of development throughout the world. It may not be possible to obtain regulatory approval for any or all of the new compounds and new indications referred to in this Form 20-F in any country or in every country. See "—Regulation" for further information on the approval process. Some of the products listed below have lost patent protection or are otherwise subject to generic competition. Others are subject to patent challenges by potential generic competitors. Please see "—Intellectual Property" for general information on intellectual property and regulatory data protection, and for further information on the status of patents and exclusivity for Pharmaceuticals Division products.

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Selected Marketed Products

Business franchise	Product	Common name	Indications (vary by country and/or formulation)	Formulation
Oncology	Afinitor/Votubia and Afinitor Disperz/Votubia dispersible tablets	everolimus	Advanced renal cell carcinoma after failure of treatment with VEGF-targeted therapy Advanced pancreatic neuroendocrine tumors SEGA associated with tuberous sclerosis Renal angiomyolipoma associated with tuberous sclerosis Advanced breast cancer in post-menopausal HR+/HER2– women in combination with exemestane, after failure of anastrozole or letrozole	Tablet Dispersible tablets for oral suspension
	Arzerra	ofatumumab	In combination with chlorambucil for first- line chronic lymphocytic leukemia (CLL) In combination with chlorambucil or bendamustine for first-line CLL CLL refractory to fludarabine and alemtuzumab Extended treatment of patients who are in complete or partial response after at least two lines of therapy for recurrent or progressive CLL	Intravenous infusion
	Atriance/Arranon	nelarabine	Relapsed and/or refractory T-cell acute lymphoblastic leukemia and T-cell lymphoblastic lymphoma	Solution for infusion
	Exjade and Jadenu	deferasirox	Chronic iron overload due to blood transfusions and non-transfusion dependent thalassemia	Dispersible tablet for oral suspension Oral film-coated tablet
	Farydak	panobinostat	Relapsed and/or refractory multiple myeloma, in combination with bortezomib and dexamethasone, after at least two prior regimens including bortezomib and an immunomodulatory agent	Capsules
	Femara	letrozole	Hormone receptor-positive early breast cancer in postmenopausal women following surgery (upfront adjuvant therapy) Early breast cancer in post-menopausal women following standard tamoxifen therapy (extended adjuvant therapy) Advanced breast cancer in post-menopausal women (both as first- and second-line therapies)	Tablet
	Gleevec/Glivec	imatinib mesylate/imatinib	Certain forms of Ph+ chronic myeloid leukemia Certain forms of KIT+ gastrointestinal stromal tumors Certain forms of acute lymphoblastic leukemia Dermatofibrosarcoma protuberans Hypereosinophilic syndrome Aggressive systemic mastocytosis Myelodysplastic/myeloproliferative diseases	Tablet Capsules

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Business franchise	Product	Common name	Indications (vary by country and/or formulation)	Formulation
	Hycamtin	topotecan	Relapsed small cell lung cancer Metastatic carcinoma of the ovary after failure of initial or subsequent chemotherapy	Capsule Powder for infusion
			Small cell lung cancer sensitive disease after failure of first-line chemotherapy Combination therapy with cisplatin for Stage IV-B, recurrent, or persistent carcinoma of the cervix which is not amenable to curative treatment with surgery and/or radiation therapy
	Jakavi	ruxolitnib	Disease-related splenomegaly or symptoms in adult patients with primary myelofibrosis (also known as chronic idiopathic myelofibrosis), post-polycythemia vera myelofibrosis or post-essential thrombocythemia myelofibrosis Polycythemia vera in adult patients who are resistant to or intolerant of hydroxyurea	Tablet
	Odomzo	sonidegib	Locally advanced basal cell carcinoma that has recurred following surgery or radiation therapy, or is not a candidate for surgery or radiation therapy	Capsule
	Proleukin	aldesleukin	Metastatic renal cell carcinoma Metastatic melanoma	Powder for injection or infusion
	Promacta/Revolade	eltrombopag	Thrombocytopenia in adult and pediatric patients one year and older with chronic immune (idiopathic) thrombocytopenia who have had insufficient response to corticosteroids, immunoglobulins, or splenectomy Thrombocytopenia in patients with chronic hepatitis C to allow initiation and maintenance of interferon-based therapy Severe aplastic anemia in patients who have had an insufficient response to immunosuppressive therapy	Tablet Eltrombopag for oral suspension
	Sandostatin LAR and Sandostatin SC	octreotide acetate	Acromegaly Symptom control for certain forms of neuroendocrine tumors Delay of tumor progression in patients with midgut tumors	Vial Ampoule/pre-filled syringe
	Signifor and Signifor LAR	pasireotide	Cushing's disease Acromegaly	Solution for subcutaneous injection in ampoule Powder and solvent for suspension for IM injection
	Tafinlar + Mekinist	dabrafenib + trametinib	BRAF V600+ metastatic melanoma	Capsule (Tafinlar) Tablet (Mekinist)
	Tasigna	nilotinib	Certain forms of chronic myeloid leukemia in patients resistant or intolerant to prior treatment including Gleevec/Glivec First-line chronic myeloid leukemia	Capsule

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Business franchise	Product	Common name	Indications (vary by country and/or formulation)	Formulation
	Tykerb	lapatinib	In combination with capacitabine for the treatment of patients with HER2+ advanced or metastatic breast cancer who have progressed on prior trastuzumab therapy In combination with trastuzumab for patients with HR-negative metastatic disease that has progressed on prior trastuzumab therapy(ies) plus chemotherapy In combination with paclitaxel for first line treatment of patients with HER2+ metastatic breast cancer for whom trastuzumab is not appropriate In combination with an aromatase inhibitor for the treatment of patients with hormone sensitive metastatic breast cancer	Tablet
	Votrient	pazopanib	Advanced renal cell carcinoma Certain types of advanced soft tissue sarcoma after prior chemotherapy	Tablet
	Zofran	ondansetron	Use in children and adults for the prevention of chemotherapy induced nausea and vomiting and prevention of post-operative nausea and vomiting, and in adults for the prevention of radiation-induced nausea and vomiting	Tablet Oral solution Orally disintegrating tablets Solution for injection/infusion
	Zometa	zoledronic acid	Skeletal-related events from bone metastases (cancer that has spread to the bones) Hypercalcemia of malignancy	Vial/4mg Ready-to-use
	Zykadia	ceritinib	Anaplastic lymphoma kinase-positive metastatic non-small cell lung cancer	Capsules
Cardio-Metabolic	Entresto	sacubitril/valsartan	Chronic heart failure with reduced ejection fraction	Tablet
	Galvus and Eucreas	Galvus: vildagliptin Eucreas: vildagliptin and metformin	Type 2 diabetes	Tablet
Immunology and Dermatology	Cosentyx	secukinumab	Active ankylosing spondylitis in adults who have responded inadequately to conventional therapy Active psoriatic arthritis in adult patients when the response to previous disease-modifying anti-rheumatic drug therapy has been inadequate Moderate-to-severe plaque psoriasis in adult patients who are candidates for systemic therapy or phototherapy Moderate-to-severe plaque psoriasis in adults who are candidates for systemic therapy Psoriasis vulgaris and psoriatic arthritis in adults who are not adequately responding to systemic therapies (except for biologics)	Lyophilized pre-filled syringe; Auto-injector
	Ilaris	canakinumab	Cryopyrin-associated periodic syndromes Systemic juvenile idiopathic arthritis Gouty arthritis	Lyophilized powder for reconstitution for subcutaneous injection
	Myfortic	mycophenolic acid (as mycophenolate sodium)	Prophylaxis of organ rejection in patients receiving allogeneic renal transplants	Gastro-resistant tablet

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Business franchise	Product	Common name	Indications (vary by country and/or formulation)	Formulation
	Neoral and Sandimmune	cyclosporine, USP Modified	Prevention of rejection following certain organ transplantation Non-transplantation autoimmune conditions such as severe psoriasis and severe rheumatoid arthritis	Capsule Oral solution Intravenous (Sandimmune)
	Simulect	basiliximab	Prevention of acute organ rejection in de novo renal transplantation	Vial for injection or infusion
	Xolair	omalizumab	Chronic spontaneous urticaria/ Chronic idiopathic urticaria See also, "Respiratory"	Lyophilized powder in vial and liquid formulation in pre-filled syringes
	Zortress/Certican	everolimus	Prevention of organ rejection (heart, liver and kidney)	Tablet Dispersible tablet
Retina	Lucentis	ranibizumab	Neovascular age-related macular degeneration Visual impairment due to diabetic macular edema Visual impairment due to macular edema secondary to central retinal vein occlusion Visual impairment due to macular edema secondary to branch retinal vein occlusion Visual impairment due to choroidal neovascularization secondary to pathologic myopia	Intravitreal injection
Respiratory	Arcapta Neohaler/ Onbrez Breezhaler	indacaterol	Chronic obstructive pulmonary disease	Inhalation powder hard capsules
	Seebri Neohaler/ Seebri Breezhaler	glycopyrronium bromide (glycopyrrolate)	Chronic obstructive pulmonary disease	Inhalation powder hard capsules
	TOBI and TOBI Podhaler	tobramycin	Pseudomonas aeruginosa infection in cystic fibrosis	Nebulizer solution (TOBI), Inhalation powder (TOBI Podhaler)
	Utibron Neohaler/ Ultibro Breezhaler	indacaterol / glycopyrronium bromide (glycopyrrolate)	Chronic obstructive pulmonary disease	Inhalation powder hard capsules
	Xolair	omalizumab	Severe allergic asthma See also, "Immunology and Dermatology"	Lyophilized powder in vial and liquid formulation in pre-filled syringes
Neuroscience	Comtan	entacapone	Parkinson's disease patients who experience end-of-dose motor (or movement) fluctuations	Tablet
	Exelon	rivastigmine	Mild-to-moderate Alzheimer's disease dementia Severe Alzheimer's disease dementia Dementia associated with Parkinson's disease	Capsule Oral solution Transdermal patch
	Extavia	interferon beta-1b	Relapsing remitting and/or relapsing forms of multiple sclerosis in adult patients	Subcutaneous injection
	Gilenya	fingolimod	Relapsing forms of multiple sclerosis	Capsule

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Business franchise	Product	Common name	Indications (vary by country and/or formulation)	Formulation
	Stalevo	carbidopa, levodopa and entacapone	Parkinson's disease patients who experience end-of-dose motor (or movement) fluctuations	Tablet
Established Medicines	Cibacen	benazepril hydrochloride	Hypertension Adjunct therapy in congestive heart failure Progressive chronic renal insufficiency	Tablet
	Clozaril/Leponex	clozapine	Treatment-resistant schizophrenia Prevention and treatment of recurrent suicidal behavior in patients with schizophrenia and psychotic disorders	Tablet
	Coartem/Riamet	artemether and lumefantrine	Plasmodium falciparum malaria or mixed infections that include Plasmodium falciparum Standby emergency malaria treatment	Tablet Dispersible tablet for oral suspension
	Diovan	valsartan	Hypertension Heart failure Post-myocardial infarction	Tablets Capsules Oral solution
	Diovan HCT and Co-Diovan	valsartan and hydrochlorothiazide	Hypertension	Tablet
	Exforge and Exforge HCT	valsartan and amlodipine besylate	Hypertension	Tablet
	Focalin and Focalin XR	dexmethylphenidate HCl and dexmethylphenidate extended release	Attention deficit hyperactivity disorder	Tablet Capsule
	Foradil	formoterol	Asthma Chronic obstructive pulmonary disease	Aerolizer (capsules) Aerosol
	Lamisil	terbinafine (terbinafine hydrochloride)	Fungal infection of the skin and nails caused by dermatophyte fungi tinea capitis Fungal infections of the skin for the treatment of tinea corporis, tinea cruris, tinea pedis and yeast infections of the skin caused by the genus candida Onychomycosis of the toenail or fingernail due to dermatophytes	Tablet
	Lescol and Lescol XL	fluvastatin sodium	Hypercholesterolemia and mixed dyslipidemia in adults Secondary prevention of major adverse cardiac events Slowing the progression of atherosclerosis Heterozygous familial hypercholesterolemia in children and adolescents	Capsule (Lescol) Tablet (Lescol XL)
	Reclast/Aclasta	zoledronic acid 5 mg	Treatment of osteoporosis in postmenopausal women Treatment of osteoporosis in men Treatment and prevention of glucocorticoid-induced osteoporosis Prevention of postmenopausal osteoporosis Treatment of Paget's disease of the bone	Intravenous—solution for infusion

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Business franchise	Product	Common name	Indications (vary by country and/or formulation)	Formulation
	Ritalin	methylphenidate HCl	Attention deficit hyperactivity disorder and narcolepsy	Tablet
	Ritalin LA	methylphenidate HCl modified release	Attention deficit hyperactivity disorder	Capsule
	Tegretol	carbamazepine	Epilepsy Pain associated with trigeminal neuralgia Acute mania and bipolar affective disorders Alcohol withdrawal syndrome Painful diabetic neuropathy Diabetes insipidus centralis Polyuria and polydipsia of neurohormonal origin	Tablet Chewable tablet Oral suspension Suppository
	Tekamlo/Rasilamlo	aliskiren and amlodipine besylate	Hypertension	Tablet
	Tekturna/Rasilez	aliskiren	Hypertension	Tablet
	Tekturna HCT/ Rasilez HCT	aliskiren and hydrochlorothiazide	Hypertension	Tablet
	Trileptal	oxcarbazepine	Epilepsy	Tablet Oral suspension
	Tyzeka/Sebivo	telbivudine	Chronic hepatitis B	Tablet Oral solution
	Vivelle-Dot/Estradot	estradiol hemihydrate	Estrogen replacement therapy for the treatment of the symptoms of natural or surgically induced menopause Prevention of postmenopausal osteoporosis	Transdermal patch
	Voltaren/Cataflam	diclofenac sodium/potassium/resinate/free acid	Inflammatory and degenerative forms of rheumatism Post traumatic and post-operative pain, inflammation and swelling Painful and/or inflammatory conditions in gynecology Other painful and/or inflammatory conditions such as renal and biliary colic, migraine attacks and as adjuvant in severe ear, nose and throat infections	Tablet Capsule Oral drops/oral suspension Ampoule for injection Suppository Gel Powder for oral solution Transdermal patch

Key Marketed Products

Oncology

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Gleevec/Glivec (imatinib mesylate/imatinib) is a kinase inhibitor approved to treat patients with metastatic and/or unresectable KIT (CD117) positive (KIT+) gastrointestinal stromal tumors (GIST), as an adjuvant treatment for certain adult patients following resection of KIT+ GIST, and as a targeted therapy for Philadelphia chromosome-positive (Ph+) chronic myeloid leukemia (CML). First launched in 2001, Gleevec/Glivec is available in more than 120 countries. Gleevec/Glivec is also approved in the US, EU and Japan to treat Ph+ acute lymphoblastic leukemia, a rapidly progressive form of leukemia. Gleevec/Glivec is also approved in the US and EU to treat dermatofibrosarcoma protuberans, a rare solid tumor; hypereosinophilic syndrome; myelodysplastic/myeloproliferative diseases and other rare blood disorders. In the US, Gleevec is also approved for aggressive systemic mastocytosis. Gleevec/Glivec has received approvals in more than 65 countries as a post-surgery (adjuvant setting) therapy for certain adult patients with KIT+ GIST. Following approval by the FDA in 2013, the EMA approved Gleevec/Glivec in July 2013 for pediatric patients with newly diagnosed Ph+ acute lymphoblastic leukemia in combination with chemotherapy.

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Afinitor/Votubia and Afinitor Disperz/Votubia dispersible tablets (everolimus) is an oral inhibitor of the mTOR pathway. Afinitor is approved in more than 120 countries including the US, EU member states and Japan for advanced renal cell carcinoma following vascular endothelial growth factor-targeted therapy (in the US, after failure of sunitinib or sorafenib). Afinitor is also approved in more than 95 countries, including the US, EU member states and Japan for the treatment of advanced pancreatic neuroendocrine tumors. In addition, Afinitor is approved in more than 100 countries for advanced hormone receptor-positive, HER2-negative (HR+/HER2–) breast cancer in combination with the drug exemestane. Everolimus is also approved in more than 95 countries including in the US as Afinitor and in the EU as Votubia to treat patients with subependymal giant cell astrocytoma (SEGA) associated with tuberous sclerosis complex (TSC) and in more than 90 countries for the treatment of adult patients with renal angiomyolipomas and TSC who do not require immediate surgery. Afinitor Disperz, the dispersible tablet for oral suspension formulation of Afinitor, is approved for the TSC-SEGA population in several countries including the US and Japan. Votubia dispersible tablets are approved for the treatment of patients with TSC-SEGA in the EU member states. Everolimus, the active ingredient in Afinitor, is also available under the trade names Zortress/Certican for use in transplantation in the US and EU, respectively, and is exclusively licensed to Abbott and sublicensed to Boston Scientific for use in drug-eluting stents.

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Tasigna (nilotinib) is a signal transduction inhibitor of the BCR-ABL tyrosine kinase. Since its launch in 2007, Tasigna has been approved in more than 110 countries to treat patients with Ph+ CML in the chronic and/or accelerated phase who are resistant or intolerant to existing treatment, including Gleevec/Glivec. It is also approved in more than 85 markets, including the US, EU member states, Switzerland and Japan, to treat newly diagnosed patients in the chronic phase.

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Sandostatin SC and Sandostatin LAR (octreotide acetate/octreotide acetate for injectable suspension) is a somatostatin analogue indicated for the treatment of patients with acromegaly, a chronic disease caused by over-secretion of pituitary growth hormone in adults. Sandostatin is also indicated for the treatment of patients with certain symptoms associated with carcinoid tumors and other types of gastrointestinal and pancreatic neuroendocrine tumors. Additionally, Sandostatin LAR is approved in more than 60 countries for treatment of patients with advanced neuroendocrine tumors of the midgut or unknown primary tumor location. More than 65 countries have also approved an enhanced presentation of Sandostatin LAR, which includes a diluent, safety needle and vial adapter. Sandostatin was first launched in 1988 and is approved in more than 100 countries.

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Exjade and Jadenu (deferasirox) is an iron chelator approved for the treatment of chronic iron overload due to blood transfusions in patients two years of age and older as well as chronic iron overload in patients with non-transfusion-dependent thalassemia. Exjade is a dispersible tablet for oral suspension. Jadenu is an oral tablet formulation of Exjade that can be swallowed or crushed and was approved by the FDA in 2015. Patients with chronic anemia from diseases such as thalassemia, sickle cell disease and myelodysplastic syndromes require repeated transfusions, which puts them at risk of iron overload. Exjade was first approved in 2005 and is now approved in more than 100 countries, including the US, EU member states and Japan. Exjade is also approved in more than 70 countries, including the US and EU member states, for the treatment of chronic iron overload in patients 10 years of age and older with non-transfusion-dependent thalassemia. Regulatory applications for Jadenu have been submitted in the EU, Canada, Switzerland and other countries.

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Votrient (pazopanib) is a small molecule tyrosine kinase inhibitor that targets a number of intracellular proteins to limit tumor growth and cell survival. Votrient is approved in the US for the treatment of patients with advanced renal cell carcinoma (aRCC), and in the EU for first-line treatment of adult patients with aRCC and for patients who have received prior cytokine therapy

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for advanced disease. RCC is the most common type of kidney cancer in adults, and nearly one-fifth of patients have aRCC at the time of diagnosis. Votrient is also indicated for the treatment of patients with advanced soft tissue sarcoma (STS) who have received prior chemotherapy (efficacy in adipocytic STS or gastrointestinal stromal tumors has not been demonstrated). STS is a type of cancer which can arise from a wide variety of soft tissues including muscle, fat, blood vessel and nerves. Votrient is approved in more than 95 countries worldwide for aRCC and in more than 85 countries for aSTS. Votrient was acquired from GSK.

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Tafinlar + Mekinist (dabrafenib + trametinib) is the first combination of its kind for the treatment of patients with BRAF V600 mutation positive unresectable or metastatic melanoma, as detected by a validated test, in the US, EU and several other markets. In November 2015, the FDA granted regular approval for the combination of Tafinlar + Mekinist for the treatment of patients with BRAF V600E/K mutation-positive unresectable or metastatic melanoma as detected by an FDA-approved test. In August 2015, the combination of Tafinlar and Mekinist was approved in Europe for the treatment of adult patients with unresectable or metastatic melanoma with a BRAF V600 mutation. Tafinlar targets the serine/threonine kinase BRAF in the RAS/RAF/MEK/ERK pathway and Mekinist targets the threonine/tyrosine kinases MEK1 and MEK2 in the MAP kinase pathway, resulting in dual blockade of this pathway. This is the first combination of BRAF/MEK inhibitors to achieve a median overall survival of more than two years in two Phase III studies in BRAF V600 mutation positive unresectable or metastatic melanoma patients. Tafinlar and Mekinist are each also approved as single agents for the treatment of patients with unresectable or metastatic melanoma in more than 45 and 30 countries worldwide, respectively. Tafinlar and Mekinist were each acquired from GSK. As part of our purchase of oncology products from GSK, we obtained the worldwide exclusive rights granted by Japan Tobacco Inc. (JT) to develop, manufacture, and commercialize trametinib.

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Jakavi (ruxolitinib) is an oral inhibitor of the JAK1 and JAK2 tyrosine kinases. It is the first JAK inhibitor indicated for the treatment of disease-related splenomegaly or symptoms in adult patients with primary myelofibrosis, post-polycythemia vera myelofibrosis or post-essential thrombocythemia myelofibrosis and adult patients with polycythemia vera who are resistant to or intolerant of hydroxyurea. Jakavi is currently approved in more than 95 countries for patients with myelofibrosis, including EU member states, Japan, Canada, Australia, Mexico and Argentina. Jakavi is approved for the polycythemia vera indication in more than 45 countries, including Switzerland, Japan and Canada. Worldwide regulatory filings are ongoing in different regions for myelofibrosis and polycythemia vera. In the COMFORT-II Phase III study, five-year treatment with Jakavi demonstrated an overall survival advantage for myelofibrosis patients, despite crossover from best available therapy after week 48. Novartis licensed ruxolitinib from Incyte Corporation for development and commercialization outside the US. Ruxolitinib, marketed in the US as Jakafi® by Incyte Corporation, is approved by the FDA for the treatment of patients with polycythemia vera who have had an inadequate response to or are intolerant of hydroxyurea. Jakafi® is also approved by the FDA for treatment of patients with intermediate or high-risk myelofibrosis, including primary myelofibrosis, post-polycythemia vera myelofibrosis and post-essential thrombocythemia myelofibrosis.

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Promacta/Revolade (eltrombopag) is a once-daily oral thrombopoietin (TPO) receptor agonist that works by stimulating bone marrow cells to produce platelets. It is the only approved once-daily oral thrombopoietin receptor agonist, and is marketed under the brand name Promacta in the US and Revolade in most countries outside the US. In the US, Promacta is approved for the treatment of thrombocytopenia in adult and pediatric patients one year and older with chronic immune (idiopathic) thrombocytopenia (ITP) who have had an insufficient response to corticosteroids, immunoglobulins, or splenectomy. In August 2015, the FDA approved an oral suspension formulation of Promacta that is designed for younger children with chronic ITP who may not be able to swallow tablets. Promacta is also approved for the treatment of thrombocytopenia in

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patients with chronic hepatitis C to allow the initiation and maintenance of interferon-based therapy, and for the treatment of patients with severe aplastic anemia (SAA) who have had an insufficient response to immunosuppressive therapy. Revolade is approved in more than 100 countries worldwide for the treatment of adult chronic ITP splenectomised patients who are refractory to other treatments (e.g., corticosteroids, immunoglobulins). Revolade may be considered as second line treatment for adult non-splenectomised patients where surgery is contraindicated. In December 2015, the CHMP adopted a positive opinion recommending a change to the adult ITP indication to remove language which limited Revolade use only to splenectomised patients who are refractory to other treatments. The EC decision is expected in February 2016. Revolade is also indicated in more than 45 countries worldwide in adult patients with chronic hepatitis C virus infection for the treatment of thrombocytopenia, where the degree of thrombocytopenia is the main factor preventing the initiation or limiting the ability to maintain optimal interferon-based therapy. In September 2015, Revolade was approved by the EC for the treatment of adults with acquired SAA who were either refractory to prior immunosuppressive therapy or heavily pretreated and are unsuitable for hematopoietic stem cell transplant. Promacta/Revolade is marketed under a collaboration agreement between Ligand Pharmaceuticals, Inc., and Novartis. Promacta/Revolade was acquired from GSK.

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Farydak (panobinostat), previously known as LBH589, is a histone deacetylase (HDAC) inhibitor indicated, in combination with bortezomib and dexamethasone, for the treatment of adult patients with relapsed and/or refractory multiple myeloma who have received at least two prior regimens including bortezomib and an immunomodulatory agent. Farydak marks the first time an HDAC inhibitor with epigenetic activity is available to patients with multiple myeloma and provides an additional treatment option for patients whose disease has progressed after standard-of-care therapy. Farydak in combination with bortezomib and dexamethasone was approved in 2015 in the US, EU and Japan for certain patients with previously treated multiple myeloma. The exact indication for Farydak varies by country. Additional regulatory submissions for Farydak are being reviewed by health authorities worldwide. Results from the pivotal Phase III PANORAMA-1 study of Farydak in combination with bortezomib and dexamethasone in patients with multiple myeloma who have received at least two prior regimens, including bortezomib and an immunomodulatory agent, were published online in the journal Blood and showed a progression free survival benefit favoring the Farydak combination.

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Odomzo (sonidegib), previously known as LDE225, is a selective smoothened inhibitor approved in the US in July 2015 for the treatment of adult patients with locally advanced basal cell carcinoma (laBCC) that has recurred following surgery or radiation therapy, or those who are not candidates for surgery or radiation therapy. In addition, the EC approved Odomzo in August 2015 for the treatment of adult patients with laBCC who are not amenable to curative surgery or radiation therapy.

Cardio-Metabolic

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Galvus (vildagliptin), an oral DPP-4 inhibitor, and Eucreas, a vildagliptin and metformin single-pill combination, are indicated for the treatment of type 2 diabetes. The products were first approved in 2007. Galvus is currently approved in more than 130 countries, including EU member states, Japan (as Equa) and countries in Latin America and Asia-Pacific. Eucreas was the first single-pill combination of a DPP-4 inhibitor and metformin approved in Europe, and also under the trade name Galvus Met, and is currently approved in more than 125 countries. In 2012, Galvus received EU approval for expanded use as a second-line monotherapy for type 2 diabetes patients who cannot take metformin. In 2012, the EC approved the use of Galvus and Eucreas in combination with other diabetes treatments. The first new approval was for the use of vildagliptin in combination with insulin, with or without metformin, for patients with type 2 diabetes when diet, exercise and a stable dose of insulin do not result in glycemic control. The second approval was for

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the use of vildagliptin in triple combination with metformin and a sulphonylurea for the treatment of type 2 diabetes when diet and exercise plus dual therapy with these two agents do not provide adequate glycemic control. In 2013, a German agency, the Gemeinsamer Bundesausschuss (G-BA), initiated an analysis of the benefits of drugs approved prior to 2011. As part of that analysis, the G-BA concluded that Galvus and Eucreas did not provide an added benefit over certain other medicines indicated for the treatment of that disease. As a result, we were unable to reach agreement with the head organization of the German statutory health insurance funds, GKV-Spitzenverband, on an acceptable price for Galvus and Eucreas, and in 2014 we stopped distribution of these products in Germany. In 2014, Eucreas (850/50mg and 1000/50mg) was approved in China as the first high-dose single-pill combination metformin/DPP-4 inhibitor approved in that country. Galvus monotherapy indication was approved in China in April 2015. Eucreas was approved in Japan in September 2015 under the name EquMet as the first single-pill combination metformin/DPP-4 inhibitor approved in that country.

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Entresto (sacubitril/valsartan), previously known as LCZ696, is a first-in-class angiotensin receptor/neprilysin inhibitor indicated for the treatment of chronic heart failure with reduced ejection fraction (HFrEF). It acts to enhance the protective neurohormonal systems of the heart (neprilysin system) while simultaneously suppressing the harmful system (the renin-angiotensin-aldosterone system, or RAAS). Entresto was approved and launched in the US in July 2015 as a treatment for HFrEF. In September 2015, the Swiss health authority approved Entresto to reduce the risk of cardiovascular mortality and morbidity in patients with HFrEF. In November 2015, Entresto was approved in the EU for the treatment of adult patients with symptomatic HFrEF. PARAGON-HF, a Phase III trial of Entresto in patients with chronic heart failure with preserved ejection fraction is underway.

Immunology and Dermatology

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Neoral (cyclosporine, USP Modified) is an immunosuppressant to prevent organ rejection following a kidney, liver, or heart transplant. Neoral is also approved for use in lung transplant in many countries outside of the US. This micro-emulsion formulation of cyclosporine is also indicated for treating selected autoimmune disorders such as psoriasis and rheumatoid arthritis. First launched in 1995, Neoral is marketed in approximately 100 countries.

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Myfortic (enteric-coated formulation of mycophenolate sodium) is approved in more than 90 countries for the prevention of acute rejection of kidney allografts, and is indicated in combination with cyclosporine and corticosteroids. Myfortic was first approved in the US in 2004 and in the EU in 2003.

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Zortress/Certican (everolimus) is an oral inhibitor of the mTOR pathway, indicated to prevent organ rejection following solid organ transplantation. Under the trade name Certican, it is approved in more than 90 countries to prevent organ rejection for renal and heart transplant patients, and in addition, in more than 70 countries worldwide to prevent organ rejection for liver transplant patients. In the US, under the trade name Zortress, the drug is approved for the prophylaxis of organ rejection in adult patients at low-moderate immunologic risk receiving a kidney transplant as well as for the prophylaxis of allograft rejection in adult liver transplant recipients. Everolimus is also available from Novartis in different dosage strengths and for different uses in non-transplant patient populations under the brand names Afinitor, Afinitor Disperz and Votubia. Everolimus is also exclusively licensed to Abbott and sublicensed to Boston Scientific for use in drug-eluting stents.

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Ilaris (canakinumab) is a human monoclonal antibody that selectively binds and neutralizes interleukin-1b (IL-1b), a pro-inflammatory cytokine. Since 2009, Ilaris has been approved in more than 70 countries for the treatment of children and adults suffering from cryopyrin-associated periodic syndromes, a group of rare disorders characterized by chronic recurrent fever, urticaria,

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occasional arthritis, deafness, and potentially life-threatening amyloidosis. In 2013, Ilaris was approved in the EU for the treatment of acute gouty arthritis in patients who cannot be managed with standard of care, and in the US, EU and other countries for the treatment of systemic juvenile idiopathic arthritis. Ilaris is also being developed for hereditary periodic fever syndromes.

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Xolair (omalizumab) is currently approved in the EU, Switzerland and more than 40 other countries as a treatment for chronic spontaneous urticaria (CSU)/chronic idiopathic urticaria (CIU) including approvals in the EU as add-on therapy for the treatment of CSU in adult and adolescent (12 years and above) patients with inadequate response to H1 antihistamine treatment, and, in the US, for the treatment of adults and adolescents (12 years of age and above) with CIU who remain symptomatic despite H1 antihistamine treatment. See also, Xolair in "Respiratory" below. We co-promote Xolair with Genentech in the US and share a portion of operating income, but we do not record any US sales. Novartis records all sales of Xolair outside the US. See "Item 18. Financial Statements—Note 27" for further information.

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Cosentyx (secukinumab) is a fully human monoclonal antibody that selectively neutralizes circulating interleukin 17A (IL-17A). In December 2014, Cosentyx was approved in Japan for the treatment of both psoriasis vulgaris and psoriatic arthritis in adults who are not adequately responding to systemic therapies (except for biologics). This approval marked the first country approval for Cosentyx in the world and made it the first IL-17A inhibitor to receive regulatory approval in either of these indications. In January 2015, Cosentyx was approved in the EU as a first-line systemic treatment of moderate-to-severe plaque psoriasis in adults who are candidates for systemic therapy, and in the US as a treatment for moderate-to-severe plaque psoriasis in adult patients who are candidates for systemic therapy or phototherapy. In addition to the EU and US, Cosentyx has been approved and launched in Switzerland, Canada, Australia and various other markets for the treatment of moderate-to-severe plaque psoriasis. In November 2015, Cosentyx was approved in the EU for the treatment of adults with ankylosing spondylitis who have responded inadequately to conventional therapy, such as non-steroidal anti-inflammatory drugs, and for the treatment of active psoriatic arthritis in adults when the response to disease modifying anti-rheumatic drug therapy is unsatisfactory. In Japan, Cosentyx is approved for the treatment of moderate-to-severe plaque psoriasis as well as PsA. In December 2015, the Japanese MHLW approved Cosentyx for the treatment of patients with pustular psoriasis. In January 2016, Cosentyx was approved in the US for the treatment of adults with active ankylosing spondylitis and for the treatment of adults with active psoriatic arthritis.

Retina

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Lucentis (ranibizumab) is a recombinant humanized high affinity antibody fragment that binds to vascular endothelial growth factors (VEGF). It is an anti-VEGF therapy licensed in many countries for five ocular indications: neovascular age-related macular degeneration (nAMD), visual impairment due to diabetic macular edema (DME), visual impairment due to macular edema secondary to branch retinal vein occlusion (BRVO), visual impairment due to macular edema secondary to central retinal vein occlusion (CRVO), and visual impairment due to choroidal neovascularization secondary to pathologic myopia (myopic CNV). Lucentis is approved in more than 100 countries to treat patients with nAMD, for the treatment of visual impairment due to DME and macular edema secondary to RVO. Also, Lucentis is licensed in more than 80 countries for the treatment of visual impairment due to myopic CNV. Lucentis is the only anti-VEGF treatment available in a pre-filled syringe. Since its launch in 2007, there have been more than 3.7 million patient-treatment years of exposure for Lucentis and more than 22 million injections. We licensed Lucentis from Genentech for development and commercialization outside of the US. See "Item 18. Financial Statements—Note 27" for further information.

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Respiratory

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Xolair (omalizumab) is the only humanized monoclonal antibody approved for the treatment of moderate to severe persistent allergic asthma in the US in adolescents (aged 12 and above) and adults. Xolair is approved in more than 90 countries, including the US since 2003 and the EU since 2005. It is approved for severe persistent allergic asthma in the EU in children (aged six and above), adolescents, and adults. A liquid formulation of Xolair in pre-filled syringes has been launched in most European countries. In Japan, Xolair was approved in January 2009 for the treatment of severe persistent allergic asthma in adults (aged 15 and older) and was approved in August 2013 in pediatric patients aged 6 years or older for the same indication. Xolair was submitted to the FDA in December 2015 for pediatric allergic asthma. See also, Xolair in "Immunology and Dermatology" above.

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Ultibro Breezhaler (indacaterol/glycopyrronium bromide) / Utibron Neohaler (indacaterol/glycopyrrolate) is a fixed-dose combination of the long-acting beta₂-adrenergic agonist (LABA) indacaterol and the long-acting muscarinic antagonist (LAMA) glycopyrronium bromide. Ultibro Breezhaler (indacaterol 85 mcg/glycopyrronium 43 mcg), inhalation powder, hard capsules was approved in the EU in 2013 as a once-daily maintenance bronchodilator treatment to relieve symptoms in adult patients with COPD, and in Japan the MHLW approved Ultibro Inhalation Capsules (glycopyrronium 50 mcg/indacaterol 110 mcg), delivered through the low resistance Breezhaler inhalation device, for relief of various symptoms due to airway obstruction in COPD (chronic bronchitis, emphysema). In October 2015 the combination was approved in the US under the name Utibron Neohaler (indacaterol 27.5 mcg/glycopyrrolate 15.6 mcg) as a twice-daily dual bronchodilator for the long-term maintenance treatment of airflow obstruction in patients with COPD, including chronic bronchitis and/or emphysema. The combination is approved in more than 80 countries and launched in more than 40 countries. The LAMA glycopyrronium bromide is approved individually as once-daily Seebri Breezhaler in the EU, Seebri (glycopyrronium) Inhalation Capsules 50 mcg administered through the Breezhaler device in Japan, and twice-daily Seebri Neohaler in the US, where the active ingredient is known as glycopyrrolate. It is now approved in more than 90 countries worldwide. Glycopyrronium bromide was exclusively licensed to Novartis in April 2005 by Vectura Group plc and its co-development partner Sosei. The LABA indacaterol is approved individually as once-daily Onbrez Breezhaler in the EU, Onbrez Inhalation Capsules delivered through the Breezhaler inhalation device in Japan, and Arcapta Neohaler in the US. It is now approved in more than 100 countries worldwide.

Neuroscience

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Gilenya (fingolimod) is the first oral therapy approved to treat relapsing forms of multiple sclerosis (RMS) and the first in a new class of compounds called sphingosine 1-phosphate receptor modulators. In the US, Gilenya is indicated for relapsing forms of MS. In the EU, Gilenya is indicated for adult patients with high disease activity despite treatment with at least one disease modifying agent, or rapidly evolving severe relapsing-remitting MS. Gilenya is the only oral disease-modifying therapy to impact the course of RMS with high efficacy across four key measures of disease activity: relapses, MRI lesions, brain shrinkage (brain volume loss) and disability progression. As of November 2015, more than 130,000 patients have been treated in clinical trials and in a post-marketing setting, with more than 285,000 total patient-years of exposure. Gilenya is currently approved in more than 80 countries around the world. Gilenya is licensed from Mitsubishi Tanabe Pharma Corporation.

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Exelon (rivastigmine tartrate) and Exelon Patch (rivastigmine transdermal system) are cholinesterase inhibitors indicated for the treatment of Alzheimer's disease (AD) dementia and Parkinson's disease (PD) dementia. They are the oral and transdermal formulations, respectively, of the cholinesterase inhibitor rivastigmine. Exelon capsules have been available since 1997 to treat

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mild to moderate AD dementia and are approved in more than 90 countries. In 2006, Exelon became the only cholinesterase inhibitor to be approved for mild to moderate PD dementia in addition to AD in both the US and EU. Exelon Patch was approved in 2007 in the US and EU and has been approved for the treatment of mild-to-moderate AD in more than 90 countries, including more than 20 countries where it is also approved for Parkinson's disease dementia. The once-daily Exelon Patch has shown comparable efficacy and superior tolerability to the highest recommended doses of Exelon capsules, with significant improvement in cognition and overall functioning compared to placebo. In 2013, the FDA expanded the approved indication for Exelon Patch to also include the treatment of patients with severe Alzheimer's disease. In 2013, European Marketing Authorization was obtained for the higher dose in mild-to-moderate AD. The higher dose has been approved in more than 50 countries. In 2013, the FDA expanded the approved indication for Exelon Patch to also include the treatment of patients with severe Alzheimer's disease. The severe indication has now been approved in more than 10 countries.

Established Medicines

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Diovan (valsartan), together with Diovan HCT/Co-Diovan (valsartan and hydrochlorothiazide), is an angiotensin II receptor blocker (ARB) and is one of the top-selling branded anti-hypertensive medications worldwide (IMS MAT October 2015; 58 countries audited). Diovan is the only agent in its class approved to treat all of the following: high blood pressure (including children 6 to 18 years), high-risk heart attack survivors and patients with heart failure. First launched in 1996, Diovan is available in more than 120 countries for treating high blood pressure, in more than 90 countries for heart failure, and in more than 70 countries for heart attack survivors. First launched in 1997, Diovan HCT/Co-Diovan is approved in more than 100 countries worldwide. Diovan is subject to generic competition in the US, EU and Japan. Diovan HCT/Co-Diovan is subject to generic competition in the US and EU.

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Exforge (valsartan and amlodipine besylate) is a single-pill combination of the ARB Diovan and the calcium channel blocker amlodipine besylate. First approved for the treatment of high blood pressure in Switzerland in 2006, and in the US and EU in 2007, it is now available in more than 100 countries. Exforge HCT (valsartan, amlodipine besylate and hydrochlorothiazide) is a single pill combining three widely prescribed high blood pressure treatments: an ARB, a calcium channel blocker and a diuretic (hydrochlorothiazide). Exforge HCT was approved in the EU and the US in 2009, and is now available in more than 75 countries.

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Voltaren/Cataflam (diclofenac sodium/potassium/resinate/free acid) is a leading non-steroidal anti-inflammatory drug (NSAID) for the relief of symptoms in rheumatic diseases such as rheumatoid arthritis and osteoarthritis, and for various other inflammatory and pain conditions. Voltaren/Cataflam was first registered in 1973 and is available in more than 140 countries. This product, which is subject to generic competition, is marketed by the Pharmaceuticals Division in a wide variety of dosage forms, including tablets, drops, suppositories, ampoules and topical therapy. In addition, in various countries, our Sandoz Division markets generic versions of the product, and our Alcon Division markets Voltaren for ophthalmic indications. In addition, we have licensed the Voltaren trademarks to our consumer healthcare joint venture with GSK to be used in the marketing of low dose oral forms and the topical forms of Voltaren as over-the-counter products.

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Ritalin, Ritalin LA, Focalin and Focalin XR (methylphenidate HCl, methylphenidate HCl extended release, dexmethylphenidate HCl and dexmethylphenidate HCl extended release) are indicated for the treatment of attention deficit hyperactivity disorder (ADHD) in children. Ritalin LA and Focalin XR are additionally indicated for ADHD in adults. Ritalin is also indicated for narcolepsy. Ritalin was first marketed during the 1950s and is available in more than 70 countries. Ritalin LA is available in more than 30 countries. Focalin comprises the active d-isomer of methylphenidate and therefore requires half the dose of Ritalin. Focalin and Focalin XR are available in the US.

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Compounds in Development

        The traditional model of development comprises three phases, which are defined as follows:

Phase I:    First clinical trials of a new compound, generally performed in a small number of healthy human volunteers, to assess the clinical safety and tolerability as well as metabolic and pharmacologic properties of the compound.

Phase II:    Clinical studies that are performed with patients who have the target disease, with the aim of continuing the Phase I safety assessment in a larger group, assessing the efficacy of the drug in the patient population, and determining the appropriate doses for further evaluation.

Phase III:    Large-scale clinical studies with several hundred to several thousand patients, which are conducted to establish the safety and efficacy of the drug-specific indications for regulatory approval. Phase III trials may also be used to compare a new drug against a current standard of care to evaluate the overall benefit-risk relationship of the new medicine.

        Though we use this traditional model as a platform, we have tailored the process to be simpler, more flexible and efficient. Our development paradigm consists of two parts: Exploratory Development and Confirmatory Development. Exploratory Development consists of clinical "proof of concept" (PoC) studies, which are small clinical trials (typically 5-15 patients) that combine elements of traditional Phase I/II testing. These customized trials are designed to give early insights into issues such as safety, efficacy and toxicity for a drug in a given indication. Once a positive proof of concept has been established, the drug moves to the Confirmatory Development stage. Confirmatory Development has elements of traditional Phase II/III testing and includes trials aimed at confirming the safety and efficacy of the drug in the given indication leading up to submission of a dossier to health authorities for approval. Like traditional Phase III testing, this stage can also include trials which compare the drug to the current standard of care for the disease, in order to evaluate the drug's overall risk/benefit profile.

        The following table and paragraph summaries provide an overview of the key projects currently in the Confirmatory Development stage within our Pharmaceuticals Division, including projects seeking to develop potential uses of new molecular entities, as well as potential additional indications or new formulations for already marketed products. The year that each project entered the current phase of development disclosed below reflects the year in which the decision to enter the phase was made. This may be different from the year in which the first patient received the first treatment in the related clinical trial. A reference to a project being in registration means that an application has been filed with a health authority for marketing approval.

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Selected Development Projects

Project/Product	Common name	Mechanism of action	Potential indication/ Disease area	Business franchise	Formulation/ Route of administration	Year Project Entered Current Development Phase	Planned filing dates/Current phase
ABL001	TBD	BCR-ABL inhibitor	Chronic myeloid leukemia	Oncology	Oral	2015	³2020/I
ACZ885	canakinumab	Anti-interleukin-1b monoclonal antibody	Hereditary periodic fevers	Immunology and Dermatology	Subcutaneous injection	2013	2016/III
			Secondary prevention of cardiovascular events	Cardio-Metabolic	Subcutaneous injection	2011	2017/III
Afinitor/Votubia (RAD001)	everolimus	mTOR inhibitor	Non-functioning GI and lung neuroendocrine tumors	Oncology	Oral	2015	US/EU (registration)
			Tuberous sclerosis complex seizures	Oncology	Oral	2013	2016/III
			Diffuse large B-cell lymphoma	Oncology	Oral	2009	2016/III
AMG 334	TBD	Selective CGRP receptor antagonist	Migraine	Neuroscience	Subcutaneous injection	2015	III
Arzerra	ofatumumab	Anti-CD20 monoclonal antibody	Chronic lymphocytic leukemia (extended treatment)	Oncology	Intravenous infusion	2015	EU (registration) US (approved)
			Chronic lymphocytic leukemia (relapse)	Oncology	Intravenous infusion	2009	2016/III
			Refractory non-Hodgkin's lymphoma	Oncology	Intravenous infusion	2010	2017/III
ASB183	afuresertib	AKT inhibitor	Solid and hematologic tumors	Oncology	Oral	2011	³ 2020/I
BAF312	siponimod	Sphingosine-1-phosphate receptor modulator	Secondary progressive multiple sclerosis	Neuroscience	Oral	2012	2019/III
BGJ398	infigratinib	Pan-FGF receptor kinase inhibitor	Solid tumors	Oncology	Oral	2012	³ 2020/II
BKM120	buparlisib	PI3K inhibitor	Metastatic breast cancer, hormone receptor-positive, aromatase inhibitor resistant/mTOR naïve, 2nd line (+ fulvestrant)	Oncology	Oral	2011	2016/III
			Metastatic breast cancer, hormone receptor-positive, aromatase inhibitor and mTOR inhibitor resistant, 3rd line (+ fulvestrant)	Oncology	Oral	2011	2016/III
			Solid tumors	Oncology	Oral	2011	³ 2020/I
BYL719	alpelisib	PI3Ka inhibitor	Hormone receptor-positive, HER2 negative advanced breast cancer (postmenopausal women), 2nd line (+ fulvestrant)	Oncology	Oral	2015	2019/III
			Solid tumors	Oncology	Oral	2010	³2020/I

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Project/Product	Common name	Mechanism of action	Potential indication/ Disease area	Business franchise	Formulation/ Route of administration	Year Project Entered Current Development Phase	Planned filing dates/Current phase
BYM338	bimagrumab	Inhibitor of activin receptor Type II	Sporadic inclusion body myositis	Neuroscience	Intravenous infusion	2013	2016/III
			Hip fracture	Neuroscience	Intravenous infusion	2013	³2020/II
			Sarcopenia	Neuroscience	Intravenous infusion	2014	³2020/II
CAD106	TBD	Beta-amyloid-protein therapy	Alzheimer's disease	Neuroscience	Intramuscular injection	2008	³2020/ II/III
CJM112	TBD	Anti-IL-17 monoclonal antibody	Immune disorders	Immunology and Dermatology	Subcutaneous injection	2015	³2020/II
CNP520	TBD	BACE inhibitor	Alzheimer's Disease	Neuroscience	Oral	2015	³2020/ I/II
Cosentyx (AIN457)	secukinumab	Anti-IL-17 monoclonal antibody	Non-radiographic axial spondyloarthritis	Immunology and Dermatology	Subcutaneous injection	2015	2018/III
CTL019	tisagenlecleucel-T	CD19-targeted chimeric antigen receptor T-cell immunotherapy	Pediatric acute lymphoblastic leukemia	Cell and Gene Therapies	Intravenous	2012	2017/II
			Diffuse large B-cell lymphoma	Cell and Gene Therapies	Intravenous	2014	2017/II
EGF816	TBD	Epidermal growth factor receptor inhibitor	Solid tumors	Oncology	Oral	2014	2018/ I/II
EMA401	TBD	Angiotensin II receptor antagonist	Neuropathic Pain	Neuroscience	Oral	2011	³2020/II
Entresto (LCZ696)	valsartan and sacubitril (as sodium salt complex)	Angiotensin receptor/ neprilysin inhibitor	Chronic heart failure with preserved ejection fraction	Cardio-Metabolic	Oral	2013	2019/III
			Post-acute myocardial infarction	Cardio-Metabolic	Oral	2015	³ 2020/III
Exjade film-coated tablet (FCT)	deferasirox	Iron chelator	Iron overload	Oncology	Oral film-coated tablet	2015	EU (registration) US (approved as Jadenu)
FCR001	TBD	Inducing stable donor chimerism and immunological tolerance	Renal transplant	Cell and Gene Therapies	Intravenous	2009	³2020/II
Gilenya	fingolimod	Sphingosine-1-phosphate receptor modulator	Chronic inflammatory demyelinating polyradiculoneuropathy	Neuroscience	Oral	2012	2017/III
HSC835	TBD	Stem cell regeneration	Stem cell transplantation	Cell and Gene Therapies	Intravenous	2012	³2020/II
INC280	capmatinib	c-MET inhibitor	Non-small cell lung cancer	Oncology	Oral	2013	2018/II
KAE609	cipargamin	PfATP4 inhibitor	Malaria	Established Medicines	Oral	2012	³2020/II
KAF156	TBD	Imidazolopiperazines derivative	Malaria	Established Medicines	Oral	2013	2019/II
LCI699	osilodrostat	Aldosterone synthase inhibitor	Cushing's disease	Oncology	Oral	2011	2017/III
LEE011	ribociclib	CDK4/6 inhibitor	Hormone receptor-positive, HER2 negative advanced breast cancer (postmenopausal women), 1st line (+ letrozole)	Oncology	Oral	2013	2016/III

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Project/Product	Common name	Mechanism of action	Potential indication/ Disease area	Business franchise	Formulation/ Route of administration	Year Project Entered Current Development Phase	Planned filing dates/Current phase
			Hormone receptor-positive, HER2 negative advanced breast cancer (postmenopausal women), 1st/2nd line (+ fulvestrant)	Oncology	Oral	2015	2018/III
			Hormone receptor-positive, HER2 negative advanced breast cancer (premenopausal women), 1st line, (+ tamoxifen + goserelin or NSAI + goserelin)	Oncology	Oral	2014	2018/III
			Solid tumors	Oncology	Oral	2011	³2020/I
LJM716	elgemtumab	HER3 monoclonal antibody	Solid tumors	Oncology	Intravenous infusion	2012	³2020/I
LJN452	TBD	FXR agonist	Non-alcoholic steatohepatitis	Immunology and Dermatology	Oral	2015	³2020/II
Lucentis	ranibizumab	Anti-VEGF monoclonal antibody fragment	Choroidal neovascularization secondary to conditions other than age-related macular degeneration and pathologic myopia	Retina	Intravitreal injection	2013	2016/III
			Retinopathy of Prematurity	Retina	Intravitreal injection	2014	2018/III
OAP030 (also known as Fovista / E10030)	pegpleranib	Aptamer anti-platelet-derived growth factor (PDGF)	Neovascular age-related macular degeneration	Retina	Solution	2013	2017/III
OMB157	ofatumumab	Anti-CD-20 monoclonal antibody	Relapsing multiple sclerosis	Neuroscience	Subcutaneous injection	2008	2019/II
PIM447	TBD	Pan-PIM inhibitor	Hematologic tumors	Oncology	Oral	2015	³2020/I
PKC412	midostaurin	Signal transduction inhibitor	Acute myeloid leukemia	Oncology	Oral	2008	2016/III
			Aggressive systemic mastocytosis	Oncology	Oral	2008	2016/II
Promacta/ Revolade	eltrombopag	Thrombopoietin receptor agonist	Pediatric immune thrombocytopenia	Oncology	Oral and oral suspension	2015	EU (registration) US (approved)
QAW039	fevipiprant	CRTH2 antagonist	Asthma	Respiratory	Oral	2010	2019/III
			Atopic dermatitis	Immunology and Dermatology	Oral	2013	³2020/II
QAX576	TBD	Anti-interleukin-13 monoclonal antibody	Allergic diseases	Immunology and Dermatology; Respiratory	Subcutaneous injection	2013	³2020/II
QGE031	ligelizumab	High affinity anti-IgE monoclonal antibody	Chronic spontaneous urticaria/ Inducible urticaria	Immunology and Dermatology	Subcutaneous injection	2015	³2020/II
QMF149	indacaterol, mometasone furoate (in fixed dose combination)	Long-acting beta2-adrenergic agonist and inhaled corticosteroid	Asthma	Respiratory	Inhalation	2015	2018/III
QVM149	indacaterol, mometasone furoate, glycopyrronium bromide (in fixed dose combination)	Long-acting beta2-adrenergic agonist, Long-acting muscarinic antagonist and inhaled corticosteroid	Asthma	Respiratory	Inhalation	2015	2018/III
RLX030	serelaxin	Recombinant form of human relaxin-2 hormone	Acute heart failure	Cardio-Metabolic	Intravenous infusion	2009	2017/III

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Project/Product	Common name	Mechanism of action	Potential indication/ Disease area	Business franchise	Formulation/ Route of administration	Year Project Entered Current Development Phase	Planned filing dates/Current phase
Signifor LAR (SOM230)	pasireotide	Somatostatin analogue	Cushing's disease	Oncology	Long-acting release/ intramuscular injection	2011	2016/III
Tafinlar+Mekinist	dabrafenib + trametinib	BRAF inhibitor + MEK inhibitor	BRAF V600+ non-small cell lung cancer	Oncology	Oral	2011	2016/II
			BRAF V600+ melanoma (adjuvant)	Oncology	Oral	2013	2017/III
			BRAF V600+ colorectal cancer	Oncology	Oral	2012	³ 2020/ I/II
Tasigna	nilotinib	BCR-ABL inhibitor	Chronic myeloid leukemia treatment-free remission	Oncology	Oral	2012	2016/III
VAY736	TBD	Anti BAFF (B-cell activating factor) antibody	Primary Sjoegren's syndrome	Immunology and Dermatology	Subcutaneous injection	2015	³2020/II
Votrient	pazopanib	Angiogenesis inhibitor	Renal cell carcinoma (adjuvant)	Oncology	Oral	2010	2016/III
Zykadia (LDK378)	ceritinib	ALK inhibitor	ALK + advanced non-small cell lung cancer (first line, treatment naïve)	Oncology	Oral	2013	2017/III
			ALK + advanced non-small cell lung cancer (brain metastases)	Oncology	Oral	2015	2019/II

Key Development Projects

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ACZ885 (canakinumab) was first approved in 2009 for cryopyrin associated periodic syndrome (CAPS) as Ilaris. Since then, Ilaris has been approved in the EU in 2013 for the treatment of acute attacks in gouty arthritis and for the treatment of systemic juvenile idiopathic arthritis in the US, EU and other countries. Based on Phase II data of ACZ885 in TNF-receptor associated periodic syndrome and Familial Mediterranean Fever showing substantial symptom relief in these two rare periodic fever syndromes, a Phase III study was initiated in June 2014. The goal of this pivotal confirmatory study is to demonstrate efficacy and safety in TNF-receptor associated periodic syndrome, colchicine resistant Familial Mediterranean Fever and Hyper-IgD syndrome. This approach has been agreed with FDA and CHMP. ACZ885 is also being investigated in the fully enrolled pivotal Phase III CANTOS study to determine whether ACZ885 can reduce the risk of recurrent cardiovascular events (cardiovascular death, non-fatal myocardial infarction, non-fatal stroke) in post-myocardial infarction patients with elevated inflammatory burden versus placebo when administered quarterly in addition to standard of care.

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Afinitor/Votubia and Afinitor Disperz (RAD001, everolimus) is an oral inhibitor of the mTOR pathway. Phase III studies are underway in patients with advanced breast cancer and diffuse large B-cell lymphoma (PILLAR-2). The EXIST-3 (EXamining everolimus In a Study of TSC) clinical trial is underway to evaluate the efficacy and safety of everolimus in patients with TSC who have refractory partial-onset seizures (uncontrollable seizures localized to a specific area of the brain). Results from the pivotal Phase III RADIANT-4 (RAD001 In Advanced Neuroendocrine Tumors) trial were presented in 2015 at a European medical congress and showed that Afinitor reduced the risk of progression by 52% versus placebo in patients with advanced, progressive, nonfunctional neuroendocrine tumors (NET) of gastrointestinal (GI) or lung origin. The safety results were in line with the known safety profile of Afinitor. In October 2015, the FDA granted priority review to Afinitor for use in advanced, progressive, non-functional neuroendocrine tumors of gastrointestinal or lung origin. Results from the RADIANT-4 trial were published in The Lancet in December 2015.

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•

AMG 334 is a fully human monoclonal antibody which is part of a new class of compounds targeting Calcitonin-Gene-Related-Peptide (CGRP) being investigated for the prevention of migraine. AMG 334 inhibits the activity of CGRP by targeting its receptor, which is believed to transmit signals to cause the pain associated with migraine. Data announced in May 2015 showed that AMG 334 met its primary endpoint of reduction of monthly mean migraine days compared with placebo in a Phase II trial for the prevention of episodic migraine. AMG 334 is currently being evaluated in a large global Phase II trial in the prevention of chronic migraine and in two large global Phase III studies to further assess its safety and efficacy in the prevention of episodic migraine. Novartis and Amgen entered into a collaboration agreement in August 2015 with respect to the development and commercialization of Amgen's proprietary monoclonal antibody AMG 334.

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Arzerra (ofatumumab) is a human monoclonal antibody that is designed to target the CD20 molecule found on the surface of chronic lymphocytic leukemia (CLL) cells and normal B lymphocytes. In 2015, results from the Phase III COMPLEMENT 2 study showed that treatment with ofatumumab plus fludarabine and cyclophosphamide significantly improved median progression-free survival by 54% compared to treatment with fludarabine and cyclophosphamide alone in patients with relapsed CLL. In addition, results from the Phase III PROLONG study evaluating ofatumumab maintenance therapy versus no further treatment (observation) in patients with relapsed CLL who responded to induction treatment at relapse formed the basis for submissions made in 2015 to the EMA and FDA for this indication. In September 2015, the FDA granted Priority Review for ofatumumab as maintenance therapy in relapsed CLL, and in January 2016 the FDA approved Arzerra for extended treatment of patients who are in complete or partial response after at least two lines of therapy for recurrent or progressive CLL. A Phase III trial is also underway to investigate ofatumumab in refractory non-Hodgkin's lymphoma. In November 2015, Genmab announced that the Phase III study of single-agent ofatumumab compared to single-agent rituximab in patients with follicular non-Hodgkin's lymphoma that has relapsed at least six months after completion of treatment with a rituximab-containing regimen will be stopped early. The decision to stop the study was made after a planned interim analysis performed by an independent data monitoring committee showed that it was unlikely that ofatumumab would show superiority if the trial were to be completed as planned. Arzerra is marketed under a license agreement between Genmab and Novartis. Arzerra for oncology indications was acquired from GSK as part of the previously-announced portfolio transformation transactions. In December 2015, we acquired all remaining rights from GSK to develop ofatumumab for multiple sclerosis and other autoimmune indications, disclosed as OMB157.

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BAF312 (siponimod) is an oral, second-generation sphingosine 1-phosphate receptor modulator in Phase III development for secondary progressive multiple sclerosis. BAF312 binds selectively to the sphingosine 1-phosphate receptor subtypes 1 and 5, distributes effectively to the brain where it may modulate central S1P1,5 receptors to impact central nervous system inflammation and repair mechanisms. The results from the BOLD study, an adaptive dose-ranging Phase II study, were published in Lancet Neurology in 2013. These results showed that compared to placebo, BAF312 reduced brain MRI lesions by up to 80% in relapsing-remitting multiple sclerosis and relapses were infrequent and significantly reduced. BAF312 entered Phase III development in secondary progressive multiple sclerosis in 2012.

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BKM120 (buparlisib) is an orally bioavailable pan-PI3K inhibitor. The PI3K/AKT/mTOR pathway is an important intracellular signaling network that regulates cellular metabolism, proliferation and survival. Abnormal activation of the PI3K/AKT/mTOR pathway has been identified as an important step in the initiation and maintenance of tumors and a key regulator of angiogenesis and upregulated metabolic activities in tumor cells. BKM120 has shown significant cell growth inhibition and induction of apoptosis in a variety of tumor cell lines as well as in animal models. BKM120 is currently being investigated in clinical trials in advanced solid tumors in combination

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with other agents, including two Phase III trials in hormone receptor-positive (HR+) advanced breast cancer. Results from the Phase III BELLE-2 trial of BKM120 in patients with HR+, HER2 negative advanced breast cancer were presented in December 2015 at a US breast cancer symposium. In this trial, BKM120 plus fulvestrant led to 6.9 months of progression free survival compared to 5.0 months for placebo plus fulvestrant, a statistically significant difference. The subpopulation of patients with ctDNA PIK3CA mutation experienced a 3.8 month progression-free survival improvement when adding BKM120 to fulvestrant compared to the placebo plus fulvestrant arm. The results of this trial are being discussed with regulatory authorities.

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BYL719 (alpelisib) is an orally bioavailable, alpha isoform-specific PI3K inhibitor. In breast cancer cell lines harboring PIK3CA mutations, BYL719 has been shown to inhibit the PI3K/AKT/mTOR pathway and have anti-proliferative effects. In addition, cancer cell lines with PIK3CA mutations were more sensitive to alpelisib than those without the mutation across a broad range of different cancers. BYL719 is in a Phase III study in hormone receptor-positive advanced breast cancer.

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BYM338 (bimagrumab) is a novel, human monoclonal antibody in development to treat sporadic inclusion body myositis (sIBM). In 2013, FDA granted Breakthrough Therapy designation to BYM338 for sIBM, and we initiated a Phase II/III study of bimagrumab in patients with sIBM. This study showed that in sIBM patients, a single dose of bimagrumab improved muscle volume at eight weeks (muscle volume for right leg increased 6.5% compared to placebo) and walking distance at 16 weeks. BYM338 binds with high affinity to activin type II receptors, preventing natural ligands, including myostatin and activin, from binding. BYM338 stimulates muscle growth by blocking signaling from these inhibitory molecules. In addition to sIBM, BYM338 is in clinical development for multiple acute and chronic muscle-wasting conditions, including recovery from hip fracture and sarcopenia. BYM338 was developed by Novartis, in collaboration with MorphoSys.

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Cosentyx (secukinumab) is a fully human monoclonal antibody that selectively neutralizes circulating IL-17A. In January 2016, Cosentyx was approved by the FDA for the treatment of adults with ankylosing spondylitis (AS) and for the treatment of adults with psoriatic arthritis (PsA). Results for Cosentyx presented at a US medical meeting showed up to 80% of patients with AS had no radiographic progression in the spine as shown by x-ray assessment over two years. This is the first time that data on structural spinal progression in AS have been presented for an IL-17A inhibitor. At the same meeting, new data was also presented showing no further progression in joint damage in 84% of patients with PsA over two years of treatment. In addition, the results of the MEASURE 1 and MEASURE 2 Phase III studies for Cosentyx in AS were published in the New England Journal of Medicine in December 2015. These pivotal studies demonstrated significant clinical improvements with Cosentyx versus placebo in the signs and symptoms of active AS, and collectively, the studies form the largest clinical trial program ever conducted in AS, involving 590 patients. Secukinumab is also in Phase III development for non-radiographic axial spondyloarthritis.

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CTL019 (tisagenlecleucel-T) is an investigational therapy that uses chimeric antigen receptors (CARs) to fight cancer. CARs are engineered proteins that transform a patient's own T cells into antigen-specific cells which seek out target proteins present on a patient's cancerous tumor. When these cells are re-introduced into the patient's blood, they demonstrate the potential to bind to the cancer cells and destroy them. CTL019 targets a protein called CD19 that is associated with a number of B-cell malignancies. The latest findings from two ongoing Phase II studies of CTL019 were presented in December 2015 at the American Society of Hematology annual meeting. In a study of relapsed/refractory pediatric acute lymphoblastic leukemia, 55 of 59 patients experienced complete remissions with CTL019. Overall survival was 79% at 12 months and relapse-free survival was 76% at six months and 55% at 12 months. Additionally, 52 of 59 patients developed Grade 1–4 cytokine-release syndrome. In a study of CTL019 in certain relapsed/refractory non-Hodgkin

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lymphomas, an overall response rate of 73% (8/11) was observed in patients with follicular lymphoma and an overall response rate of 47% (7/15) in patients with diffuse large B-cell lymphoma. Four patients developed cytokine-release syndrome of grade 3 or higher at peak T cell expansion.

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EMA401 is a novel angiotensin II Type 2 receptor (AT₂R) antagonist in Phase II development. Targeting AT₂R is an emerging approach to neuropathic pain treatment. AT₂R antagonists block the pain signaling pathways in the peripheral nervous system. Positive results from a Phase II clinical trial of EMA401 in post-herpetic neuralgia, a painful condition that develops in some people following herpes zoster (shingles), were published in a major medical journal in February 2014. In addition, thus far, EMA401 has not been associated with central nervous system side effects such as dizziness or confusion, which are typically associated with existing therapies.

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Entresto (sacubitril/valsartan), previously known as LCZ696, is a first-in-class angiotensin receptor/neprilysin inhibitor approved and marketed for the treatment of chronic heart failure with reduced ejection fraction (HFrEF). In addition, Novartis is conducting two large outcome studies. The first, PARAGON-HF, a Phase III trial of Entresto in patients with chronic heart failure with preserved ejection fraction is underway, and the second, PARADISE-HF, in patients at high risk for heart failure after a myocardial infarction (MI) is about to start.

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Gilenya (fingolimod) is a sphingosine 1-phosphate receptor modulator approved for the treatment of relapsing forms of multiple sclerosis. A Phase III study of fingolimod in patients with chronic inflammatory demyelinating polyradiculoneuropathy was initiated in 2012. Submissions to health authorities in this indication are anticipated in 2017.

•

LEE011 (ribociclib) is an orally bioavailable, highly selective small molecule inhibitor of cyclin dependent kinase (CDK) 4 and 6. The compound is in Phase III registration studies in hormone receptor-positive advanced breast cancer with results expected in 2016. LEE011 is also in Phase I and II investigation, with a number of ongoing studies in solid tumors. LEE011 was discovered by Novartis as part of a drug discovery collaboration with Astex Pharmaceuticals.

•

Lucentis (ranibizumab) is an anti-VEGF monoclonal antibody fragment in Phase III development for the treatment of visual impairment due to choroidal neovascularization secondary to conditions other than age-related macular degeneration and pathologic myopia. Filings for this indication are expected in 2016.

•

OAP030 (pegpleranib; also known as Fovista and E10030) is an oligo-nucleotide aptamer that inhibits the action of platelet-derived growth factor (PDGF), and has the potential to enhance the symptomatic treatment effect of anti-VEGFs to induce lesion regression, which may result in vision gains, reduce vision loss and potentially modify the disease in the longer term. The OAP030 Phase III program consists of three clinical trials to evaluate the safety and efficacy of OAP030 in combination with anti-VEGF drugs for the treatment of neovascular age-related macular degeneration (AMD). The second Phase III trial of pegpleranib in combination with Lucentis for the treatment of neovascular age-related macular degeneration (nAMD) completed enrollment in October 2015. Initial top-line data from the OAP030 Phase III clinical program are expected to be available in 2016. In November 2015, Genentech entered into an agreement with Novartis to participate in certain rights related to the Novartis licensing and commercialization agreement with Ophthotech Corporation for OAP030. We continue to hold the license for the exclusive rights to develop and market OAP030 outside the US and will remain responsible for the development and commercialization for OAP030 outside of the US. Genentech will share certain risks and benefits with Novartis.

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OMB157 (ofatumumab) is a fully human monoclonal antibody administered by subcutaneous injection in development for MS. OMB157 works by binding to the CD20 molecule on the B cell surface and inducing B cell depletion. Positive phase IIb results in MS patients were presented in

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2014 and showed significant reduction in the number of new brain lesions in the first 24 weeks after ofatumumab administration. Novartis plans to initiate a Phase III program for OMB157 in MS in 2016. We expect to make regulatory filings in MS in 2019. Ofatumumab is marketed by Novartis for oncology indications under the brand name Arzerra.

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PKC412 (midostaurin) is an oral, multi-targeted kinase inhibitor in Phase III development for treatment of patients with FLT3-mutated acute myeloid leukemia (AML) and in Phase II development for aggressive systemic mastocytosis (ASM) and mast cell leukemia (MCL). The pivotal Phase III RATIFY study of newly-diagnosed AML patients aged 18 to under 60 who have a FLT3 mutation was presented at a major US congress in 2015. In the RATIFY study, patients who received PKC412 plus standard induction and consolidation chemotherapy experienced a 23% improvement in overall survival compared to those treated with standard induction and consolidation chemotherapy alone. The median overall survival for patients in the PKC412 treatment group was 74.7 months, versus 26.0 months for patients in the placebo group. This study evaluated the addition of either PKC412 or placebo to daunorubicin/cytarabine in the induction phase, followed by high-dose cytarabine in the consolidation phase. Patients who achieved complete remission after consolidation chemotherapy continued treatment with PKC412 or placebo as a single agent for up to one year. PKC412 is the first compound to illustrate an overall survival benefit targeting FLT3 in AML. These data are expected to form the basis for regulatory filings for PKC412 in newly diagnosed FLT3 mutated AML. Filings are expected for newly diagnosed, FLT3-mutated AML and for ASM/MCL in 2016.

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Promacta/Revolade (eltrombopag) is a once-daily oral thrombopoietin receptor agonist that works by stimulating bone marrow cells to produce platelets. Promacta/Revolade is currently under review in the EU for pediatric immune thrombocytopenia. Phase II and III studies to investigate eltrombopag in myelodysplastic syndrome (MDS) and acute myeloid leukemia (AML) associated thrombocytopenia do not support registration of Promacta/Revolade in intermediate-1, 2 and high risk MDS and/or AML. We are evaluating the data from both trials to assess whether ongoing development of Promacta/Revolade in these patient populations is warranted.

•

RLX030 (serelaxin), the first in a new class of medicines, is a recombinant form of the human hormone relaxin-2, and is believed to act through multiple mechanisms on the heart, kidneys and blood vessels. Results from the Phase III RELAX-AHF study show that RLX030 improved symptoms and reduced mortality in patients with acute heart failure (AHF). Data from the study were presented at the American Heart Association congress in 2012 and published simultaneously in The Lancet showing that RLX030 significantly reduced dyspnea (or shortness of breath), the most common symptom of AHF, which was the primary objective of the study based on pre-specified protocol criteria. In addition, RLX030 was associated with reductions in worsening of heart failure and all-cause mortality (a safety endpoint) and in deaths due to cardiovascular causes (an additional pre-specified exploratory endpoint) at the end of six months. In 2014, the FDA and CHMP each decided that further data would be required in order for marketing authorizations to be granted. A second Phase III study, RELAX-AHF-2, is underway and aims to replicate the key findings of RELAX-AHF, with cardiovascular mortality as the primary endpoint. Following interim analysis, the Data Monitoring Committee of the RELAX-AHF-2 study recommended continuing the serelaxin RELAX-AHF-2 trial without changes. Top-line results are expected in 2017, after study completion based on a pre-specified number of cardiovascular events. RLX030 received regulatory approval from the Ministry of Health in Russia in 2014 and is launched there under the trade name Reasanz.

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Signifor LAR (SOM230, pasireotide) is a somatostatin analogue in development as a long-acting release formulation for patients with Cushing's disease, with a Phase III study underway.

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Tafinlar (dabrafenib) targets the serine/threonine kinase BRAF in the RAS/RAF/MEK/ERK pathway and Mekinist (trametinib) targets the threonine/tyrosine kinases MEK1 and MEK2 in the

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MAP kinase pathway, resulting in dual blockade of this pathway, which is the main escape mechanism for resistance. Phase II studies are underway to evaluate the efficacy and safety of Tafinlar + Mekinist in patients with BRAF V600 mutation positive non-small cell lung cancer (NSCLC). Tafinlar has a Breakthrough Therapy designation from the FDA for treatment of NSCLC patients with BRAF V600E mutations who have received at least one prior line of platinum-containing chemotherapy. In July 2015, the combination therapy Tafinlar + Mekinist also received Breakthrough Therapy designation from the FDA for NSCLC patients with BRAF V600E mutations. A Phase III study is also underway for BRAF V600 mutation positive melanoma patients in the adjuvant setting. Results from a pooled data analysis showed that patients with BRAF V600E/K mutation-positive unresectable or metastatic melanoma treated with Tafinlar + Mekinist experienced longer progression-free survival and overall survival when baseline lactate dehydrogenase (LDH) levels were normal compared to those with elevated LDH levels, further validating the combination for BRAF positive patients with a better prognosis (indicated by a normal LDH level).

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Tasigna (nilotinib) is a selective tyrosine-kinase inhibitor that inhibits the BCR-ABL protein produced by the Philadelphia chromosome, which is found in most people who have chronic myeloid leukemia (CML). Novartis has initiated a global clinical trial program to evaluate the potential for Philadelphia chromosome positive (Ph+) CML patients to maintain deep molecular response after stopping nilotinib. ENESTfreedom, ENESTop, ENESTgoal, and ENESTpath will evaluate the feasibility of stopping treatment, and achieving successful treatment free remission in patients with Ph+ CML in the chronic phase and deep molecular response on nilotinib. ENESTfreedom and ENESTop are pivotal trials and have completed enrollment.

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Votrient (pazopanib) is a small molecule tyrosine kinase inhibitor that targets a number of intracellular proteins to limit tumor growth and cell survival. A phase III trial (PROTECT) is underway to evaluate Votrient for the adjuvant treatment of patients with localized or locally advanced renal cell carcinoma following nephrectomy.

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Zykadia (LDK378, ceritinib) is a potent and highly selective oral anaplastic lymphoma kinase (ALK) inhibitor that is in development for ALK positive (ALK+) cancers. Two Phase III clinical trials comparing ceritinib with chemotherapy in treatment-naïve and in previously-treated NSCLC patients are ongoing and actively recruiting patients worldwide.

Projects Added To And Subtracted From The Development Table Since 2014

Project/Product	Potential indication/ Disease area	Change	Reason
ABL001	Chronic myeloid leukemia	Added	Entered Confirmatory Development
AMG 334	Migraine	Added	Collaboration with Amgen announced in September 2015
Arzerra	Chronic lymphocytic leukemia (extended treatment)	Added	Acquired from GSK
	Chronic lymphocytic leukemia (relapse)	Added	Acquired from GSK
	Refractory non-Hodgkin's lymphoma	Added	Acquired from GSK

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Project/Product	Potential indication/ Disease area	Change	Reason
ASB183	Solid and hematologic tumors	Added	Acquired from GSK
BCT197	Chronic obstructive pulmonary disease	Removed	Transferred to Mereo BioPharma Group Limited
BGS649	Obese hypogonadotropic hypogonadism	Removed	Transferred to Mereo BioPharma Group Limited
BKM120	Metastatic breast cancer, hormone receptor-positive, aromatase inhibitor resistant, mTOR inhibitor naïve	Now disclosed as metastatic breast cancer, hormone receptor-positive, aromatase inhibitor resistant/mTOR naïve, 2nd line (+ fulvestrant)
	Metastatic breast cancer, hormone receptor-positive, aromatase inhibitor and mTOR inhibitor resistant	Now disclosed as metastatic breast cancer, hormone receptor-positive, aromatase inhibitor and mTOR inhibitor resistant, 3rd line (+ fulvestrant)
BYL719	Hormone receptor-positive, HER2 negative advanced breast cancer (postmenopausal women), 2nd line (+ fulvestrant)	Added	Entered Confirmatory Development
CNP520	Alzheimer's disease	Added	Entered Confirmatory Development
CTL019	Adult and pediatric acute lymphoblastic leukemia	Now disclosed as pediatric acute lymphoblastic leukemia
Cosentyx (AIN457)	Non-radiographic axial spondyloarthritis	Added	Entered Confirmatory Development
	Psoriatic arthritis	Commercialized
	Ankylosing spondylitis	Commercialized
EMA401	Neuropathic Pain	Added	Acquired in acquisition of Spinifex Pharmaceuticals, Inc.
Entresto (LCZ696)	Chronic heart failure with reduced ejection fraction	Commercialized

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Project/Product	Potential indication/ Disease area	Change	Reason
	Post-acute myocardial infarction	Added	Entered Confirmatory Development
Jakavi	Polycythemia vera	Commercialized
LBH589 (Farydak)	Relapsed or relapsed-and-refractory multiple myeloma	Commercialized
LCQ908	Familial chylomicronemia syndrome	Removed	Development discontinued
LDE225 (Odomzo)	Advanced basal cell carcinoma	Commercialized
LEE011	Hormone receptor-positive, HER2 negative advanced breast cancer (postmenopausal women)	Now disclosed as hormone receptor-positive, HER2 negative advanced breast cancer (postmenopausal women), 1st line (+ letrozole)
	Hormone receptor-positive, HER2 negative advanced breast cancer (postmenopausal women), 1st/2nd line (+ fulvestrant)	Added	Entered Confirmatory Development
	Hormone receptor-positive, HER2 negative advanced breast cancer (premenopausal women)	Now disclosed as hormone receptor-positive, HER2 negative advanced breast cancer (premenopausal women), 1st line, (+ tamoxifen + goserelin or NSAI + goserelin)
LGX818	Solid tumors	Removed	Divested to Array BioPharma Inc.
LIK066	Type 2 diabetes	Removed	Development discontinued
LJN452	Non-alcoholic steatohepatitis	Added	Entered Confirmatory Development

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Project/Product	Potential indication/ Disease area	Change	Reason
Lucentis	Choroidal neovascularization and macular edema secondary to conditions other than age-related macular degeneration, diabetic macular edema, retinal vein occlusion and pathologic myopia	Now disclosed as choroidal neovascularization secondary to conditions other than age-related macular degeneration and pathologic myopia
MEK162	NRAS mutant melanoma	Removed	Rights returned to Array BioPharma Inc.
	Low-grade serous ovarian cancer	Removed	Rights returned to Array BioPharma Inc.
	Solid tumors	Removed	Rights returned to Array BioPharma Inc.
MEK162 and LGX818	BRAF mutant melanoma	Removed	MEK162 rights returned to Array BioPharma Inc.
			LGX818 divested to Array BioPharma Inc.
OAP030 (also known as Fovista/E10030)	Wet age-related macular degeneration	Now disclosed as neovascular age-related macular degeneration
OMB157	Relapsing multiple sclerosis	Added	Acquired from GSK
PIM447	Hematologic tumors	Added	Entered Confirmatory Development
Promacta/Revolade	Pediatric immune thrombocytopenia	Added	Acquired from GSK
QGE031	Asthma	Removed	Development discontinued
	Chronic spontaneous urticaria/ Inducible urticaria	Added	Entered Confirmatory Development
QMF149	Asthma	Added	Entered Confirmatory Development
QVM149	Asthma	Added	Entered Confirmatory Development
Seebri (NVA237)	Chronic obstructive pulmonary disease	Commercialized

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Project/Product	Potential indication/ Disease area	Change	Reason
Tafinlar + Mekinist	BRAF V600+ non-small-cell lung cancer	Added	Acquired from GSK
	BRAF V600+ melanoma (adjuvant)	Added	Acquired from GSK
	BRAF V600+ colorectal cancer	Added	Acquired from GSK
Tekturna	Reduction of cardiovascular death/ hospitalizations in chronic heart failure patients	Removed	Development discontinued
Ultibro (QVA149)	Chronic obstructive pulmonary disease	Commercialized
Votrient	Renal cell carcinoma (adjuvant)	Added	Acquired from GSK
VAY736	Primary Sjoegren's syndrome	Added	Entered Confirmatory Development
Zykadia (LDK378)	ALK + advanced non-small cell lung cancer (brain metastases)	Added	Entered Confirmatory Development
	ALK + advanced non-small cell lung cancer (post chemotherapy and post crizotinib)	Commercialized
	ALK + advanced non-small cell lung cancer (chemotherapy naïve, crizotinib naïve)	Now disclosed as ALK + advanced non-small cell lung cancer (first line, treatment naïve)

Principal Markets

        The Pharmaceuticals Division sells products in approximately 155 countries worldwide. Net sales are generally concentrated in the US, Europe and Japan. However, sales from expanding "emerging growth

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markets" have become increasingly important to us. The following table sets forth the aggregate 2015 net sales of the Pharmaceuticals Division by region:

Pharmaceuticals	2015 Net sales to third parties
	$ millions		%
Europe		10,139		33
United States		10,279		34
Asia, Africa, Australasia		7,224		24
Canada and Latin America		2,803		9
Total		30,445		100
Of which in Established Markets*		22,615		74
Of which in Emerging Growth Markets*		7,830		26

*

Emerging Growth Markets comprise all markets other than the Established Markets of the US, Canada, Western Europe, Japan, Australia and New Zealand.

        Many of our Pharmaceuticals Division's products are used for chronic conditions that require patients to consume the product over long periods of time, ranging from months to years. Net sales of the vast majority of our products are not subject to material changes in seasonal demand.

Production

        The primary goal of our manufacturing and supply chain management program is to ensure the uninterrupted, timely and cost-effective supply of products that meet all product specifications. We manufacture our products at eleven pharmaceutical and four bulk chemical production facilities, as well as one biotechnology site. Bulk chemical production involves the manufacture of therapeutically active compounds, mainly by chemical synthesis or by biological processes such as fermentation. Pharmaceutical production involves the manufacture of "galenic" forms of pharmaceutical products such as tablets, capsules, liquids, ampoules, vials and creams. Major bulk chemical sites are located in Schweizerhalle, Switzerland; Grimsby, UK; Ringaskiddy, Ireland and Changshu, China. Significant pharmaceutical production facilities are located in Stein, Switzerland; Wehr, Germany; Singapore; Torre, Italy; Barbera, Spain and in various other locations. Operational responsibility for biologics manufacturing at our facilities in Huningue, France and Singapore, and at our Sandoz Division facilities in Kundl and Schaftenau, Austria, and Menges, Slovenia, has been brought together within our Pharmaceuticals Division. In addition, we own and operate a Good Manufacturing Practices quality cell processing site in Morris Plains, New Jersey. In 2015, we announced the closing of our site in Resende, Brazil and the downsizing of our site in Ringaskiddy, Ireland, and finalized the divestment of our manufacturing site in Taboão de Serra, Brazil.

        During clinical trials, which can last several years, the manufacturing process for a particular product is rationalized and refined. By the time clinical trials are completed and products are launched, the manufacturing processes have been extensively tested and are considered stable. However, improvements to these manufacturing processes may continue over time.

        Raw materials for the manufacturing process are either produced in-house or purchased from a number of third party suppliers. Where possible, we maintain multiple supply sources so that the business is not dependent on a single or limited number of suppliers. However, our ability to do so may at times be limited by regulatory or other requirements. We monitor market developments that could have an adverse effect on the supply of essential materials. Our suppliers of raw materials are required to comply with Novartis quality standards.

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        The manufacture of our products is complex and heavily regulated by governmental health authorities, which means that supply is never guaranteed. If we or our third party suppliers fail to comply with applicable regulations then there could be a product recall or other shutdown or disruption of our production activities. We have implemented a global manufacturing strategy to maximize business continuity in case of such events or other unforeseen catastrophic events. However, there can be no guarantee that we will be able to successfully manage such issues when they arise.

Marketing and Sales

        The Pharmaceuticals Division serves customers with nearly 2,000 field force representatives in the US, and an additional nearly 20,000 in the rest of the world, as of December 31, 2015, including supervisors and administrative personnel. These trained representatives, where permitted by law, present the therapeutic risks and benefits of our products to physicians, pharmacists, hospitals, insurance groups and managed care organizations. We continue to see increasing influence of customer groups beyond prescribers, and Novartis is responding by adapting our business practices to engage appropriately with such constituencies.

        Although specific distribution patterns vary by country, Novartis generally sells its prescription drugs primarily to wholesale and retail drug distributors, hospitals, clinics, government agencies and managed healthcare providers. The growing number of so-called "specialty" drugs in our portfolio has resulted in increased engagement with specialty pharmacies. In the US, specialty pharmacies continue to grow as a distribution channel for specialty products, with an increasing number of health plans mandating use of specialty pharmacies to monitor specialty drug utilization and costs.

        In the US, certain products can be advertised by way of television, newspaper and magazine advertising. Novartis also pursues co-promotion/co-marketing opportunities as well as licensing and distribution agreements with other companies when legally permitted and economically attractive.

        The marketplace for healthcare is evolving with consumers becoming more informed stakeholders in their healthcare decisions and looking for solutions to meet their changing needs. Where permitted by law, Novartis seeks to assist the patient, delivering innovative solutions to drive education, access, and improved patient care.

        As a result of continuing changes in healthcare economics and an aging population, the US Centers for Medicare & Medicaid Services (CMS) is now the largest single payor for healthcare services in the US. In addition, both commercial and government sponsored managed care organizations continue to be one of the largest groups of payors for healthcare services in the US. In other territories, national health services are often the only significant payor for healthcare services. In an effort to control prescription drug costs, almost all managed care organizations and national health services use formularies that list specific drugs that may be reimbursed, and/or the level of reimbursement for each drug. Managed care organizations and national health services also increasingly utilize various cost-benefit analyses to determine whether or not newly-approved drugs will be added to a formulary and/or the level of reimbursement for that drug, and whether or not to continue to reimburse existing drugs. We have dedicated teams that actively seek to optimize formulary positions for our products.

Competition

        The global pharmaceutical market is highly competitive, and we compete against other major international corporations which sell patented prescription pharmaceutical products, and which have substantial financial and other resources. Competition within the industry is intense and extends across a wide range of commercial activities, including pricing, product characteristics, customer service, sales and marketing, and research and development.

        In addition, as is the case with other pharmaceutical companies selling patented pharmaceuticals, Novartis faces ever-increasing challenges from companies selling products which compete with our

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products, including competing patented products and generic forms of our products following the expiry of patent protection. Generic companies may also gain entry to the market through successfully challenging our patents, but we vigorously use legally permissible measures to defend our patent rights. We also face competition from over-the-counter (OTC) products that do not require a prescription from a physician. See also "—Regulation—Price Controls", below.

        There is ongoing consolidation in the pharmaceutical industry. At the same time, new entrants are looking to use their expertise to establish or expand their presence in healthcare, including technology companies hoping to benefit as data and data management become increasingly important in our industry.

Research and Development

        We are a leader in the pharmaceuticals industry in terms of research and development, including the level of our investment. In 2015, our Pharmaceuticals Division expensed $7.2 billion (on a core basis $7.1 billion) in research and development, which amounted to 24% of the division's net sales. For additional information about research and development expenditures by our Pharmaceuticals Division over the last three years, please see "Item 5. Operating and Financial Review and Prospects—5.A Operating Results—Results of Operations—Research and development."

        The discovery and development of a new drug is a lengthy process, usually requiring approximately 10 to 15 years from the initial research to bringing a drug to market, including approximately six to eight years from Phase I clinical trials to market entry. At each of these steps, there is a substantial risk that a compound will not meet the requirements to progress further. In such an event, we may be required to abandon a compound in which we have made a substantial investment.

        We manage our research and development expenditures across our entire portfolio in accordance with our strategic priorities. We make decisions about whether or not to proceed with development projects on a project-by-project basis. These decisions are based on the project's potential to meet a significant unmet medical need or to improve patient outcomes, the strength of the science underlying the project, and the potential of the project (subject to the risks inherent in pharmaceutical development) to generate significant positive financial results for the Company. Once a management decision has been made to proceed with the development of a particular molecule, the level of research and development investment required will be driven by many factors, including the medical indications for which it is being developed, the number of indications being pursued, whether the molecule is of a chemical or biological nature, the stage of development, and the level of evidence necessary to demonstrate clinical efficacy and safety.

Research program

        Our Research program is conducted by the Novartis Institutes for BioMedical Research (NIBR), which is responsible for the discovery of new medicines. We established NIBR in 2003. The principal goal of our research program is to discover new medicines for diseases with unmet medical need. To do this we focus our work in areas where we have sufficient scientific understanding and believe we have the potential to change the practice of medicine. This requires the hiring and retention of the best talent, a focus on fundamental disease mechanisms that are relevant across different disease areas, continuous improvement in technologies for drug discovery and potential therapies, close alliance with clinical colleagues, and the establishment of appropriate external complementary alliances.

        At NIBR's headquarters in Cambridge, Massachusetts, and at sites in Switzerland, Singapore, China and three other US locations, more than 6,000 scientists, physicians and business professionals contribute to research into disease areas such as cardiovascular and metabolism disease, neuroscience, oncology, muscle disorders, ophthalmology, autoimmune diseases, and gastrointestinal diseases. Research platforms such as the Center for Proteomic Chemistry are headquartered at the NIBR site in Basel, Switzerland. In addition, the Novartis Institute for Tropical Diseases, the Friedrich Miescher Institute, and the Genomics

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Institute of the Novartis Research Foundation focus on basic genetic and genomic research as well as research into diseases of the developing world such as malaria, dengue and African sleeping sickness.

        All drug candidates are taken to the clinic via "proof-of-concept" trials to enable rapid testing of the fundamental efficacy of the drug while collecting basic information on pharmacokinetics, safety and tolerability, and adhering to the guidance for early clinical testing set forth by health authorities. Following proof-of-concept, our Pharmaceuticals Division conducts confirmatory trials on the drug candidates.

        In 2012, Novartis and the University of Pennsylvania (Penn) announced an exclusive global research and development collaboration to develop and commercialize targeted chimeric antigen receptor (CAR) immunotherapies for the treatment of cancers. The research component of this collaboration focuses on accelerating the discovery and development of additional therapies using CAR immunotherapy. In September 2014, as part of its alliance with Novartis, Penn announced plans for the construction of the Center for Advanced Cellular Therapeutics (CACT) on the Perelman School of Medicine campus in Philadelphia, Pennsylvania. The CACT is planned to be a first of its kind research and development center established specifically to develop and manufacture adoptive T cell immunotherapies under the research collaboration guided by scientists and clinicians from NIBR and Penn. Construction of the CACT is expected to be completed in 2016.

        In February 2014, we acquired CoStim Pharmaceuticals Inc., a Cambridge, Massachusetts-based, privately held biotechnology company focused on harnessing the immune system to eliminate immune-blocking signals from cancer. This acquisition enhanced our late discovery stage immunotherapy programs directed to several targets, including PD-1.

        In January 2015, we announced collaboration and licensing agreements with Intellia Therapeutics for the discovery and development of new medicines using CRISPR genome editing technology and Caribou Biosciences for the development of drug discovery tools. CRISPR, an acronym that stands for clustered regularly interspaced short palindromic repeats, is an approach that allows scientists to easily and precisely edit the genes of targeted cells. In a short period of time it has proven to be a powerful tool for creating very specific models of disease for use in drug discovery and has potential for use as a therapeutic modality for treating disease at the genetic level by deleting, repairing or replacing the genes that cause disease.

        In March 2015, we entered into a collaboration with Aduro Biotech focused on the discovery and development of next generation cancer immunotherapies targeting the STING signaling pathway. STING is a signaling pathway that when activated is known to initiate broad innate and adaptive immune responses in tumors. Aduro's novel small molecule cyclic dinucleotides (CDNs) have proven to generate an immune response in preclinical models that specifically attacks tumor cells. In addition, we launched a new research group dedicated to immuno-oncology.

        In September 2015, we announced that NIBR's President Dr. Mark Fishman will retire when he reaches his contractual retirement age in March 2016. Dr. James E. Bradner, a physician-scientist from Dana Farber Cancer Institute and Harvard Medical School has been named Dr. Fishman's successor.

        In January 2016, we announced a collaboration and licensing agreement with Surface Oncology, which gives Novartis access to four pre-clinical programs in immuno-oncology.

Development program

        The focus of our Development program is to determine the safety and efficacy of a potential new medicine in humans. As previously described (see "—Compounds in Development"), we view the development process as generally consisting of an Exploratory phase where "proof of concept" is established, and a Confirmatory phase where this concept is confirmed in large numbers of patients.

        Within this paradigm, clinical trials of drug candidates generally proceed through the traditional three phases: I, II and III. In Phase I clinical trials, a drug is usually tested with about 5 to 15 subjects. The

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tests study the drug's safety profile, including the safe dosage range. The studies also determine how a drug is absorbed, distributed, metabolized and excreted, and the duration of its action. In Phase II clinical trials, the drug is tested in controlled studies of approximately 100 to 300 volunteer patients to assess the drug's efficacy and safety, and to establish the appropriate therapeutic dose. In Phase III clinical trials, the drug is further tested in larger numbers of volunteer patients in clinics and hospitals. In each of these phases, physicians monitor volunteer patients closely to assess the potential new drug's safety and efficacy. The vast amount of data that must be collected and evaluated makes clinical testing the most time-consuming and expensive part of new drug development. The next stage in the drug development process is to seek registration for the new drug. See "—Regulation."

        At each of these phases of clinical development, our activities are managed by our Innovation Management Board (IMB). The IMB is responsible for oversight over all major aspects of our development portfolio. In particular, the IMB is responsible for the endorsement of proposals to commence the first clinical trials of a development compound, and of major project phase transitions and milestones following a positive proof of concept outcome, including transitions to full development and the decision to submit a regulatory application to the health authorities. The IMB is also responsible for project discontinuations, for the endorsement of overall development strategy and the endorsement of development project priorities. The IMB is chaired by the Head of Development of our Pharmaceuticals Division and has representatives from Novartis senior management, as well as experts from a variety of fields among its core members and extended membership.

Cell and Gene Therapies

        In 2014, Novartis Pharmaceuticals created a franchise focused on the development and commercialization of Cell and Gene Therapies. The Cell and Gene Therapies franchise aims to develop a new approach to treating or potentially curing some patients suffering from a variety of life-threatening diseases, including blood-borne cancers, sickle cell disease, thalassemias and other diseases of the blood by developing a portfolio of new treatments that replace, repopulate and/or reprogram cells, and potentially selectively regulate the immune system. The franchise will initially focus on novel cell therapies and cell-based gene therapies including: Chimeric Antigen Receptor T-Cell technology in immuno-oncotherapy with CTL019, Facilitated Cell Therapy Platform (FCRx) in renal transplantation with FCR001 and stem cell expansion and transplantation with HSC835.

Diagnostics

        Recent advances in biology and bioinformatics have led to a much deeper understanding of the underlying genetic drivers of disease and the molecular pathways cancer uses to progress. Novartis is developing new therapies that specifically target the mechanisms responsible for disease. To support these advances, Novartis is developing innovative diagnostic tests that could potentially improve physicians' ability to administer the appropriate treatment to those patients who have the greatest potential to benefit from them. Our Pharmaceuticals Division has two units that support our commitment to advancing precision medicine.

Companion Diagnostics

        Our Companion Diagnostics (CDx) function works as an integrated part of the drug development process. CDx brings internal capabilities and resources to bear in the development of new diagnostic tests to support our global program teams and efforts in various disease areas. Additionally, the CDx team forms strategic collaborations with third parties to secure access to technologies and capabilities that fit the requirements of our drug development programs. The CDx unit develops tests to meet high regulatory standards for the approval of companion diagnostics around the world.

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Genoptix Medical Laboratory

        In 2011, Novartis acquired Genoptix Medical Laboratory, located in Carlsbad, California. This organization provides comprehensive diagnostics and informatics services to community-based hematologists and oncologists in the US. As one of the largest hematopathology centers in the US, Genoptix offers comprehensive testing solutions in hematology and solid tumor molecular profiling. Their mission is to create value for the patient and the healthcare system by transforming diagnostic information into actionable clinical insights. Genoptix also provides services to support Novartis and third-party clinical trials.

Alliances and acquisitions

        Our Pharmaceuticals Division enters into business development agreements with other pharmaceutical and biotechnology companies and with academic institutions in order to develop new products and access new markets. We license products that complement our current product line and are appropriate to our business strategy. Therapeutic area strategies have been established to focus on alliances and acquisition activities for key disease areas and indications that are expected to be growth drivers in the future. We review products and compounds we are considering licensing using the same criteria as we use for our own internally discovered drugs.

Regulation

        The international pharmaceutical industry is highly regulated. Regulatory authorities around the world administer numerous laws and regulations regarding the testing, approval, manufacturing, importing, labeling and marketing of drugs, and also review the safety and efficacy of pharmaceutical products. Extensive controls exist on the non-clinical and clinical development of pharmaceutical products. These regulatory requirements, and the implementation of them by local health authorities around the globe, are a major factor in determining whether a substance can be developed into a marketable product, and the amount of time and expense associated with that development.

        Health authorities, including those in the US, EU and Japan, have high standards of technical evaluation. The introduction of new pharmaceutical products generally entails a lengthy approval process. In all major countries, products must be authorized or registered prior to marketing, and such authorization or registration must subsequently be maintained. In recent years, the registration process has required increased testing and documentation for the approval of new drugs, with a corresponding increase in the expense of product introduction.

        To register a pharmaceutical product, a registration dossier containing evidence establishing the safety, efficacy and quality of the product must be submitted to regulatory authorities. Generally, a therapeutic product must be registered in each country in which it will be sold. In every country, the submission of an application to a regulatory authority does not guarantee that approval to market the product will be granted. Although the criteria for the registration of therapeutic drugs are similar in most countries, the formal structure of the necessary registration documents and the specific requirements, including risk tolerance, of the local health authorities can vary significantly from country to country. It is possible that a drug can be registered and marketed in one country while the registration authority in another country may, prior to registration, request additional information from the pharmaceutical company or even reject the product. It is also possible that a drug may be approved for different indications in different countries.

        The registration process generally takes between six months and several years, depending on the country, the quality of the data submitted, the efficiency of the registration authority's procedures and the nature of the product. Many countries provide for accelerated processing of registration applications for innovative products of particular therapeutic interest. In recent years, intensive efforts have been made among the US, the EU and Japan to harmonize registration requirements in order to achieve shorter

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development and registration times for medical products. However, the requirement in many countries to negotiate selling prices or reimbursement levels with government regulators and other payors can substantially extend the time until a product may finally be available to patients.

        The following provides a summary of the regulatory processes in the principal markets served by Pharmaceuticals Division affiliates:

United States

        In the US, applications for drug registration are submitted to and reviewed by the FDA. The FDA regulates the testing, manufacturing, labeling and approval for marketing of pharmaceutical products intended for commercialization in the US. The FDA continues to monitor the safety of pharmaceutical products after they have been approved for sale in the US market. The pharmaceutical development and registration process is typically intensive, lengthy and rigorous. When a pharmaceutical company has gathered data which it believes sufficiently demonstrates a drug's safety, efficacy and quality, then the company may file a New Drug Application (NDA) or Biologics License Application (BLA), as applicable, for the drug. The NDA or BLA must contain all the scientific information that has been gathered about the drug and typically includes information regarding the clinical experiences of patients tested in the drug's clinical trials. A Supplemental New Drug Application (sNDA) or BLA amendment must be filed for new indications for a previously approved drug.

        Once an application is submitted, the FDA assigns reviewers from its staff in biopharmaceutics, chemistry, clinical microbiology, pharmacology/toxicology, and statistics. After a complete review, these content experts then provide written evaluations of the NDA or BLA. These recommendations are consolidated and are used by senior FDA staff in its final evaluation of the NDA or BLA. Based on that final evaluation, the FDA then provides to the NDA or BLA's sponsor an approval, or a "complete response" letter if the NDA or BLA application is not approved. If not approved, the letter will state the specific deficiencies in the NDA or BLA which need to be addressed. The sponsor must then submit an adequate response to the deficiencies in order to restart the review procedure.

        Once the FDA has approved an NDA, BLA, sNDA or BLA amendment, the company can make the new drug available for physicians to prescribe. The drug owner must submit periodic reports to the FDA, including any cases of adverse reactions. For some medications, the FDA requires additional post-approval studies (Phase IV) to evaluate long-term effects or to gather information on the use of the product under special conditions.

        Throughout the life cycle of a product, the FDA also requires compliance with standards relating to good laboratory, clinical, manufacturing and promotional practices.

European Union

        In the EU, there are three main procedures for application for authorization to market pharmaceutical products in the EU Member States, the Centralized Procedure, the Mutual Recognition Procedure and the Decentralized Procedure. It is also possible to obtain a national authorization for products intended for commercialization in a single EU member state only, or for additional indications for licensed products.

        Under the Centralized Procedure, applications are made to the EMA for an authorization which is valid for the European Community. The Centralized Procedure is mandatory for all biotechnology products and for new chemical entities in cancer, neurodegenerative disorders, diabetes and AIDS, autoimmune diseases or other immune dysfunctions and optional for other new chemical entities or innovative medicinal products or in the interest of public health. When a pharmaceutical company has gathered data which it believes sufficiently demonstrates a drug's safety, efficacy and quality, then the company may submit an application to the EMA. The EMA then receives and validates the application, and appoints a Rapporteur and Co-Rapporteur to review it. The entire review cycle must be completed

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within 210 days, although there is a "clock stop" at day 120, to allow the company to respond to questions set forth in the Rapporteur and Co-Rapporteur's Assessment Report. When the company's complete response is received by the EMA, the clock restarts on day 121. If there are further aspects of the dossier requiring clarification, the EMA will then request an Oral Explanation on day 180, in which case the sponsor must appear before the CHMP to provide the requested additional information. On day 210, the CHMP will then take a vote to recommend the approval or non-approval of the application. The final decision under this Centralized Procedure is a European Community decision which is applicable to all Member States. This decision occurs on average 60 days after a positive CHMP recommendation.

        Under the Mutual Recognition Procedure (MRP), the company first obtains a marketing authorization from a single EU member state, called the Reference Member State (RMS). In the Decentralized Procedure (DCP) the application is done simultaneously in selected or all Member States if a medicinal product has not yet been authorized in a Member State. During the DCP, the RMS drafts an Assessment Report within 120 days. Within an additional 90 days the Concerned Member States (CMS) review the application and can issue objections or requests for additional information. On Day 90, each CMS must be assured that the product is safe and effective, and that it will cause no risks to the public health. Once an agreement has been reached, each Member State grants national marketing authorizations for the product.

        After the Marketing Authorizations have been granted, the company must submit periodic safety reports to the EMA (if approval was granted under the Centralized Procedure) or to the National Health Authorities (if approval was granted under the DCP or the MRP). In addition, several pharmacovigilance measures must be implemented and monitored including Adverse Event collection, evaluation and expedited reporting and implementation, as well as update Risk Management Plans. For some medications, post approval studies (Phase IV) may be required to complement available data with additional data to evaluate long term effects (called a Post Approval Safety Study, or PASS) or to gather additional efficacy data (called a Post Approval Efficacy Study, or PAES).

        European Marketing Authorizations have an initial duration of five years. After this time, the Marketing Authorization may be renewed by the competent authority on the basis of re-evaluation of the risk/benefit balance. Once renewed the Marketing Authorization is valid for an unlimited period. Any Marketing Authorization which is not followed within three years of its granting by the actual placing on the market of the corresponding medicinal product ceases to be valid.

Japan

        In Japan, applications for new products are made through the Pharmaceutical and Medical Devices Agency (PMDA). Once an NDA is submitted, a review team is formed consisting of specialized officials of the PMDA, including chemistry/manufacturing, non-clinical, clinical and biostatistics. While a team evaluation is carried out, a data reliability survey and Good Clinical Practice/Good Laboratory Practice/Good Manufacturing Practice inspection are carried out by the Office of Conformity Audit and Office of GMP/GQP Inspection of the PMDA. Team evaluation results are passed to the PMDA's external experts who then report back to the PMDA. After a further team evaluation, a report is provided to the Ministry of Health, Labor and Welfare (MHLW), which makes a final determination for approval and refers this to the Council on Drugs and Foods Sanitation which then advises the MHLW on final approvability. Marketing and distribution approvals require a review to determine whether or not the product in the application is suitable as a drug to be manufactured and distributed by a person who has obtained a manufacturing and distribution business license for the type of drug concerned and confirmation that the product has been manufactured in a plant compliant with Good Manufacturing Practices.

        Once the MHLW has approved the application, the company can make the new drug available for physicians to prescribe. After that, the MHLW lists its national health insurance price within 60 days (or 90 days) from the approval, and physicians can obtain reimbursement. For some medications, the MHLW requires additional post-approval studies (Phase IV) to evaluate safety, effects and/or to gather information on the use of the product under special conditions. The MHLW also requires the drug's

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sponsor to submit periodic safety update reports. Within three months from the specified re-examination period, which is designated at the time of the approval of the application for the new product, the company must submit a re-examination application to enable the drug's safety and efficacy to be reassessed against approved labeling by the PMDA.

Price Controls

        In most of the markets where we operate, the prices of pharmaceutical products are subject to both direct and indirect price controls and to drug reimbursement programs with varying price control mechanisms. Due to increasing political pressure and governmental budget constraints, we expect these mechanisms to continue to remain robust—and to perhaps even be strengthened—and to have a negative influence on the prices we are able to charge for our products.

Direct efforts to control prices

        United States.    In the US, as a result of the Patient Protection and Affordable Care Act (ACA), the recurring focus on deficit reduction, and public pressure on elected officials based on recent price increases by certain pharmaceutical manufacturers, there is a significant likelihood of continued actions to control prices. Specifically, one proposal that has been repeatedly advanced would impose a government-mandated pricing formula on both patented and generic medications provided through the Medicare prescription drug benefit (Medicare Part D). In addition, the ACA mandated the creation of a new entity, the Independent Payment Advisory Board (IPAB), which has been granted unprecedented authority to implement broad actions to reduce future costs of the Medicare program. This could include required prescription drug discounts or rebates, which could limit net prices for our products. The Medicare Trustees' Report from July 2015 predicted that the projected 5-year average growth in per capita Medicare program spending could exceed a specified target level as early as 2017. If the Chief Actuary for CMS determines that the projected 5-year average growth rate exceeds the target, the IPAB would then develop savings proposals in 2018 based on a savings target set by the Chief Actuary, to be implemented in 2019. There is also a possibility that government officials will continue to search for additional ways to reduce or control prices.

        Europe.     In Europe, our operations are subject to significant price and marketing regulations. Many governments are introducing healthcare reforms in a further attempt to curb increasing healthcare costs. In the EU, governments influence the price of pharmaceutical products through their control of national healthcare systems that fund a large part of the cost of such products to consumers. The downward pressure on healthcare costs in general in the EU, particularly with regard to prescription drugs, has become very intense. Increasingly strict analyses are applied when evaluating the entry of new products, and, as a result, payors are more frequently limiting access to innovative medicines based on these strict cost-benefit analyses. In addition, prices for marketed products are referenced within Member States and across Member State borders, including new EU Member States, further impacting individual EU Member State pricing.

        Japan.    In Japan, the government generally introduces price cuts every other year, and the government additionally mandates price decreases for specific products. In 2014, the National Health Insurance price calculation method for new products and the price revision rule for existing products were reviewed, and the resulting new drug tariffs became effective beginning April 2014. The Japanese government is currently undertaking a healthcare reform initiative with a goal of sustaining the universal coverage of the National Health Insurance program, and is addressing the efficient use of drugs, including promotion of generic use. Meanwhile, the government tentatively initiated a premium system which basically maintains the price of patented drugs for unmet medical needs in order to promote innovative new drug creation and the solution of the unapproved indication issue. The continuance of this system will be reviewed as a part of price reforms in 2016. In addition, the MHLW has proposed extraordinary price cuts in 2016 for certain products the sales of which have increased substantially more than official forecasts.

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        Rest of World.    Many other countries around the world are also taking steps to control prescription drug prices. As an example, China, one of our most important emerging growth markets, organized tendering in every province, with requested drug price reductions of up to 20% in 2015. Drug prices in China may further decline due to a stated national policy of reducing healthcare costs, including recent strategic initiatives implemented at the province level specifically designed to reduce drug prices. China has also been monitoring drug pricing for irregularities in the market. Although the ultimate impact of this monitoring on the regulatory and pricing framework is not yet clear, China is developing a new pricing framework in which price reductions remain a consistent national priority.

Regulations favoring generics and biosimilars

        In response to rising healthcare costs, many governments and private medical care providers, such as Health Maintenance Organizations, have instituted reimbursement schemes that favor the substitution of generic pharmaceuticals for more expensive brand-name pharmaceuticals. In the US, generic substitution statutes have been enacted by virtually all states and permit or require the dispensing pharmacist to substitute a less expensive generic drug instead of an original patented drug. Other countries have similar laws, including numerous European countries. We expect that the pressure for generic substitution will continue to increase. In addition, the US, EU and other jurisdictions are increasingly developing laws and regulations encouraging the development of biosimilar versions of biologic drugs, which can also be expected to have an impact on pricing.

Cross-Border Sales

        Price controls in one country can also have an impact in other countries as a result of cross-border sales. In the EU, products which we have sold to customers in countries with stringent price controls can in some instances legally be re-sold to customers in other EU countries with less stringent price controls at a lower price than the price at which the product is otherwise available in the importing country. In North America, products which we have sold to customers in Canada, which has relatively stringent price controls, are sometimes re-sold into the US, again at a lower price than the price at which the product is otherwise sold in the US. Such imports from Canada and other countries into the US are currently illegal.

We expect that pressures on pricing will continue worldwide, and will likely increase. Because of these pressures, there can be no certainty that, in every instance, we will be able to charge prices for a product that, in a particular country or in the aggregate, would enable us to earn an adequate return on our investment in that product.

Intellectual Property

        We attach great importance to patents, trademarks, copyrights and know-how, including research data, in order to protect our investment in research and development, manufacturing and marketing. It is our policy to seek the broadest protection available under applicable laws for significant product developments in all major markets. Among other things, patents may cover the products themselves, including the product's active ingredient and its formulation. Patents may cover processes for manufacturing a product, including processes for manufacturing intermediate substances used in the manufacture of the products. Patents may also cover particular uses of a product, such as its use to treat a particular disease, or its dosage regimen. In addition, patents may cover assays or tests for certain diseases or biomarkers, which will improve patient outcomes when administered certain drugs, as well as assays, research tools and other techniques used to identify new drugs. The protection offered by such patents extends for varying periods depending on the grant and duration of patents in the various countries or region. The protection afforded, which may vary from country to country, depends upon the type of patent and its scope of coverage. Even though we may own, co-own or in-license patents protecting our products,

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and conduct pre-launch freedom-to-operate analyses, a third party may nevertheless claim that one of our products infringes a third party patent for which we do not have a license.

        In addition to patent protection, various countries offer data or marketing exclusivities for a prescribed period of time. Data exclusivity may be available which would preclude a potential competitor from filing a regulatory application for a set period of time that relies on the sponsor's clinical trial data, or the regulatory authority from approving the application. The data exclusivity period can vary depending upon the type of data included in the sponsor's application. When it is available, market exclusivity, unlike data exclusivity, precludes a competitor from obtaining marketing approval for a product even if a competitor's application relies on its own data. Data exclusivity and other regulatory exclusivity periods generally run from the date a product is approved, and so their expiration dates cannot be known with certainty until the product approval date is known.

        In the US and other countries, pharmaceutical products are eligible for a patent term extension for patent periods lost during product development and regulatory review. The law recognizes that product development and review by the FDA and other health authorities can take an extended period, and permits an extension of the patent term for a period related to the time taken for the conduct of clinical trials and for the health authority's review. However, the length of this extension and the patents to which it applies cannot be known in advance, but can only be determined after the product is approved.

        Patents, patent term extensions and marketing exclusivities can be challenged through various proceedings that depend on the country. For example, patents in the US can be challenged in the United States Patent and Trademark Office (USPTO) through various proceedings, including Inter Partes Review (IPR) proceedings. They may also be challenged through patent infringement litigation under the Hatch-Waxman Act. See generally, "—Sandoz—Intellectual Property" In the EU, EU patents may be challenged through oppositions in the European Patent Office (EPO) or national patents may be challenged in national courts or national patent offices. In Japan, patents may be challenged in the Japanese patent office and in national courts.

United States

Patents

        In the US, a patent issued for an application filed today will receive a term of 20 years from the application filing date, subject to potential patent term adjustments for USPTO delay. A US pharmaceutical patent which claims a product, method of treatment using a product, or method of manufacturing a product, may also be eligible for a patent term extension based on the time the FDA took to approve the product. This type of extension may only extend the patent term for a maximum of 5 years, and may not extend the patent term beyond 14 years from regulatory approval. Only one patent may be extended for any product based on FDA delay.

        In practice, however, it is not uncommon for significantly more than the 5 year maximum patent extension period to pass between the time that a patent application is filed for a product and the time that the product is approved by the FDA. As a result, it is rarely the case that, at the time a product is approved by FDA, it will have the full 20 years of remaining patent life. Rather, in our experience, it is not uncommon that, at the date of approval, a product will have from 13 to 16 years of patent life remaining, including all extensions available at that time.

Data and Market Exclusivity

        In addition to patent exclusivities, the FDA may provide data or market exclusivity for a new chemical entity or an "orphan drug," each of which run in parallel to any patent protection. Regulatory data protection or exclusivity prevents a potential generic competitor from relying on clinical trial data which were generated by the sponsor when establishing the safety and efficacy of its competing product. Market exclusivity prohibits any marketing of the same drug for the same indication.

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A new small-molecule active pharmaceutical ingredient shall have 5 years of regulatory data exclusivity, during which time a competitor generally may not submit an application to the FDA based on a sponsor's clinical data.

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Orphan drug exclusivity provides 7 years of market exclusivity for drugs designated by the FDA as "orphan drugs," meaning drugs that treat rare diseases, as designated by the FDA. During this period, a potential competitor may not market the same drug for the same indication even if the competitor's application does not rely on data from the sponsor.

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A new biologic active pharmaceutical ingredient shall have 12 years of market exclusivity, during which time a competitor may not market the same drug for the same indication.

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The FDA may also request that a sponsor conduct pediatric studies, and in exchange will grant an additional 6-month period of pediatric market exclusivity, if the FDA accepts the data, the sponsor makes a timely application for approval for pediatric treatment, and the sponsor has either a patent-based or regulatory-based exclusivity period for the product which can be extended.

European Community

Patents

        Patent applications in Europe may be filed in the EPO or in a particular country in Europe. The EPO system permits a single application to be granted for the EU, plus other non-EU countries, such as Switzerland and Turkey. When the EPO grants a patent, it is then validated in the countries that the patent owner designates. A patent granted by the EPO or a European country office will expire no later than 21 years from the earliest patent application on which the patent is based. Pharmaceutical patents can also be granted a further period of exclusivity under the Supplementary Protection Certificate (SPC) system. SPCs are designed to compensate the owner of the patent for the time it took to receive marketing authorization by the European Health Authorities. An SPC may be granted to provide, in combination with the patent, up to 15 years of exclusivity from the date of the first European marketing authorization. However, an SPC cannot last longer than 5 years. The SPC duration can additionally be extended by a further 6 months if the product is the subject of an agreed pediatric investigation plan. The post-grant phase of patents, including the SPC system, is currently administered on a country-by-country basis under national laws which, while differing, are intended to, but do not always, have the same effect.

        As in the US, in practice, it is not uncommon for the granting of an SPC to not fully compensate the owner of a patent for the time it took to receive marketing authorization by the European health authorities. Rather, since it can often take from 5 to 10 years to obtain a granted patent in Europe after the filing of the application, and since it can commonly take longer than this to obtain a marketing authorization for a pharmaceutical product in Europe, it is not uncommon that a pharmaceutical product, at the date of approval, will have a patent lifetime of 10 to 15 years, including all extensions available at that time.

Data and Market Exclusivity

        In addition to patent exclusivity, the EU also provides a system of regulatory data exclusivity for authorized human medicines, which runs in parallel to any patent protection. The system for drugs being approved today is usually referred to as "8+2+1" because it provides: an initial period of 8 years of data exclusivity, during which a competitor cannot rely on the relevant data; a further period of 2 years of market exclusivity, during which the data can be used to support applications for marketing authorization, but the competitive product cannot be launched; and a possible 1-year extension of the market exclusivity period if, during the initial 8-year data exclusivity period, the sponsor registered a new therapeutic indication with "significant clinical benefit." This system applies both to national and centralized authorizations. This system has been in force since 2005, therefore some medicines remain covered by the previous system in which EU member states provided either 6 or 10 years of data exclusivity.

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        The EU also has an orphan drug exclusivity system for medicines similar to the US system. If a medicine is designated as an "orphan drug," then it benefits from 10 years of market exclusivity after it is authorized, during which time a similar medicine for the same indication will not receive marketing authorization.

Japan

        In Japan, a patent can be issued for active pharmaceutical ingredients. Although methods of treatment, such as dosage and administration, are not patentable in Japan, pharmaceutical compositions for a specific dosage or administration method are patentable. Processes to make a pharmaceutical composition are also patentable. The patent term granted is generally 20 years from the filing date of the patent application on which the patent is based. A patent term extension can be granted for up to 5 years under the Japanese Patent Act to compensate for erosion against the patent term caused by the time needed to obtain marketing authorization from the MHLW. Japan also has an 8-year regulatory data protection system called a "re-examination period" and a 10-year orphan drug exclusivity system.

        Typically, it takes approximately 7 to 8 years to obtain marketing authorization in Japan. A patent application on a pharmaceutical substance is usually filed shortly before or at the time when clinical testing begins. Regarding compound patents, it commonly takes approximately 4 to 5 years or more from the patent application filing date to the date that the patent is ultimately granted. As a result, it is not uncommon for the effective term of patent protection for an active pharmaceutical ingredient in Japan to be approximately 10 to 15 years, if duly extended.

        The following are certain additional details regarding intellectual property protection for selected Pharmaceuticals Division products and compounds in development. Administrative proceedings or litigation to obtain intellectual property, to enforce intellectual property or to resolve challenges to intellectual property are uncertain and unpredictable. In some circumstances a competitor may be able to market a generic version of one of our products despite the existence of our intellectual property by, for example, designing around our intellectual property or marketing the generic product for non-protected indications. Despite data exclusivity protections, a competitor could opt to incur the costs of conducting its own clinical trials and preparing its own regulatory application, and avoid our data exclusivity protection altogether. There is also a risk that some countries may seek to impose limitations on the availability of patent protection for pharmaceutical products, or on the extent to which such protections may be enforced. As a result, there can be no assurance that our intellectual property will protect our products or that we will be able to avoid adverse effects from the loss of intellectual property protection in the future.

        For each selected product or compound in development, we identify certain issued, unexpired patents by general subject matter and, in parentheses, years of expiry in, if relevant, the US, EU and Japan that are owned, co-owned or exclusively in-licensed by Novartis and that relate to one or more forms of the product or methods of use. Novartis may own or control additional patents relating to compound forms, formulations, processes, synthesis, purification and detection. For additional information regarding commercial arrangements with respect to these products, see "—Key Marketed Products." Identification of an EU patent refers to national patents in EU countries and/or to the national patents that have been derived from a patent granted by the EPO. We identify unexpired regulatory data protection periods and, in parentheses, years of expiry for selected products and compounds in development if the relevant marketing authorizations have been authorized or granted. The term "RDP" refers to regulatory data protection, regulatory data exclusivity (which in the EU refers to the protections under "8+2+1" regulatory data exclusivity), and to data re-examination protection systems. We also identify certain unexpired patent term extensions, SPCs and marketing exclusivities and, in parentheses, years of expiry if they are granted; their subject matter scope may be limited, and is not specified. We designate them as "pending" if they have been applied for but not granted and years of expiry are estimable. Such pending applications may or may not ultimately be granted. In the case of the EU, grant or authorization of a patent term extension, marketing exclusivity or data protection means grant or authorization in at least

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one country and possibly pending in others. Marketing exclusivities and patent term extensions include orphan drug exclusivity (ODE), pediatric exclusivity (PE), patent term extension (PTE) and SPC. For each selected product and compound in development, we indicate whether there is current generic competition for one or more product versions or approved indications in each of the major markets for which intellectual property is identified. We also identify ongoing challenges to the disclosed intellectual property that have not been finally resolved without indicating the likelihood of success in each individual case. Resolution of such challenges may include agreements under which Novartis grants licenses permitting marketing of generic versions of our products before expiration of the relevant intellectual property. We disclose certain material terms of certain settlement agreements relating to certain selected products and compounds in development where they could have a material adverse effect on our business. In other cases, certain settlement agreements may contain confidentiality obligations restricting what may be disclosed.

Oncology

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Gleevec/Glivec. US: Patent on polymorphic compound form (2019), PE (2019); patent on GIST method of use (2021), PE (2022); patent on tablet formulation (2018). EU: Patent on compound (2013), SPC (2016), PE (2016); patent on polymorphic compound form (2018); patent on GIST method of use (2021); patent on tablet formulation (2023). Japan: Patent on polymorphic compound form (2019); patent on GIST method of use (2021); patent on tablet formulation (2023).

There is currently no generic competition in the US. There is generic competition in Japan and some EU countries. In the US, Novartis has resolved patent litigation with certain generic manufacturers. Novartis has licensed a subsidiary of Sun Pharmaceutical Industries to market a generic version of Gleevec in the US as of February 1, 2016. Additional generic manufacturers have filed ANDAs challenging the US polymorphic compound form patent; the earliest automatic 30-month stay preventing FDA approval will expire in December 2016. Novartis is taking steps in some EU countries to enforce the EU compound patent, the EU polymorphic compound form patent and the EU GIST method of use patent against generic manufacturers. The EU compound patent PE and the EU GIST method of use patent are being challenged in the patent offices and courts of several EU countries.

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Afinitor/Votubia and Afinitor Disperz/Votubia dispersible tablets and Zortress/Certican.

Afinitor/Votubia and Afinitor Disperz/Votubia dispersible tablets: US: Patent on compound (2014), PTE (2019), PE (2020); patent on tablet formulation (2016), PE (2017); patent on dispersible tablet formulation (2022), PE (2023); patents on antioxidant (2019), PE (2020); patent on TSC/SEGA use (2022), PE 2022); patent on breast cancer use (2022), PE (2022); patent on renal cell carcinoma use (2025), PE (2026); patent on pancreatic neuroendocrine tumor use (2028). EU: Patent on compound (2013), SPC (2018); patent on tablet formulation (2016); patent on dispersible tablet formulation (2022); patent on antioxidant (2019); patent on breast cancer use (2022); patent on pancreatic neuroendocrine tumor use (2026); ODE (Votubia) (2021). Japan: Patent on compound (2013), PTE (2018); patent on tablet formulation (2016); patent on dispersible tablet formulation (2022); patent on antioxidant (2019); patent on breast cancer use (2022); patent on pancreatic neuroendocrine tumor use (2026); patent on renal cell carcinoma use (2022); ODE (tuberous sclerosis) (2022); RDP (2018).

There is currently no generic competition in the US, EU or Japan. In the US, generic manufacturers have filed ANDAs challenging several patents; the earliest automatic 30-month stay preventing FDA approval will expire in October 2017. The US compound patent and antioxidant patents are being challenged in IPR proceedings in the USPTO.

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Zortress/Certican: US: Patent on compound (2014), PTE (2019), PE (2020); patent on tablet formulation (2016), PE (2017); patent on dispersible tablet formulation (2022), PE (2023); two patents on antioxidant (2019, 2019); patents on methods of use (2017, PE (2018)). EU: Patent on compound (2013), SPC (2018); patent on tablet formulation (2016); patent on dispersible tablet formulation (2022); patent on antioxidant (2019). Japan: Patent on compound (2013), PTE (2018); patent on tablet formulation (2016); patent on dispersible tablet formulation (2022); patent on antioxidant (2019).

There is currently no generic competition in the US, EU or Japan. In the US, generic manufacturers have filed ANDAs challenging several patents; the earliest automatic 30-month stay preventing FDA approval will expire in March 2017. The US compound patent and a method of use patent are being challenged in IPR proceedings in the USPTO.

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Tasigna. US: Patent on compound (2023); patents on salt forms (2026, 2027, 2028); patent on polymorph compound form (2026). EU: Patent on compound (2023); patent on salt form (2026); patent on polymorph compound form (2026); ODE (2017). Japan: Patent on compound (2023), PTE (2024); patent on salt form (2026); patent on polymorph compound form (2026); RDP (2017). There is currently no generic competition in the US, EU or Japan. The EU salt form patent and polymorph compound form patent are being opposed in the EPO.

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Sandostatin. Sandostatin SC: There is no patent protection in the US, EU or Japan. There is generic competition in the US, EU and Japan. Sandostatin LAR: US: Patent on microparticles (2017). There is no patent protection in the EU or Japan. There is currently no generic competition in the US, EU or Japan.

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Exjade and Jadenu. Exjade: US: Patent on compound (2019); patent on method of use (2017). EU: Patent on compound (2017), SPC (2021); patent on tablet formulation (2023); ODE (2016). Japan: Patent on compound (2017), SPC (2021); RDP (2016). There is currently no generic competition in the US, EU or Japan. In the US, Novartis has resolved patent litigation with generic manufacturers relating to Exjade.

Jadenu: The compound patents in the US, EU and Japan and the US method of use patent identified for Exjade also protect Jadenu. There is currently no generic competition in the US, EU or Japan. In the US, a generic manufacturer has filed an ANDA challenging the US compound patent; the earliest automatic 30-month stay preventing FDA approval will expire in May 2018.

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Votrient. US: Patent on compound (2021), PTE (2023), ODE (2019). EU: Patent on compound (2021), SPC (2025); RDP (2020). Japan: patent on compound (2021), PTE (2025); RDP (2020). There is currently no generic competition in the US, EU or Japan.

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Tafinlar and Mekinist. Tafinlar: US: Patent on compound (2030); RDP (2018); ODE (2020). EU: RDP (2023). Japan: Patent on compound (2029). There is currently no generic competition in the US, EU or Japan. Mekinist: US: Patent on compound (2025), pending PTE (2027); patent on method of use (2025); patent on formulation (2032); RDP (2018); ODE (2020). EU: Patent on compound and method of use (2025), SPC (2029); RDP (2025). Japan: Patent on compound (2025); patent on method of use (2025); patent on formulation (2031). There is currently no generic competition in the US, EU or Japan. Use of Mekinist with Taflinar or Taflinar with Mekinist: US: Patent on use of Tafinlar and Mekinist (2030); RDP (2017); ODE 2021. EU: RDP (2025). Japan: Patent on use of Tafinlar and Mekinist (2030). There is currently no generic competition in the US, EU or Japan.

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Jakavi. EU: Patent on compound (2026), SPC (2027); patent on salt (2028); RDP (2023). Japan: Patent on compound (2026), PTE (2028), pending PTE (2030); patent on salt (2028), PTE (2028), pending PTE (2030); patent on compositions for medical uses (2026), pending PTE (2027); RDP

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(2022). There is currently no generic competition in the EU or Japan. The EU salt patent is being opposed in the EPO.

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Promacta/Revolade. US: Patent on compound (2021), PTE (2022), PE (2023); patent on salt form (2025); patent on formulation (2027). EU: Patent on compound (2021), SPC (2025); patent on salt form (2023); patent on formulation (2027). Japan: Patent on compound (2021), PE (2025); patent on salt form (2023); patent on formulation (2027). There is currently no generic competition in the US, EU or Japan.

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Farydak. US: Patent on compound (2021), pending PTE (2026); patent on method of use (2026); patent on crystalline salt (2028); RDP (2020). EU: Patent on compound (2021), pending SPC (2026); patent on method of use (2026); RDP (2025). Japan: Patent on compound (2021), pending PTE (2026); patent on method of use (2026); RDP (2023). There is currently no generic competition in the US, EU or Japan.

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Odomzo. US: Patent on compound (2029), pending PTE (2029); patent on salt form (2029); RDP (2020). EU: Patent on compound (2027), pending SPC (2030); patent on salt form (2029); RDP (2025). Japan: Patent on compound (2027); patent on salt form (2029). There is currently no generic competition in the US, EU or Japan.

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Arzerra. US: Patent on compound (2031); RDP (2023). EU: Patent on compound (2023), SPC (2025); RDP (2021). Japan: Patent on compound (2023), PTE (2025); patent on formulation (2028); RDP (2019). There is currently no generic competition in the US, EU or Japan.

Cardio-Metabolic

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Galvus and Eucreas. EU: Patent on compound (2019), SPC (2022); patent on combination (2021), SPC (2022); patent on Eucreas formulation (2026); RDP (2017). Japan: Patent on compound (2019), PTE (2024), pending PTE (2024); patent on combination (2021); patent on Galvus formulation (2025), PTE (2025); patent on Eucreas formulation (2026), pending PTE (2028); Galvus RDP (2018); Eucreas RDP (2019). Galvus/Eucreas is not marketed in the US. There is currently no generic competition in the EU or Japan. The EU Eucreas formulation patent is being opposed in the EPO.

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Entresto. US: Patents on combination (2023); patent on complex (2027); RDP (2020). EU: Patent on combination (2023); patent on complex (2026); patent on formulation (2028); RDP (2025). Japan: Patent on combination (2023); patent on complex (2026); patent on formulation (2028). There is currently no generic competition in the US, EU or Japan. The EU complex patent and the EU formulation patent are being opposed in the EPO.

Immunology and Dermatology

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Neoral. There is no patent protection for Neoral in the US, EU or Japan. There is generic competition in the US, EU and Japan.

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Myfortic. US: Patent on formulation (2017), PTE (2018); patent on particle size (2024). EU: Patent on formulation (2017), SPC (2017); patent on formulation (2022); patent on particle size (2024). There is generic competition in the US. There is currently no generic competition in the EU. In the EU, Novartis has resolved patent litigation with a generic manufacturer. The EU formulation patent and particle size patent are being opposed in the EPO.

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Xolair. US: Patent on compound (2018); patent on lyophilized formulation (2016), PTE (2017); patents on syringe formulation (2021, 2024). EU: Patent on compound (2012), SPC (2017); patent on lyophilized formulation (2016); patents on syringe formulation (2021, 2024). Japan: Patent on compound (2012), PTE (2017); patent on lyophilized formulation (2016); patents on syringe formulation (2021, 2024); RDP (2017). There is currently no generic competition in the US, EU or

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Japan. The EU syringe formulation patent and lyophilized formulation patent are being opposed in the EPO.

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Cosentyx. US: Patent on compound (2027), pending PTE (2029); RDP (2027). EU: Patent on compound (2025), pending SPC (2030), pending PE (2030); RDP (2026). Japan: Patent on compound (2025), PTE (2029); patent on method of use (2031), PTE (2032); RDP (2022). There is currently no generic competition in the US, EU, or Japan.

Retina

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Lucentis. EU: Patent on compound (2018), SPC (2022); patent on method of use (2016). Japan: Patent on compound (2018), PTE (AMD indication) (2019), PTE (other indications) (2023). There is currently no generic competition in the EU or Japan.

Neuroscience

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Gilenya. US: Patent on compound (2014), PTE (2019); patent on formulation (2026); patent on dose (2027). EU: Patent on compound (2013), SPC (2018); RDP (2021); patent on formulation (2024), SPC (2026). There is currently no generic competition in the US or EU. In the US, generic manufacturers have filed ANDAs challenging the US compound patent and formulation patent; the earliest automatic 30-month stays preventing FDA approval will expire in March 2018. Generic manufacturers have filed ANDAs challenging the US dose patent. The US formulation patent is being challenged in an IPR proceeding in the USPTO.

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Exelon/Exelon Patch. Exelon: There is no patent protection for Exelon capsules in the US, EU or Japan. There is generic competition in the US, EU and Japan. Exelon Patch: US: Patents on formulations (2019). EU: Patent on formulation (2019); patent on transdermal dosage regime (2026). Japan: Patent on formulation (2019); RDP (2019). There is generic competition in the US and in most EU countries. There is currently no generic competition in Japan. We are taking steps in several countries to enforce our EU transdermal dosage regime patent against generic competitors. The EU transdermal dosage regime patent is being opposed in the EPO and several national patents are being challenged in national courts. In the US, generic manufacturers have filed ANDAs challenging the US formulation patents; the earliest automatic 30-month stays preventing FDA approval expires in 2017. The US formulation patents are being challenged in an IPR proceeding in the USPTO.

Established Medicines

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Diovan and Co-Diovan/Diovan HCT. Diovan: US: Patent on formulation (2017), PE (2017). There is generic competition in the US, EU and Japan. Co-Diovan/Diovan HCT: US: Patent on formulation (2017), PE (2017). Japan: Patent on compound (2011), PTE for Co-Diovan (2016); patent on formulation (2017). In Japan, Novartis has resolved patent litigation with a generic manufacturer. There is generic competition in the US and EU. There is currently no generic competition in Japan.

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Exforge and Exforge HCT. Exforge: US: Patent on Exforge combination (2019). EU: Patent on Exforge combination/Exforge HCT combination (2019); RDP (2017). There is generic competition in the US and Japan. There is currently no generic competition in the EU. The EU Exforge combination/Exforge HCT combination patent is being challenged in the patent offices of some EU countries. We are taking steps to enforce the EU Exforge combination/Exforge HCT combination patent against generic manufacturers seeking to market Exforge. Exforge HCT: US: Patent on Exforge HCT combination (2023). EU: patent on Exforge combination/Exforge HCT combination (2019); RDP (2019). Japan: Patent on Exforge HCT combination (2023). There is generic

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competition in the US. There is currently no generic competition in the EU. Exforge HCT is not currently marketed in Japan.

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Voltaren/Cataflam. There is no patent protection in the US, EU or Japan. There is generic competition in the US, EU and Japan.

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Ritalin LA/Focalin XR. US: Patent on drug-delivery formulation (2019). EU: Patent on dose (2018); patent on drug-delivery formulations (2019). Japan: Patent on dose (2018); patent on drug-delivery formulation (2019). There is generic competition in the US for Ritalin LA and Focalin XR. There is currently no generic competition in the EU or Japan. The EU formulation patent is being opposed in the EPO.

Compounds in Development

        We provide the following information regarding our compounds in Phase III clinical development, if any, that have been submitted for registration to the FDA or the EMA: As of the date of this 20-F, the only compounds that we have in Phase III clinical development that have been submitted for registration to the FDA or the EMA are compounds that have previously been approved by FDA or EMA, and have been submitted for the approval of one or more additional indications. See above for intellectual property information regarding our selected Pharmaceuticals Division products.

ALCON

        Our Alcon Division is a leader in the research, development, manufacturing and marketing of eye care products worldwide, and its products are available in more than 180 markets. In 2015, the Alcon Division had consolidated net sales of $9.8 billion representing 20% of total Group net sales.

        Alcon offers an extensive breadth of products serving the full lifecycle of patient needs across eye diseases, vision conditions and refractive errors. To meet the needs of patients, ophthalmologists, surgeons, optometrists, opticians and physician specialists, Alcon operates with three franchises: Surgical, Ophthalmic Pharmaceuticals and Vision Care. Each franchise operates with specialized sales forces and marketing support.

        To accelerate growth, we are taking concerted action on two fronts. For the Surgical and Vision Care franchises, we have identified key actions as part of a growth plan. They include steps to optimize innovation in intraocular lenses (IOLs) for cataract surgery, prioritizing and investing in the development of promising new products, and improving the effectiveness of our sales force.

        In addition, we plan to strengthen our ophthalmic medicines business by transferring Ophthalmic Pharmaceuticals products from Alcon to our Pharmaceuticals Division, combining expertise in pharmaceuticals development and marketing with the strong Alcon brand.

        Alcon's dedication to research and development is important to our growth plans. As part of our efforts, the Alcon Division works together with the Novartis Institutes for BioMedical Research (NIBR), our global pharmaceutical research organization. This collaboration allows our Alcon Division to leverage the resources of NIBR in an effort to discover and expand ophthalmic pharmaceutical research targets and to develop chemical and biologic compounds for the potential treatment of diseases of the eye, with a particular focus on diseases such as glaucoma and macular degeneration.

        In July 2014, Alcon entered into an agreement with Verily (formerly Google Life Sciences) to license its "smart lens" technology with the potential to address ocular conditions. In October 2014, Alcon acquired WaveTec Vision. The acquisition provided Alcon with the ORA System, the first commercialized intra-operative guidance system for cataract surgeons implanting IOLs. Alcon has integrated the ORA System into its existing Cataract Refractive Suite by Alcon.

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Alcon Division Products

Surgical

        Our Alcon Division's Surgical franchise is the market leader in global ophthalmic surgical product revenues, offering ophthalmic surgical equipment, instruments, disposable products and intraocular lenses for surgical procedures that address cataracts, vitreoretinal conditions, glaucoma and refractive errors.

        Alcon's Surgical portfolio includes the Cataract Refractive Suite by Alcon, a suite of equipment to help plan and perform some of the most challenging steps of cataract surgery with automation and precision. It is comprised of the Centurion vision system phacoemulsification technology platform; the LenSx laser, a femtosecond laser for increased precision and reproducibility for the corneal incision, capsulorhexis and lens fragmentation steps of the procedure; the Verion image guided system, an ocular surgical planning, imaging and guidance technology; the ORA System, an intra-operative guidance system for IOL implantation during cataract surgery; and the LuxOR LX3 surgical microscope for greater visualization during surgery. The portfolio also includes Contoura vision, the latest vision system in the Wavelight refractive suite portfolio for refractive procedures and LASIK treatments, the Constellation vision system for retinal operations, and the Infiniti vision system to perform cataract surgeries, which is the phacoemulsification platform introduced prior to the Centurion vision system. Alcon also offers the AcrySof family of intraocular lenses (IOLs) to treat cataracts, including the AcrySof IQ, AcrySof IQ PanOptix, AcrySof IQ Toric and AcrySof IQ ReSTOR Toric IOLs. In addition, Alcon provides advanced viscoelastics, surgical solutions, surgical packs and other disposable products for cataract and vitreoretinal surgery.

Ophthalmic Pharmaceuticals

        Our Alcon Division's Ophthalmic Pharmaceuticals franchise develops and markets a broad range of pharmaceuticals to treat chronic and acute conditions of the eye including glaucoma, elevated intraocular pressure (associated with glaucoma), eye infection and inflammation, eye allergies, dry eye and retinal diseases. Ophthalmic Pharmaceuticals also oversees the line of professionally driven over-the-counter brands that include artificial tears and ocular vitamins. Product highlights within the Ophthalmic Pharmaceuticals portfolio include Ilevro ophthalmic suspension for the treatment of pain and inflammation associated with cataract surgery; Simbrinza suspension to lower intraocular pressure as a fixed-dose combination; Azopt, Azarga, Travatan Z and DuoTrav, each ophthalmic solutions for the treatment of elevated intraocular pressure associated with open-angle glaucoma or ocular hypertension; Vigamox ophthalmic solution for bacterial conjunctivitis; Pazeo and Pataday ophthalmic solutions for ocular itching associated with allergic conjunctivitis; Nevanac ophthalmic suspension for eye pain and inflammation following cataract surgery and to reduce the risk of macular edema associated with cataract surgery in diabetic patients; the Systane family of over-the-counter products for dry eye relief; and Jetrea intravitreal injection for treating vitreomacular traction.

Vision Care

        Our Alcon Division's Vision Care franchise develops and markets contact lenses and lens care products. Alcon's broad portfolio of silicone hydrogel, daily disposables and color contact lenses includes our Air Optix, Dailies and Freshlook brands. Our Dailies product line includes Dailies Total1 lenses, a first-of-its-kind water gradient contact lens. Our Air Optix monthly contact lens product line includes Air Optix Colors silicone hydrogel contact lenses. Our contact lens care solutions business includes the Opti-Free line of multi-purpose disinfecting solutions and drops, as well as the Clear Care and AOSept Plus hydrogen peroxide lens care solutions.

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New Products

        Alcon received a number of approvals and launched a number of products in 2015, including:

•

AcrySof IQ aspheric intraocular lens with UltraSert Pre-loaded Delivery System was approved in the US and EU to provide a single-use system for cataract surgery.

•

AcrySof IQ PanOptix trifocal intraocular lens was launched in the EU for patients seeking presbyopia-correction during cataract surgery.

•

AcrySof IQ ReSTOR multifocal +2.5D intraocular lens was approved in the US for patients wanting near, intermediate and distance vision correction during cataract surgery.

•

Air Optix Colors contact lenses: silicone hydrogel, color cosmetic monthly contact lenses were launched in Japan.

•

Air Optix Colors contact lenses in plus powers were launched in the US for patients with hyperopia.

•

Air Optix with HydraGlyde contact lenses received approval in the EU for longer-lasting surface wettability.

•

Clear Care Plus/AOSept Plus with HydraGlyde was launched in the US and EU to provide hydrogen peroxide-based cleaning and disinfecting for contact lenses.

•

Contoura vision topography guided, refractive surgical system was launched in the US for patients seeking myopic and astigmatic vision correction.

•

Dailies Total1 contact lenses with plus powers were launched in the US and EU for patients with hyperopia seeking a daily disposable lens.

•

LuxOr ceiling-mounted ophthalmic microscope system was approved in the US for enhanced visualization during cataract surgery.

•

ORA System with VerifEye+ was launched in the US and EU for enhanced pre-operative planning during cataract surgery.

•

Pazeo Solution (olopatadine hydrochloride) for 24-hour ocular allergy itch relief was approved and launched in the US.

•

Systane Hydration lubricant eye drops in unit-dose and multi-dose were launched in the EU for the palliative treatment of dry eye.

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Key Marketed Products

        The following tables set forth certain key marketed products in our Alcon Division. While we intend to sell our marketed products throughout the world, not all products and indications are currently available in every country.

Surgical

Cataract	AcrySof family of intraocular lenses includes but is not limited to:
	AcrySof IQ ReSTOR, AcrySof IQ PanOptix, AcrySof IQ Toric and
	AcrySof IQ ReSTOR Toric advanced technology intraocular lenses that correct cataracts and distance vision with presbyopia and/or astigmatism
	Cataract Refractive Suite by Alcon designed to streamline the cataract surgical procedure through surgical planning and execution
	Centurion vision system intelligent phacoemulsification technology platform with cataract removal capabilities
	Infiniti vision system with the OZil torsional hand piece for cataract procedures
	LenSx laser used for specific steps in the cataract surgical procedure
	LuxOR microscope used for ophthalmic surgical procedures
	ORA System intra-operative guidance system for intraocular lens implant during cataract surgery
	UltraSert pre-loaded delivery system for intraocular lenses that correct cataracts
	Verion imaged-guided system for use during cataract surgery
Vitreoretinal	Constellation vision system for vitreoretinal operations
	Ultravit vitrectomy probes
	23+, 25+ and 27+ vitrectomy packs
	Purepoint laser system and probes
	Finesse flex loop
	Grieshaber surgical instruments
	Edgeplus blade trocar cannula system
	Ispan gas, Perfluron, Silkon oil: Retina stabilizing adjuncts
Refractive	Allegretto Wave Eye-Q excimer laser for LASIK vision correction
	Contoura vision for LASIK vision correction in patients with myopia and astigmatism
	WaveLight FS200 laser for specific steps in LASIK surgical procedures
	WaveLight EX500 laser for LASIK vision correction
Glaucoma	Ex-press glaucoma filtration device

        In addition, Alcon provides advanced viscoelastics, surgical solutions, surgical packs and other disposable products for cataract and vitreoretinal surgery.

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Ophthalmic Pharmaceuticals

Glaucoma	Simbrinza suspension to lower intraocular pressure without a beta blocker
	Izba, Travatan and Travatan Z ophthalmic solutions to lower intraocular pressure
	Azopt ophthalmic suspension to lower intraocular pressure
	DuoTrav ophthalmic solution to lower intraocular pressure (outside US markets)
	Azarga/Azorga ophthalmic suspension to lower intraocular pressure (outside US markets)
Anti-Infectives	Vigamox and Moxeza ophthalmic solution for treatment of bacterial conjunctivitis
Anti-Inflammation	Ilevro suspension to treat pain and inflammation following cataract surgery
	Nevanac ophthalmic suspension to treat pain and inflammation following cataract surgery, and to reduce the risk of macular edema associated with cataract surgery in diabetic patients
	Durezol emulsion to treat pain and inflammation associated with eye surgery, and to treat endogenous anterior uveitis
	TobraDex and TobraDex ST ophthalmic suspensions, combination anti-infective/anti-inflammatory products
	Voltaren ophthalmic solution to treat post-operative inflammation after cataract surgery, and for temporary relief of pain and photophobia after refractive surgery
Dry Eye	The Systane family of over-the-counter dry eye products:
	Systane lubricant eye drops
	Systane Balance lubricant eye drops
	Systane Hydration lubricant eye drops
	Systane Ultra lubricant eye drops
	Systane gel drops
	Systane lid wipes
	Lubricants for eye dryness, discomfort or ocular fatigue:
	GenTeal lubricant eye drops
	Tears Naturale lubricant eye drops
Allergy	Pazeo, Patanol and Pataday ophthalmic solutions for ocular itching associated with allergic conjunctivitis
	Patanase nasal spray for seasonal nasal allergy symptoms
	Zaditor antihistamine eye drops for temporary relief of itchy eyes associated with eye allergies (over-the-counter in the US)
	Zaditen Ophtha an H1-antagonist to fight allergic conjunctivitis
	Livostin an H1-antagonist to fight allergic conjunctivitis (Canada only)
Ear Infections	Ciprodex* otic suspension to treat middle and outer ear infections

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Ocular Nutrition	ICaps eye vitamin dietary supplements provide essential dietary ingredients to support eye health
	Vitalux nutrient supplements to help patients with age-related macular degeneration maintain their vision (outside US markets)
Retinal	Jetrea (ocriplasmin) intravitreal injection for the treatment of vitreomacular traction, including macular hole
	Triesence suspension for visualization during vitrectomy

*

Ciprodex is a registered trademark of Bayer Intellectual Property GmbH.

Vision Care

Contact Lenses	Air Optix family of silicone hydrogel contact lenses (including Air Optix Colors lenses)
	Dailies family of daily disposable contact lenses (including Dailies Total1 lenses)
	FreshLook family of color contact lenses
Contact Lens Care	Opti-Free PureMoist MPDS
	Opti-Free RepleniSH MPDS
	Opti-Free Express MPDS
	Clear Care Plus cleaning and disinfecting solution (AOSept Plus outside of North America)

Selected Development Projects

Surgical

Project/Product(1)	Mechanism of action	Potential indication	Planned submission date/Current Phase
AcrySof IQ ReSTOR Toric 2.5D IOL	Multifocal, aspheric and cylinder correcting intraocular lens	Cataractous lens replacement with or without presbyopia, and with astigmatism	2016 US/Advanced development
AcrySof IQ ReSTOR Toric 3.0D IOL	Multifocal, aspheric and cylinder correcting intraocular lens	Cataractous lens replacement with or without presbyopia, and with astigmatism	US/Submitted(2)
AcrySof IQ Aspheric IOL with UltraSert	Pre-loaded intraocular lens delivery device	Cataractous lens replacement	Japan/Submitted(3)

⁽¹⁾

AcrySof IQ ReSTOR Toric 3.0D diopter range expansion IOL was terminated in July 2015, as clinical data did not support submissions in the US or Japan.

⁽²⁾

Submitted to the FDA in 2014. Additional information regarding clinical data has been requested by the FDA.

⁽³⁾

Submission pending acceptance by regulatory authority.

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Ophthalmic Pharmaceuticals

Project/Product	Mechanism of action	Potential indication	Route of Administration	Planned submission date/Current Phase
EXE844b (finafloxacin)	Anti-infective	Otitis media-tympanostomy tube surgery	Topical	2016 US/III
Jetrea Ready-Diluted Injection (ocriplasmin)	Alpha-2 antiplasmin reducer	Retina (vitreomacular traction)	Intravitreal injection	2017 Japan/III
Ilevro (nepafenac 0.3%)	Anti-inflammation	Postsurgical macular edema in patients with diabetes	Topical	EU Submitted† 2018 US/III
RTH258 (brolucizumab)	Anti-VEGF single-chain antibody fragment	Wet age-related macular degeneration	Intravitreal injection	³ 2018/III

†

Submission pending acceptance by regulatory authority.

Vision Care

Project/Product	Mechanism of action	Potential indication	Planned submission date/Current Phase
AOSept Plus/Clear Care Plus with HydraGlyde	Disinfection and cleaning	Contact lens care	2017 Japan/Advanced development

Principal Markets

        The principal markets for our Alcon Division include the US, Canada and Latin America, Japan and Europe. The following table sets forth the aggregate 2015 net sales of the Alcon Division by region:

Alcon Division	2015 Net Sales to third parties
	$ millions		%
Europe		2,408		25
United States		4,275		44
Asia, Africa, Australasia		2,154		22
Canada and Latin America		975		9
Total		9,812		100
Of which in Established Markets*		7,423		76
Of which in Emerging Growth Markets*		2,389		24

*

Emerging Growth Markets comprise all markets other than the Established Markets of the US, Canada, Western Europe, Japan, Australia and New Zealand.

        Sales of certain ophthalmic pharmaceutical products, including those for allergies, anti-inflammatory and dry eye, are subject to seasonal variation. Sales of the majority of our other products are not subject to material changes in seasonal demand.

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Research and Development

        In 2015, our Alcon Division expensed $0.9 billion (on a core basis $0.9 billion) in research and development, which amounted to 9% of the Division's net sales. The Alcon Division expensed $0.9 billion (on a core basis $0.9 billion) and $1.0 billion (on a core basis $0.9 billion) in research and development in 2014 and 2013, respectively. Core results exclude impairments, amortization and certain exceptional items. For additional information, see "Item 5. Operating and Financial Review and Prospects—5.A Operating Results—Non-IFRS Measures as Defined by Novartis—Core Results."

        Our Alcon Division associates in research and development work to address diseases and conditions that affect vision, such as cataracts, glaucoma, retina diseases, dry eye, infection, ocular allergies and refractive errors. Alcon's pipeline strategy is built around a proof-of-concept qualification process, which quickly identifies opportunities that have the best chance for technical success and advances those projects, while terminating others with a low probability of success.

        In addition, the Novartis Institutes for BioMedical Research (NIBR) is the Novartis global pharmaceutical research organization that works to discover innovative medicines to treat disease and improve human health. See "—Pharmaceuticals—Research and Development." For Alcon's Ophthalmic Pharmaceuticals franchise, NIBR engages in research activities in an effort to discover and expand ophthalmic research targets, and to develop chemical and biologic compounds for the potential treatment of diseases of the eye, with a particular focus on diseases such as glaucoma and macular degeneration. The costs for these activities are allocated to Alcon.

        Research and development activities for Alcon's Surgical franchise are focused on expanding intraocular lens capabilities to improve refractive outcomes and on developing instruments for cataract, vitreoretinal and corneal refractive surgeries. The focus for the Vision Care franchise is on the research and development of new contact lens materials, coatings and designs to improve patient comfort, and on lens care solutions that provide the safety, disinfecting and cleaning power needed to help maintain ocular health. As announced in 2014, Alcon is also collaborating with Verily (formerly Google Life Sciences), and has licensed its smart lens technology for ocular medical uses, including the potential to provide an accommodative contact lens/intraocular lens for patients living with presbyopia and to monitor glucose levels in diabetic patients. The Ophthalmic Pharmaceuticals franchise is focused on the development of products for the treatment of retinal diseases, glaucoma (intraocular pressure lowering) and dry eye.

Production

        We manufacture our Alcon Division's pharmaceutical products at six facilities in the United States, Belgium, Spain, Brazil and Singapore. Our Alcon Division's surgical equipment and other surgical medical devices are manufactured at nine facilities in the United States, Belgium, Switzerland, Ireland, Germany and Israel. Our Alcon Division's contact lens and certain lens care production facilities are in the US, Canada, Germany, Singapore, Malaysia and Indonesia.

        The goal of our supply chain strategy is to efficiently produce and distribute high quality products. The manufacture of our products is heavily regulated by governmental health authorities around the world, including the FDA. In addition to regulatory requirements, many of our products involve technically complex manufacturing processes or require a supply of highly specialized raw materials. For some products and raw materials, we may also rely on a single source of supply.

        The manufacture of our products is complex and heavily regulated, which means that supply is never guaranteed. Like some of our competitors, our Alcon Division has faced manufacturing issues and has received Warning Letters relating to such manufacturing issues. In particular, in December 2012, Alcon received an FDA Warning Letter following an inspection at the LenSx laser manufacturing site in Aliso Viejo, California. Alcon responded in writing to the FDA, and in February 2013, FDA responded to Alcon acknowledging that the corrective actions described in Alcon's written response appear to address the items identified in the Warning Letter. The Warning Letter was lifted in May 2014 after all corrective

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actions were completed. The items noted in the Warning Letter did not affect the safety or effectiveness of the LenSx laser, or impact Alcon's ability to sell the product. If we or our third-party suppliers fail to comply fully with regulations then there could be a product recall or other shutdown or disruption of our production activities. We have implemented a global manufacturing strategy to maximize business continuity in case of such events or other unforeseen catastrophic events. However, there can be no guarantee that we will be able to successfully manage such issues when they arise.

Marketing and Sales

        Our Alcon Division conducts sales and marketing activities around the world organized under five operating regions (US, Europe/Middle East/Africa, Latin America/Caribbean/Canada, Asia and Japan). The Alcon Division's global commercial capability is organized around sales and marketing organizations dedicated to the Surgical, Ophthalmic Pharmaceuticals and Vision Care franchises.

        Most of our global Alcon marketing efforts are supported by advertising in trade publications and by marketing and sales representatives attending regional and national medical conferences. Marketing efforts are reinforced by targeted and timely promotional materials and direct mail to eye care practitioners in the office, hospital or surgery center setting. Technical service after the sale is provided and an integrated customer relationship management system is in place in many markets. Where applicable in our Ophthalmic Pharmaceuticals and Vision Care franchises, direct-to-consumer marketing campaigns are executed to promote selected products.

        While our Alcon Division markets all of its products by calling on medical professionals, direct customers and distribution methods differ across business lines. Although physicians write prescriptions, distributors, wholesalers, hospitals, government agencies and large retailers are the main direct customers for Alcon ophthalmic pharmaceutical products. Alcon surgical products are sold directly to hospitals and ambulatory surgical centers, although Alcon sells through distributors in certain markets outside the US. In most countries, contact lenses are available only by prescription. Our contact lenses can be purchased from eye care professionals, optical chains and large retailers, subject to country regulation. Lens care products can be found in major drugstores, food, mass merchandising and optical retail chains globally, subject to country regulations.

        As a result of changes in healthcare economics, managed care organizations are now one of the largest groups of payors for healthcare services in the US. In an effort to control prescription drug costs, almost all managed care organizations use a formulary that lists specific drugs that can be prescribed and/or the amount of reimbursement for each drug. We have a dedicated managed care team that actively seeks to optimize formulary positions for our products.

Competition

        The eye care industry is highly competitive and subject to rapid technological change and evolving industry requirements and standards. Our Alcon Division typically competes with different companies across its three respective franchises—Ophthalmic Pharmaceuticals, Surgical and Vision Care. Companies within this industry compete on technological leadership and innovation, quality and efficacy of their products, relationships with eye care professionals and healthcare providers, breadth and depth of product offering and pricing. The presence of these factors varies across our Alcon Division's product offerings, which provides a broad line of proprietary eye care products and competes in all major product categories in the eye care market, with the exception of eyeglasses. Our principal competitors also sometimes form strategic alliances and enter into co-marketing agreements in an effort to better compete with us.

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Regulation

        Our Ophthalmic Pharmaceuticals products are subject to the same regulatory procedures as are the products of our Pharmaceuticals Division. See "—Pharmaceuticals—Regulation."

        Our Surgical and Vision Care products are regulated as medical devices in the US and the EU. These jurisdictions each have risk-based classification systems that determine the type of information that must be provided to the local regulators in order to obtain the right to market a product. In the US, safety and effectiveness information for Class II and III devices must be reviewed by the FDA. There are two review procedures: a Pre-Market Approval (PMA) and a Pre-Market Notification (510(k)) submission. Under a PMA, the manufacturer must submit to the FDA supporting evidence sufficient to prove the safety and effectiveness of the device. The FDA review of a PMA usually takes 180 days from the date of filing of the application. Under Pre-Market Notification (510(k)), the manufacturer submits notification to the FDA that it intends to commence marketing the product, with data that establishes the product as substantially equivalent to another product already on the market. The FDA usually determines whether the device is substantially equivalent within 90 days.

        In the EU, the CE marking is required for all medical devices sold. By affixing the CE marking, the manufacturer certifies that a product is in compliance with provisions of the EU's Medical Device Directive. Most such products are subject to a self-certification process by the manufacturer, which requires the manufacturer to confirm that the product performs to appropriate standards. This allows the manufacturer to issue a Declaration of Conformity and to notify competent authorities in the EU that the manufacturer intends to market the product. In order to comply with European regulations, our Alcon Division maintains a full Quality Assurance system and is subject to routine auditing by a certified third party (a "notified body") to ensure that this quality system is in compliance with the requirements of the EU's Medical Device Directive as well as the requirements of the ISO quality systems' standard ISO 13485.

Intellectual Property

        We attach great importance to patents, trademarks, copyrights and know-how in order to protect our investment in research and development, manufacturing and marketing. It is our policy to seek the broadest possible protection for significant product developments in all major markets. Among other things, patents may cover the products themselves, including the product's active substance, its use and its formulation. Patents may also cover the processes for manufacturing a product, including processes for manufacturing intermediate substances used in the manufacture of the products. Patents may also cover particular uses of a product, such as its use to treat a particular disease, or its dosage regimen.

        The protection offered by such patents extends for varying periods depending on the legal life of patents in the various countries. The protection afforded, which may also vary from country to country, depends upon the type of patent and its scope of coverage. We monitor our competitors and typically challenge infringements of our intellectual property. We also defend challenges, often by generic manufacturers, to the validity of our intellectual property. However, because the outcome of intellectual property litigation is uncertain and unpredictable, there can be no assurance that we will be able to successfully protect our intellectual property rights in all cases. See generally "—Pharmaceuticals—Intellectual Property."

        We take reasonable steps to ensure that our products do not infringe valid intellectual property rights held by others. Nevertheless, third parties may assert patent and other intellectual property rights against our products. As a result, we can become involved in significant intellectual property litigation regarding our products. If we are unsuccessful in defending these suits, we could be subject to injunctions preventing us from selling our products and to damages, which may be substantial. Litigation or administrative proceedings challenging the validity of our intellectual property is similarly unpredictable. If we are

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unsuccessful in such proceedings, we may face loss of exclusivity and increased competition in the affected territories.

        Worldwide, all of our major products are sold under trademarks that we consider in the aggregate to be important to our business as a whole. We consider trademark protection to be particularly important in the protection of our investment in the sales and marketing of our Surgical, Ophthalmic Pharmaceuticals and Vision Care franchises. The scope and duration of trademark protection varies widely throughout the world. In some countries, trademark protection continues only as long as the mark is used. Other countries require registration of trademarks and the payment of registration fees. Trademark registrations are generally for fixed, but renewable, terms.

        We rely on copyright protection in various jurisdictions to protect the exclusivity of the code for the software used in our surgical equipment. The scope of copyright protection for computer software varies throughout the world, although it is generally for a fixed term which begins on the date of copyright registration.

SANDOZ

        Our Sandoz Division is a leader in generic pharmaceuticals and biosimilars and sells products in products in more than 160 countries. In 2015, the Sandoz Division achieved consolidated net sales of $9.2 billion, representing 18% of the Group's total net sales.

        Sandoz is organized globally in three franchises: Retail Generics, Anti-Infectives, and Biopharmaceuticals & Oncology Injectables. In Retail Generics, Sandoz develops, manufactures and markets active ingredients and finished dosage forms of pharmaceuticals to third parties. Retail Generics includes the areas of dermatology, respiratory and ophthalmics, as well as cardiovascular, metabolism, central nervous system, pain, gastrointestinal, and hormonal therapies. Finished dosage form anti-infectives sold to third parties are also a part of Retail Generics.

        In Anti-Infectives, Sandoz manufactures active pharmaceutical ingredients and intermediates—mainly antibiotics—for internal use by Retail Generics and for sale to third-party customers. In Biopharmaceuticals, Sandoz develops, manufactures and markets protein- or other biotechnology-based products known as biosimilars and provides biotechnology manufacturing services to other companies, and in Oncology Injectables, Sandoz develops, manufactures and markets cytotoxic products for the hospital market.

        Sandoz develops, produces and markets finished dosage form medicines as well as intermediary products including active pharmaceutical ingredients. Nearly half of the Sandoz portfolio, in terms of sales, is in differentiated products—products that are scientifically more difficult to develop and manufacture than standard generics. Examples of differentiated products in the Sandoz portfolio are the multiple sclerosis treatment Glatopa (glatiramer acetate injection), the cardiovascular polypill Sincronium (acetylsalicylic acid, atorvastatin and ramipril), and the pain medication fentanyl, which is difficult to manufacture because its delivery mechanism is a transdermal patch. Differentiated products also include biosimilars, which Sandoz began developing in 1996 and today sells in more than 60 countries. Sandoz is the market leader in biosimilars and all three of its biosimilars continue to demonstrate strong growth in their respective categories—Omnitrope, a human growth hormone; Binocrit, an erythropoiesis-stimulating agent used to treat anemia; and filgrastim for neutropenia under the brand names Zarzio outside the US and Zarxio in the US. According to IMS Health, Sandoz holds the global #1 position in terms of sales in biosimilars and generic anti-infectives, as well as in ophthalmics and transplanattion medicines. In addition, Sandoz holds leading global positions in key therapeutic areas ranging from generic injectables, dermatology and respiratory to cardiovascular, metabolism, central nervous system, pain and gastrointestinal.

        Sandoz is focused on several key priorities, including investing in key markets and therapeutic areas, increasing the performance of its Development & Regulatory organization, optimizing its manufacturing network and maximizing opportunities in biosimilars.

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        In 2015, key product launches in the US included Glatopa, the first generic version of Teva's Copaxone® 20mg (glatiramer acetate injection), the biosimilar Zarxio (filgrastim-sndz), and budesonide inhalation suspension (Astra Zeneca's Pulmicort Respules®), as well as authorized generic versions of the The Medicine Company's Angiomax® (bivalirudin) and our Pharmaceutical Division's Exelon Patch (rivastigmine patch).

        In 2015, key product launches in various European countries included aripiprazole TAB (Atsuka's Abilify®), duloxetine (Eli Lilly's Cymbalta®) pregabalin HGC (Pfizer's Lyrica®) and valganciclovir FCT (Roche's Valcyte®). In addition, the global rollout of AirFluSal Forspiro continued with launches across Europe. As of December 31, 2015, AirFluSal Forspiro was marketed in 24 countries.

        In 2015, Sandoz continued to accelerate its efforts across Sub-Saharan Africa, supported by a strong product portfolio that comprises anti-infectives, tuberculosis treatments, maternal and child health products, and medicines to address non-communicable diseases.

New Products

        Sandoz launched a number of important products in various countries in 2015, including:

•

Aripiprazole TAB (Atsuka's Abilify®)

•

Bivalirudin (authorized generic of The Medicine Company's Angiomax®)

•

Budesonide inhalation suspension (Astra Zeneca's Pulmicort Respules®)

•

Duloxetine (Eli Lilly's Cymbalta®)

•

Glatopa (Teva's Copaxone® 20mg; glatiramer acetate injection)

•

Rivastigmine patch (authorized generic of our Pharmaceutical Division's Exelon Patch)

•

Pregabalin HGC (Pfizer's Lyrica®)

•

Valganciclovir FCT (Roche's Valcyte®)

•

Zarxio (filgrastim-sndz)

Key Marketed Products

        The following tables describe key marketed products for Sandoz (availability varies by market):

Retail Generics

Product	Originator Drug	Description
Acetylcysteine	Fluimucil®	Respiratory system
Amoxicillin/clavulanic acid	Augmentin®	Anti-infective
Atorvastatin	Lipitor®	Blood cholesterol reduction
Diclofenac	Voltaren	Analgesic
Fentanyl	Duragesic®	Analgesic
Levothyroxine Sodium	Synthroid®; Levoxyl®	Hypothyroidism treatment
Omeprazole	Prilosec®	Ulcer and heartburn treatment
Pantoprazole	Protonix®	Gastrointestinal
Potassium	Klor-Con®	Hypokalemia
Tacrolimus	Prograf®	Transplantation

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Anti-Infectives

Active Ingredients	Description
Oral and sterile penicillins	Anti-infectives
Oral and sterile cephalosporins	Anti-infectives
Clavulanic acid and mixtures with clavulanic acid	ß-lactam inhibitors
Classical and semisynthetic erythromycins	Anti-infectives

Intermediates	Description
Various cephalosporin intermediates	Anti-infectives
Erythromycin base	Anti-infectives
Various crude compounds produced by fermentation	Cyclosporine, ascomysine, rapamycine, mycophenolic acid, etc.

Biopharmaceuticals

Product	Originator Drug	Description
Binocrit and Epoetin alfa Hexal	Eprex®/Erypo®	Recombinant protein used for anemia
Omnitrope	Genotropin®	Recombinant human growth hormone
Zarzio, Zarxio and Filgrastim Hexal	Neupogen®	Recombinant protein used in oncology

Oncology Injectables

Product	Originator Drug	Description
Azacitidine	Vidaza®	Bone marrow cancer, leukemia
Bortezomib	Velcade®	Multiple myeloma, lymphoma
Cyclophosphamide	Endoxan®	Breast, ovarian and non-small cell lung cancer
Decitabine	Dacogen®	Bone marrow cancer, leukemia
Docetaxel	Taxotere®	Breast, ovarian and non-small cell lung cancer
Gemcitabine	Gemzar®	Bladder, pancreas, lung, ovarian, and breast cancer
Leuprorelin	Lupron®, Eligard®	Prostate cancer
Levoleucovorin Calcium	Fusilev®	Rescue after methotrexate high-dose therapy
Methotrexate	Folex®, Rheumatrex®	Arthritis; breast, lung, cervix and ovarian cancer, and others
Paclitaxel	Taxol®	Breast, lung and ovarian cancer, Kaposi sarcoma

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Biosimilars in Phase III Development and Registration

        The following table describes Sandoz biosimilar projects that are in Phase III clinical trials (including filing preparation) and registration:

Project/product	Common name	Mechanism of action	Potential indication/ indications	Therapeutic areas	Route of administration	Current phase
GP2013	rituximab	Anti-CD20 antibody	Non-Hodgkin lymphoma, chronic lymphocytic leukemia, rheumatoid arthritis, granulomatosis with polyangiitis (also known as Wegener's granulomatosis), and microscopic polyangiitis and others (same as originator)	Oncology and Immunology	Intravenous	II and III
GP2015	etanercept	TNF-a inhibitor	Arthritidies (rheumatoid arthritis, ankylosing spondylitis, psoriatic arthritis), plaque psoriasis and others (same as originator)	Immunology	Subcutaneous	US/EU: Registration
GP2017	adalimumab	TNF-a inhibitor	Arthritidies (rheumatoid arthritis, ankylosing spondylitis, psoriatic arthritis), plaque psoriasis and others (same as originator)	Immunology	Subcutaneous	III
HX575*	epoetin alfa	Erythropoiesis-stimulating agent	Chronic kidney disease, chemotherapy-induced anemia and others (same as originator)	Oncology and Nephrology	Subcutaneous and intravenous	III
HX575 s.c.**	epoetin alfa	Erythropoiesis-stimulating agent	Chronic kidney disease	Nephrology	Subcutaneous	EU: Registration
LA-EP2006	pegfilgrastim	Pegylated granulocyte colony-stimulating factor	Chemotherapy-induced neutropenia and others (same as originator)	Oncology	Subcutaneous	US: Registration EU: III

*

Planned submission for US.

**

Filing in the EU for the addition of the subcutaneous (s.c.) route of administration for Binocrit nephrology indications.

Principal Markets

        The two largest generics markets in the world—the US and Europe—are the principal markets for Sandoz, although Sandoz sells products in more than 160 countries. The following table sets forth the aggregate 2015 net sales of Sandoz by region:

Sandoz	2015 Net Sales to third parties
	$ millions		%
Europe		3,925		43
United States		3,525		38
Asia, Africa, Australasia		1,150		13
Canada and Latin America		557		6
Total		9,157		100
Of which in Established Markets*		6,972		76
Of which in Emerging Growth Markets*		2,185		24

*

Emerging Growth Markets comprise all markets other than the Established Markets of the US, Canada, Western Europe, Japan, Australia and New Zealand.

        Many Sandoz products are used for chronic conditions that require patients to consume the product over long periods of time, from months to years. Sales of our anti-infective products are subject to seasonal variation. Sales of the vast majority of our other products are not subject to material changes in seasonal demand.

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Production

        The goal of our supply chain strategy is to produce and distribute high-quality products efficiently. The manufacture of our products is heavily regulated by governmental health authorities around the world, including the FDA and EMA. In addition to regulatory requirements, many of our products involve technically complex manufacturing processes or require a supply of highly specialized raw materials.

        We manufacture and package our Sandoz products at 45 manufacturing sites across 19 countries, supplying more than 160 countries globally. Among these, our most significant production facilities are located in Barleben and Rudolstadt, Germany; Kundl, Schaftenau and Unterach, Austria; Ljubljana and Menges, Slovenia; Stryków, Poland. In 2015, we announced that we were exiting our manufacturing sites in Frankfurt and Gerlingen, Germany, as well as in Turbhe, India. We anticipate that these site exits will be completed by the end of 2016. Our global manufacturing strategy focuses on building a high-quality manufacturing network that optimizes cost, service, technology and geography.

        Active pharmaceutical ingredients are manufactured in our own facilities or purchased from third-party suppliers. We maintain state-of-the-art and cost-competitive processes within our own production network. Those processes include fermentation, chemical syntheses and precipitation processes, such as sterile processing. Many biosimilars are manufactured using recombinant DNA derived technology, by which a gene is introduced into a host cell, which then produces a human protein. This manufacturing process requires sophisticated technical expertise. We are constantly working to improve current, and to develop new, manufacturing processes.

        Where possible, we strive to maintain multiple supply sources so that the business is not dependent on a single or limited number of suppliers, and competitive material sourcing can be assured. However, our ability to do so may at times be limited by regulatory or other requirements. We monitor market developments that could have an adverse effect on the supply of essential active pharmaceutical ingredients. All active pharmaceutical ingredients we purchase must comply with high quality standards.

        We obtain agricultural, chemical and other raw materials from suppliers around the world. The raw materials we purchase are generally subject to market price fluctuations. We seek to avoid these fluctuations, where possible, through the use of long-term supply contracts. We also proactively monitor markets and developments that could have an adverse effect on the supply of essential materials. All raw materials we purchase must comply with our quality standards. For some products and raw materials, we may also rely on a single source of supply.

        In October 2015, we received a Warning Letter from the FDA with respect to our Kalwe and Turbhe, India manufacturing sites. The Warning Letter observations follow an FDA inspection at both sites in August 2014 and are related to deficiencies in current good manufacturing practice (cGMP) for finished pharmaceuticals. The Warning Letter did not contain any new issues in addition to the 483 observations issued following the August 2014 inspection. Sandoz plans to continue to collaborate with the FDA to resolve the Warning Letter observations.

        In September 2015, the FDA confirmed that it closed out the May 2013 Warning Letter relating to our oncology injectables manufacturing facility in Unterach, Austria. That Warning Letter contained two observations which followed an FDA inspection at the site in October 2012, and were related to historical visual inspection practices for products manufactured at the site. A follow up inspection by the FDA in 2014 resulted in no observations.

        In July 2014, the FDA confirmed that it had decided to close out the Warning Letter issued in November 2011 against three Sandoz North American facilities in Broomfield, Colorado; Wilson, North Carolina; and Boucherville, Canada. The Warning Letter, which followed inspections at all three sites in the course of 2011, had raised concerns regarding these facilities' compliance with FDA cGMP regulations. The FDA observations in the Warning Letter related primarily to general documentation,

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validation and investigation practices. Novartis took steps in collaboration with the FDA to correct the observations in the Warning Letter with respect to all three sites.

        Our Sandoz Division has experienced significant supply interruptions in the past, and there can be no assurance that supply will not be interrupted again in the future as a result of unforeseen circumstances. The manufacture of our products is complex and heavily regulated, making supply never an absolute certainty. If we or our third-party suppliers fail to comply fully with regulations or other unforeseen challenges occur, then there could be a product recall or other shutdown or disruption of our production activities. We have implemented a global manufacturing strategy to maximize business continuity in case of business interruptions or other unforeseen catastrophic events. However, there can be no guarantee that we will be able to successfully manage such issues and maintain continuous supply if such issues arise.

Marketing and Sales

        Sandoz sells a broad portfolio of generic pharmaceutical products and biosimilars to wholesalers, pharmacies, hospitals and other healthcare outlets. Sandoz adapts its marketing and sales approach to local decision making processes, depending on the structure of the market in each country.

        In response to rising healthcare costs, many governments and private medical care providers, such as health maintenance organizations, have instituted reimbursement schemes that favor the substitution of bioequivalent generic products for patented pharmaceutical products. In the US, statutes have been enacted by virtually all states that permit or require pharmacists to substitute a less expensive generic product for the brand-name version of a drug that has been prescribed to a patient. Generic use is growing in Europe, but penetration rates in many EU countries (as a percentage of volume) remain well below those in the US. Legislative or regulatory changes can have a significant impact on our business in a country. In Germany, for example, the generic market is in transition and healthcare reforms have increasingly shifted decision making from physicians to insurance funds.

        Our Anti-Infectives franchise supplies generic antibiotics to a broad range of customers, as well as active pharmaceutical ingredients and intermediates to the pharmaceutical industry worldwide.

        Our Biopharmaceuticals franchise operates in an emerging business environment. Regulatory pathways for approving biosimilar products are either relatively new or still in development, and policies have not yet been fully defined or implemented for the automatic substitution and reimbursement of biosimilars in many markets, including the US (see "—Regulation"). As a result, in many of these markets, including the US, our biosimilar products are marketed as branded competitors to the originator products.

Competition

        The market for generic products is characterized by increasing demand for high-quality pharmaceuticals that can be marketed at lower costs due to comparatively minimal initial research and development investments. Increasing pressure on healthcare expenditures and numerous patent and data exclusivity period expirations have created a favorable market environment for the generics industry. This positive market trend, however, brings increased competition among the companies selling generic pharmaceutical products, leading to ongoing price pressure on generic pharmaceuticals.

        In addition, research-based pharmaceutical companies have responded to increased competition from generic products by licensing their patented products to generic companies (so-called "authorized generics"). By doing so, research-based pharmaceutical companies participate directly in the generic conversion process. Consequently, generic companies that were not in a position to compete on a specific product may enter the generic market using the innovator's product. In the US, the authorized generic is not subject to the US Hatch-Waxman Act rules regarding exclusivity (see "—Regulation"). The company that launches an authorized generic typically launches its product at the same time as the generic exclusivity holder. Authorized generics serve as a business opportunity for Sandoz when the product of a

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research-based pharmaceutical company loses patent protection and Sandoz secures a license from the research-based pharmaceutical company to launch the authorized generic of that product. However, because they are not subject to the Hatch-Waxman Act rules on exclusivity, authorized generics also reduce the value of the exclusivity for the company that invested in creating the first generic medicine to compete with the originator product. Furthermore, certain research-based companies continually seek new ways to protect their market franchise and to decrease the impact of generic competition. For example, some research-based pharmaceutical companies have reacted to generic competition by decreasing the prices of their patented product, or engaging in other tactics to preserve the sales of their branded products, thus potentially limiting the profit that the generic companies can earn on the competing generic product.

Development and Registration

        Before a generic pharmaceutical may be marketed, intensive technical and clinical development work must be performed to demonstrate, in bioavailability studies, the bioequivalency of the generic product to the reference product. Nevertheless, research and development costs associated with generic pharmaceuticals generally are much lower than those of the originator pharmaceuticals, as no pre-clinical studies or clinical trials on dose finding, safety and efficacy must be performed by the generic company. As a result, pharmaceutical products for which the patent and data exclusivity period has expired can be offered for sale at prices often much lower than those of products protected by patents and data exclusivity, which must recoup substantial basic research and development costs through higher prices over the life of the product's patent and data exclusivity period.

        While generic pharmaceuticals are follow-on versions of chemically synthesized molecules, "biosimilar" products contain a version of the active substance of an already approved original biological medicine. Due to the inherent variability of biologic products and their higher complexity, the development and the regulatory pathway of biosimilars differ significantly from that of generics.

        Development of a biosimilar product is much more technically challenging than the development of a generic pharmaceutical. Unlike generic pharmaceuticals, development of biosimilars requires clinical studies in patients. Biosimilars are engineered to match the reference product in quality, safety and efficacy. This is achieved by systematically defining the target of the reference product and then comparing the biosimilar to the reference product at various development stages to confirm biosimilarity and to establish that there are no clinically meaningful differences between the proposed biosimilar and the reference biologic. Because the purpose of a biosimilar clinical development program is to confirm biosimilarity and not establish efficacy and safety de novo, the clinical studies required are less than those required for an originator biologic. Therefore, the cost of development for a biosimilar is usually less than that of an originator biologic.

        The regulatory pathways for approval of biosimilar products are being developed and established in many countries of the world. A regulatory framework for the approval of biosimilars has been established in the EU, Japan, Canada and US, while the WHO issued guidance. Sandoz has successfully registered and launched the first biosimilar (or biosimilar type) product in Europe, the US, Canada, Japan, Taiwan, Australia and many countries in Latin American and Asia. Sandoz has three approved biosimilar products in more than 60 countries of the world, and is the first company to secure approval for a biosimilar under the US biosimilar pathway which was established as part of the Biologics Price Competition and Innovation Act (BPCIA).

        The Sandoz Division explores alternative routes for the manufacture of known compounds and develops innovative dosage forms of well-established medicines. The Development and Registration staff employed by affiliates of the Sandoz Division are based worldwide, including facilities in Holzkirchen and Rudolstadt, Germany; Kundl, Schaftenau and Unterach, Austria; Ljubljana and Mengeš, Slovenia; Boucherville, Canada; and East Hanover, New Jersey. In 2015, Sandoz expensed $0.8 billion (on a core basis $0.8 billion) in product development, which amounted to 8% of the division's net sales. Sandoz

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expensed $0.8 billion (on a core basis $0.8 billion) and $0.8 billion (on a core basis $0.8 billion) in 2014 and 2013, respectively. Core results exclude impairments, amortization and certain exceptional items. For additional information, see "Item 5. Operating and Financial Review and Prospects—5.A Operating Results—Non-IFRS Measures as Defined by Novartis—Core Results."

Regulation

        The Hatch-Waxman Act in the US (and similar legislation in the EU and in other countries) eliminated the requirement that manufacturers of generic pharmaceuticals repeat the extensive clinical trials required for originator products, so long as the generic version could be shown in bioavailability studies to be of identical quality and purity, and to be therapeutically equivalent to the reference product.

        In the US, the decision whether a generic pharmaceutical is bioequivalent to the original patented product is made by the FDA based on an Abbreviated New Drug Application (ANDA) filed by the generic product's manufacturer. The process typically takes nearly two years from the filing of the ANDA until FDA approval. However, delays can occur if issues arise regarding the interpretation of bioequivalence study data, labeling requirements for the generic product, or qualifying the supply of active ingredients. In addition, the Hatch-Waxman Act requires a generic manufacturer to certify in certain situations that the generic product does not infringe on any current applicable patents on the product held by the innovator, or to certify that such patents are invalid or the product is non-infringing. This certification often results in a patent infringement lawsuit being brought by the patent holder against the generic company. In the event of such a lawsuit, the Hatch-Waxman Act imposes an automatic 30 month delay in the approval of the generic product in order to allow the parties to resolve the intellectual property issues. For generic applicants who are the first to file their ANDA containing a certification claiming non-infringement or patent invalidity, the Hatch-Waxman Act provides those applicants with 180 days of marketing exclusivity to recoup the expense of challenging the innovator patents. However, generic applicants must launch their products within certain time frames or risk losing the marketing exclusivity that they had gained by being a first to file applicant.

        In the EU, decisions on the granting of a marketing authorization are made either by the European Commission based on a positive recommendation by the EMA under the Centralized Procedure, or by a single Member State under the national or decentralized procedure. See "—Pharmaceuticals—Regulation—European Union." Companies may submit Abridged Applications for approval of a generic medicinal product based upon its "essential similarity" to a medicinal product authorized and marketed in the EU following the expiration of the product's data exclusivity period. In such cases, the generic company is able to submit its Abridged Application based on the data submitted by the medicine's innovator, without the need to conduct extensive Phase III clinical trials of its own. For all products that received a marketing authorization in the EU after late 2005, the Abridged Application can be submitted throughout the EU. However, the data submitted by the innovator in support of its application for a marketing authorization for the reference product will be protected for ten years after the first grant of marketing authorization in all Member States, and can be extended for an additional year if a further innovative indication has been authorized for that product, based on pre-clinical and clinical trials filed by the innovator that show a significant clinical benefit in comparison to the existing therapies. Approval of biosimilars in Europe follows the same process. However, biosimilars usually have to be approved through the centralized procedure because they are manufactured using recombinant DNA technology. As part of the approval process in the EU, biosimilars have to demonstrate comparability to the originator product in terms of safety, efficacy and quality through an extensive comparability exercise, based on strict guidelines set by the authorities. Regulators will only approve a biosimilar based on data which allows the regulators to conclude that there are no clinically meaningful differences between the reference product and the biosimilar.

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        In the US, the regulatory pathway for the approval of a biosimilar product was established under the BPCIA, signed into law in March 2010. Under the BPCIA, a biosimilar must be highly similar with no clinically meaningful differences compared to the reference product. Approval of a biosimilar in the US requires the submission of a BLA to the FDA, including an assessment of immunogenicity, and pharmacokinetics or pharmacodynamics. The BLA for a biosimilar can be submitted as soon as four years after the initial approval of the reference biologic, but can only be approved 12 years after the initial approval of the reference biologic. This pathway is still relatively new and some aspects remain untried, controversial and subject to litigation.

Intellectual Property

        We take all reasonable steps to ensure that our generic products do not infringe valid intellectual property rights held by others. Nevertheless, originator companies commonly assert patent and other intellectual property rights in an effort to delay or prevent the launch of competing generic products. As a result, we can become involved in significant litigation regarding our generic products. If we are unsuccessful in defending these suits, we could be subject to injunctions preventing us from selling our generic products and to damages, which may be substantial.

        Wherever possible, our generic products are protected by our own patents. Among other things, patents may cover the products themselves, including the product's formulation, or the processes for manufacturing a product.

4.C    Organizational Structure

        See "Item 4. Information on the Company—4.A History and Development of Novartis," and "Item 4. Information on the Company—4.B Business Overview—Overview."

4.D    Property, Plants and Equipment

        Our principal executive offices are located in Basel, Switzerland. Our divisions operate through a number of affiliates having offices, research facilities and production sites throughout the world.

        We generally own our facilities. However, some sites are leased under long-term leases. Some of our principal facilities are subject to mortgages and other security interests granted to secure indebtedness to certain financial institutions.

        For a discussion of our manufacturing facilities, see "—Item 4.B Business Overview—Pharmaceuticals—Production," "—Alcon—Production," and "—Sandoz—Production." The following table sets forth our major headquarters and most significant production and research and development

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facilities by division. A number of the facilities associated with our former Vaccines, OTC and Animal Health Divisions were transferred as part of the portfolio transformation transactions completed in 2015.

Location/Division	Size of Site (in square meters)	Major Activity
Major facilities:
Pharmaceuticals
East Hanover, New Jersey	400,000	Division US headquarters, research and development
Changshu (Suzhou), China	230,000	Technical research, development and manufacturing of drug substances and drug intermediates
Cambridge, Massachusetts	212,000	Global NIBR headquarters, research and development
Basel, Switzerland—St. Johann	200,000	Global Group headquarters, global division headquarters, research and development, production of drug substances and drug intermediates
Ringaskiddy, Ireland	85,000	Production of drug substances and drug intermediates
Stein, Switzerland	64,700	Production of sterile vials, pre-filled syringes and ampoules, and of inhalation capsules, tablets and transdermals, and of active pharmaceutical ingredients
Grimsby, UK	64,000	Production of drug substances and drug intermediates
Huningue, France	35,000	Production of drug substances for clinical and commercial supply
Barbera, Spain	33,000	Production of tablets, capsules and inhalation products
Basel, Switzerland—Schweizerhalle	31,700	Production of drug substances and drug intermediates
Wehr, Germany	31,700	Production of tablets, creams and ointments

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Location/Division	Size of Site (in square meters)	Major Activity
Shanghai, China	14,200	Research and development
Morris Plains, New Jersey	14,000	Production of personalized cell therapy
Alcon
Fort Worth, Texas	252,800	Division headquarters, production, research and development for Ophthalmic Pharmaceuticals, Vision Care, Surgical
Grosswallstadt, Germany	82,400	Production, research and development for Vision Care
Johns Creek, Georgia	73,400	Production, research and development for Vision Care
Puurs, Belgium	55,000	Production for Ophthalmic Pharmaceuticals, Surgical
Houston, Texas	36,300	Production for Surgical
Huntington, West Virginia	24,600	Production for Surgical
Irvine, California	20,700	Production for Surgical
Sandoz
Kundl and Schaftenau, Austria	480,000	Production of biotech products, anti-infectives, active drug substances, product development
Barleben, Germany	340,000	Production of broad range of finished dosage forms
Ljubljana, Slovenia	83,000	Production of broad range of finished solid and sterile dosage forms
Holzkirchen, Germany	72,300	Division headquarters, production of oral films, transdermal delivery systems, matrix patches, product development
Stryków, Poland	45,000	Production of broad range of bulk oral solid forms
Rudolstadt, Germany	44,000	Development and production of respiratory technologies and ophthalmics
Princeton, New Jersey	14,300	Division US headquarters

        In 2010, we announced a Group-wide review of our manufacturing footprint. In 2015, and continuing into 2016, we continued to optimize our manufacturing footprint, bringing the total number of production

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sites that have been or are in the process of being restructured, exited or divested as part of these activities to 25 for our continuing operations. These steps help us balance production capacity and further increase efficiency. We have recorded exceptional charges of $375 million in 2015, bringing the total charges to $950 million since the program began for our continuing operations. As part of this initiative we announced in 2015 the closing of our Pharmaceuticals Division facility in Resende, Brazil and plans to exit our Sandoz Division plants in Gerlingen and Frankfurt, Germany, and Turbhe, India. We also announced downsizing at a Pharmaceutical Division site in Ringaskiddy, Ireland. In addition, we finalized the divestment of our Alcon Division manufacturing operations in Kaysersberg, France, and the divestment of our pharmaceutical manufacturing site in Taboão da Serra, Brazil.

        Our St. Johann site in Basel, Switzerland, is our largest research and development site as well as the headquarters for the Group and for the Pharmaceuticals Division. A project was started in 2001, known as "Campus," with the aim of transforming the site into a center of knowledge, innovation and encounter with a primary emphasis on international corporate functions and research activities. At that time, changes needed to be made to the site, since it had originally been designed primarily for pharmaceuticals production, but research and development had come to account for a greater proportion of our activities there. The Campus project is progressing as planned. By the end of 2015, 17 new buildings had begun operations, eight of them laboratory buildings. The current phase of the long term redevelopment of our St. Johann site is expected to be completed in 2016. In addition, the Novartis Board of Directors has approved planning for the next phase of the campus extension after 2015 in line with the overall plan for the site. A large laboratory building is planned for the northern end of the site and construction is expected to begin in 2016. In October 2014, the Basel "Grand Council" approved the second part of a high-rise building zone at the St. Johann site, which will allow us to plan a third high-rise building on the site. Through December 31, 2015, the total amount paid and committed to be paid on the Campus project is equivalent to $2.2 billion. Novartis expects to have spent more than the equivalent of $2.2 billion on the Campus project and the relocation of production facilities to other sites in the Basel region through 2017. We intend to fund these expenditures from internally generated resources.

        In 2007, NIBR opened a start-up facility for our new R&D center in Shanghai, China (CNIBR). In 2008, we broke ground on Phase 1 of a new facility that was originally to be home to approximately 400 R&D scientists and approximately 400 other Pharmaceuticals Division personnel. In 2009, we announced that we would expand the scope of the site and invest $1 billion over the next five years to increase the size of our operations in Shanghai. Based on a re-evaluation of the site conducted in 2010, the current Phase one has been extended by two buildings to fulfill the requirements for the cross-divisional Shanghai campus to house 800 offices and 400 laboratory work places. As of December 31, 2015, two laboratory buildings and two office buildings of the first phase of the project are completed. In addition, the other two office buildings which are part of phase one are nearly complete with testing, commissioning and resolution of punch list items in progress. Through December 31, 2015, the total amount paid and committed to be paid on the CNIBR Project is equivalent to $844 million.

        In 2010, we announced that we would build new laboratory and office space for NIBR in Cambridge, Massachusetts on an area of land close to the existing NIBR research facilities on Massachusetts Avenue. In 2011 we finalized design plans for the new buildings, received necessary zoning changes from the City of Cambridge and began preparing the site for construction. Construction began on the site in April 2012, and as of the end of 2015, construction is complete and associates will begin moving into the new buildings. Through December 31, 2015, the total amount paid and committed to be paid on the NIBR Project is $743 million.

        In 2012, Novartis announced the construction of a new state-of-the-art production facility to produce solid dosage form medicines for the Pharmaceuticals Division in Stein, Switzerland. We expect our investment in this facility to exceed $600 million. The new facility is planned to replace an older facility. In addition, Novartis plans to invest in new technologies and packaging facilities for pharmaceuticals at Stein. Stein is planned to be a technological competence center for both sterile and solid dosage form drugs,

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while Novartis plans to expand the site's strategic role as a key platform for global launches of new pharmaceutical products. Through December 31, 2015, the total amount paid and committed to be paid on this project is equivalent to $554 million.

        In 2012, we announced the planned construction of a new state-of-the-art biotechnology production site in Singapore with a planned investment of over $700 million. The new facility will focus on drug substance manufacturing based on cell culture technology. Ground was broken in February 2013 and construction was completed in the third quarter of 2015 for phase one of the project. We expect phase one of this project to be operational in 2017 and phase two in 2019. It will be co-located with the pharmaceutical production site based in Tuas, Singapore. In the future, Singapore is expected to be a technological competence center for both biotechnology and pharmaceutical manufacturing at Novartis. Through December 31, 2015, the total amount paid and committed to be paid on this project is equivalent to $452 million.

        In 2012, we acquired a 16,000 square meter FDA-approved manufacturing facility in Morris Plains, New Jersey, from Dendreon Corporation for $43 million. In particular, we purchased all fixed assets at the site, including all equipment, machinery, utilities, and cell therapy related plant infrastructure, while the land and building will continue to be leased from a third party. The facility, and the former Dendreon personnel whom we retained, will support both clinical and commercial production of potential new products and therapies that emerge from the Novartis-University of Pennsylvania collaboration announced in August 2012, including CTL019. The facility space and infrastructure could also accommodate future chimeric antigen receptor production activities, in addition to CTL019. Through December 31, 2015, the total amount paid and committed to be paid on this project is $33 million.

        A second expansion of the Johns Creek, Georgia facility was approved in the third quarter of 2014 to add nine production lines for Dailies and Dailies Total1 contact lenses. This project is expected to be completed by the third quarter of 2017. Through December 31, 2015, the total amount paid and committed to be paid on this project is $219 million.

        The Alcon Division began an expansion of its Singapore facility in 2014 for contact lens manufacturing. The expansion is expected to add 16,000 square meters to the existing production lines. Through December 31, 2015, the total amount paid and committed to be paid on this project is equivalent to $95 million.

Environmental Matters

        We integrate core values of environmental protection into our business strategy to add value to the business, manage risk and enhance our reputation.

        We are subject to laws and regulations concerning the environment, safety matters, regulation of chemicals and product safety in the countries where we manufacture and sell our products or otherwise operate our business. These requirements include regulation of the handling, manufacture, transportation, use and disposal of materials, including the discharge of pollutants into the environment. In the normal course of our business, we are exposed to risks relating to possible releases of hazardous substances into the environment which could cause environmental or property damage or personal injuries, and which could require remediation of contaminated soil and groundwater, in some cases over many years, regardless of whether the contamination was caused by us, or by previous occupants of the property.

        See also "Item 3. Key Information—Item 3.D Risk Factors—Environmental liabilities may adversely impact our results of operations" and "Item 18. Financial Statements—Note 20."

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Item 4A.    Unresolved Staff Comments

        Not applicable.

Item 5.    Operating and Financial Review and Prospects

5.A Operating Results

        This operating and financial review should be read together with the Group's consolidated financial statements in this Annual Report, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board.

OVERVIEW

        Novartis provides healthcare solutions that address the evolving needs of patients and societies worldwide. Our broad portfolio includes innovative medicines, eye care products and cost-saving generic pharmaceuticals.

        Following the completion of a series of transactions in 2014 and 2015, the Group's portfolio is organized into three global operating divisions. In addition, we separately report the results of Corporate activities. The disclosure in this Item focuses on these continuing operations, which are made up of Pharmaceuticals, Alcon, Sandoz and Corporate activities. In addition, from March 2, 2015, the date of the completion of a series of transactions with GSK, continuing operations also includes the results from the oncology assets acquired from GSK and the 36.5% interest in the GSK consumer healthcare joint venture (the latter reported as an investment in associated companies). We sold our Vaccines Division, excluding our influenza business, to GSK. Our influenza vaccines business was sold to CSL and our Animal Health Division was sold to Lilly. For more detail on these transactions see, "Item 10.C Material Contracts."

Continuing Operations:

•

Pharmaceuticals: Innovative patent-protected prescription medicines

•

Alcon: Surgical, ophthalmic pharmaceutical and vision care products

•

Sandoz: Generic pharmaceuticals and biosimilars

•

Corporate activities

Discontinued Operations:

•

Vaccines and Diagnostics: Preventive human vaccines and blood-testing diagnostics

•

Consumer Health: OTC (over-the-counter medicines) and Animal Health

•

Corporate: certain transactional and other expenses related to the portfolio transformation

        Novartis has leading positions globally in each of the three areas of our continuing operations. To maintain our competitive positioning across these growing segments of the healthcare industry, we place a strong focus on innovating to meet the evolving needs of patients around the world, growing our presence in new and emerging markets, and enhancing our productivity to invest for the future and increase returns to shareholders.

        We separately report the financial results of our Corporate activities as part of our continuing operations. Income and expenses from Corporate activities include the costs of the Group headquarters and those of corporate coordination functions in major countries. In addition, Corporate includes other items of income and expense which are not attributable to specific segments such as certain expenses

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related to post-employment benefits, environmental remediation liabilities, charitable activities, donations and sponsorships.

        Our continuing operations are supported by the Novartis Institutes for BioMedical Research and Novartis Business Services.

•

The Novartis Institutes for BioMedical Research (NIBR) is the innovation engine of Novartis, and is headquartered in Cambridge, Massachusetts. More than 6,000 scientists and associates at NIBR conduct research into various disease areas at sites located in the US, Switzerland, Singapore and China. For more information about NIBR, see "—Pharmaceuticals—Research and Development—Research program," below.

•

Novartis Business Services (NBS), our shared services organization, consolidates support services across Novartis divisions, helping to drive efficiency, standardization and simplification. NBS includes six service domains: human resources services, real estate and facility management, procurement, information technology, product lifecycle services and financial reporting and accounting operations. NBS has approximately 9,500 associates. Moving from division-specific services to a cross-divisional model, NBS continues to scale up the offshoring of transactional services to its five selected Global Service Centers in Mexico City, Mexico; Kuala Lumpur, Malaysia; Prague, Czech Republic; Hyderabad, India; and Dublin, Ireland.

        Our continuing operations achieved net sales of $49.4 billion in 2015, while net income from continuing operations amounted to $7.0 billion. Research & Development expenditure in 2015 amounted to $8.9 billion ($8.7 billion excluding impairment and amortization charges). Of total net sales from continuing operations, $12.4 billion, or 25%, came from Emerging Growth Markets, and $37.0 billion, or 75%, came from Established Markets. Emerging Growth Markets comprise all markets other than the Established Markets of the US, Canada, Western Europe, Japan, Australia and New Zealand.

        Headquartered in Basel, Switzerland, our Group companies employed 118,700 full-time equivalent associates as of December 31, 2015. Our products are available in approximately 180 countries around the world.

        In September 2015, Novartis announced the launch of Novartis Access, a portfolio of 15 medicines to treat chronic diseases in low- and middle-income countries. The portfolio addresses cardiovascular diseases, diabetes, respiratory illnesses, and breast cancer and will be offered to governments, non-governmental organizations (NGOs) and other public-sector healthcare providers for $1 per treatment, per month.

Continuing Operations:

Pharmaceuticals Division

        Pharmaceuticals researches, develops, manufactures, distributes and sells patented prescription medicines and is organized in the following franchises: Oncology, Cardio-Metabolic, Immunology and Dermatology, Retina, Respiratory, Neuroscience and Established Medicines. Our Pharmaceuticals Division also includes a franchise focused on the development and commercialization of Cell and Gene Therapies.

        On March 2, 2015, we completed the acquisition of the oncology products of GSK, together with certain related assets. In addition, we acquired a right of first negotiation over the co-development or commercialization of GSK's current and future oncology R&D pipeline, excluding oncology vaccines. The right of first negotiation is for a period of twelve and one half years from the acquisition closing date.

        In 2015, the Pharmaceuticals Division accounted for $30.4 billion, or 62%, of Group net sales, and for $7.6 billion, or 81%, of Group operating income (excluding Corporate income and expense, net).

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Alcon Division

        Our Alcon Division researches, develops, manufactures, distributes and sells eye care products and technologies to serve the full life cycle of eye care needs. Alcon offers a broad range of products to treat many eye diseases and conditions, and is organized into three franchises: Surgical, Ophthalmic Pharmaceuticals and Vision Care. The Surgical portfolio includes technologies and devices for cataract, retinal, glaucoma and refractive surgery, as well as intraocular lenses to treat cataracts and refractive errors, like presbyopia and astigmatism. Alcon also provides viscoelastics, surgical solutions, surgical packs, and other disposable products for cataract and vitreoretinal surgery. In Ophthalmic Pharmaceuticals, the portfolio includes treatment options for elevated intraocular pressure caused by glaucoma, anti-infectives to aid in the treatment of bacterial infections and bacterial conjunctivitis, and ophthalmic solutions to treat inflammation and pain associated with ocular surgery, as well as an intravitreal injection for vitreomacular traction including macular hole. The Ophthalmic Pharmaceuticals portfolio also includes eye and nasal allergy treatments, as well as over-the-counter dry eye relief and ocular vitamins. The Vision Care portfolio comprises daily disposable, monthly replacement, and color-enhancing contact lenses, as well as a complete line of contact lens care products including multi-purpose and hydrogen-peroxide based solutions, rewetting drops and daily protein removers.

        In 2015, Alcon accounted for $9.8 billion, or 20%, of Group net sales, and for $0.8 billion, or 8%, of Group operating income (excluding Corporate income and expense, net).

Sandoz Division

        Our Sandoz Division focuses primarily on developing, manufacturing, distributing and selling prescription medicines that are not protected by valid and enforceable third-party patents, and intermediary products including active pharmaceutical ingredients. Sandoz is organized globally in three franchises: Retail Generics, Anti-Infectives, and Biopharmaceuticals & Oncology Injectables. In Retail Generics, Sandoz develops, manufactures and markets active ingredients and finished dosage forms of pharmaceuticals to third parties. Retail Generics includes the areas of dermatology, respiratory and ophthalmics, as well as the areas of cardiovascular, metabolism, central nervous system, pain, gastrointestinal, and hormonal therapies. Finished dosage form anti-infectives sold to third parties are also part of Retail Generics. In Anti-Infectives, Sandoz supplies generic antibiotics to a broad range of customers, as well as active pharmaceutical ingredients and intermediates to the pharmaceutical industry worldwide. In Biopharmaceuticals, Sandoz develops, manufactures and markets protein or other biotechnology based products known as biosimilars and provides biotechnology manufacturing services to other companies, and in Oncology Injectables, Sandoz develops, manufactures and markets cytotoxic products for the hospital market.

        In 2015, Sandoz accounted for $9.2 billion, or 18%, of Group net sales, and for $1.0 billion, or 11%, of Group operating income (excluding Corporate income and expense, net).

Discontinued Operations:

Vaccines and Diagnostics Division

        Prior to the completion of certain transactions in 2014 and 2015, our Vaccines and Diagnostics Division researched, developed, manufactured, distributed and sold human vaccines and blood-testing products worldwide. On January 9, 2014, we completed the divestment of our blood transfusion diagnostics unit to Grifols S.A. On March 2, 2015, we completed the divestment of our Vaccines Division (excluding its influenza vaccines business) to GSK. On July 31, 2015, we completed the divestment of our influenza vaccines business to CSL Limited.

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Consumer Health

        Prior to the completion of certain transactions in 2015, Consumer Health consisted of our OTC (Over-the-Counter) and Animal Health Divisions. On January 1, 2015 we completed the divestment of our Animal Health Division to Lilly. On March 2, 2015, we completed the divestment of our OTC Division, which we contributed to a new consumer healthcare joint venture with GSK, of which we own 36.5%.

OPPORTUNITY AND RISK SUMMARY

        Our financial results are affected to varying degrees by external factors. The aging of the global population and rising rates of chronic diseases are driving demand for healthcare worldwide, as well as for treatments that Novartis provides. Continued growth in healthcare spending is contributing to increased scrutiny on drug pricing by governments, media and consumers, but also to increased demand for lower-cost treatment options, such as those produced by our generics division, Sandoz. Advances in science and technology are opening new opportunities to develop treatments tailored for individual patients.

        At the same time, the loss of market exclusivity and the introduction of branded and generic competitors could significantly erode sales of our innovative products. Heightened regulatory requirements and the inherent complexity of our industry could lead to difficulties in bringing products to market, while increased pressure on pricing could impact our ability to generate returns and invest for the future. The growing trend of government investigations and litigations against healthcare companies, despite our best efforts to comply with local laws, could also have an adverse effect on our business and reputation.

        For more detail on these trends and how they impact our results, see "Factors Affecting Results of Operations" below.

RESULTS OF OPERATIONS

        In evaluating the Group's performance, we consider not only the IFRS results, but also certain non-IFRS measures, including core results and constant currency results. These measures assist us in evaluating our ongoing performance from year to year and we believe this additional information is useful to investors in understanding our business.

        The Group's core results exclude the amortization of intangible assets, impairment charges, expenses relating to divestments, the integration of acquisitions, restructuring charges that exceed a threshold of $25 million, as well as other income and expense items that management deems exceptional and that are or are expected to accumulate within the year to be over a $25 million threshold. For a reconciliation between IFRS results and core results see "—core results," below.

        We present information about our net sales and other key figures relating to operating and net income in constant currencies (cc). We calculate constant currency net sales and operating income by applying the prior-year average exchange rates to current financial data expressed in local currencies in order to estimate an elimination of the impact of foreign exchange rate movements.

        The core results, constant currencies and other non-IFRS measures are explained in more detail see "Non-IFRS Measures as Defined by Novartis," below and are not intended to be substitutes for the equivalent measures of financial performance prepared in accordance with IFRS. These measures may differ from similarly titled non-IFRS measures of other companies.

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2015 Compared to 2014

Group Overview

Key figures

	Year ended Dec 31, 2015			Year ended Dec 31, 2014			Change in $			Change in constant currencies
	$ m			$ m			%			%
Net sales to third parties from continuing operations		49,414			52,180			(5	)		5
Sales to discontinued segments		26			239			(89	)		(88	)
Net sales from continuing operations		49,440			52,419			(6	)		4
Other revenues		947			1,215			(22	)		(22	)
Cost of goods sold		(17,404	)		(17,345	)		0			(8	)
Gross profit from continuing operations		32,983			36,289			(9	)		2
Marketing & Sales		(11,772	)		(12,377	)		5			(5	)
Research & Development		(8,935	)		(9,086	)		2			(3	)
General & Administration		(2,475	)		(2,616	)		5			(1	)
Other income		2,049			1,391			47			55
Other expense		(2,873	)		(2,512	)		(14	)		(24	)
Operating income from continuing operations		8,977			11,089			(19	)		(2	)
Return on net sales (%)		18.2			21.3
Income from associated companies		266			1,918			(86	)		(86	)
Interest expense		(655	)		(704	)		7			2
Other financial income and expense		(454	)		(31	)		nm			nm
Income before taxes from continuing operations		8,134			12,272			(34	)		(17	)
Taxes		(1,106	)		(1,545	)		28			10
Net income from continuing operations		7,028			10,727			(34	)		(18	)
Net income/loss from discontinued operations		10,766			(447	)		nm			nm
Net income		17,794			10,280			73			91
Attributable to:
Shareholders of Novartis AG		17,783			10,210			74			92
Non-controlling interests		11			70			(84	)		(84	)
Basic earnings per share ($) from continuing operations		2.92			4.39			(33	)		(17	)
Basic earnings per share ($) from discontinued operations		4.48			(0.18	)		nm			nm
Total basic earnings per share ($)		7.40			4.21			76			94
Free cash flow from continuing operations		9,259			10,934			(15	)
Free cash flow		9,029			10,762			(16	)

nm = not meaningful

        Novartis delivered solid financial performance in 2015, driven by our continued success with growth products and expansion in emerging growth markets, which helped offset the effects of generic competition of approximately $2.2 billion. As a result, we achieved net sales to third parties from continuing operations of $49.4 billion (–5%, +5% cc). Growth in constant currencies has been more than

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offset by negative currency impacts driven by the strengthening of the US dollar versus the euro, Japanese yen and major emerging market currencies.

        Operating income decreased by 2% in constant currencies to $9.0 billion (–19%, –2% cc), mainly due to the amortization of the new oncology assets in Pharmaceuticals. In addition, an exceptional expense of $400 million for a settlement of the specialty pharmacies case in the Southern District of New York was recorded in 2015, whereas the prior-year benefitted from a one-time commercial settlement gain of $302 million and $248 million gain from selling a Novartis Venture Fund investment. Operating income margin was 18.2 percent of net sales.

        Net income from continuing operations was $7.0 billion, declining more than operating income (–34%, –18% cc) mainly due to higher financial expense driven by $0.4 billion exceptional charges related to Venezuela and lower income from associated companies, which included in the prior year a gain of $0.8 billion from the sale of the shares of Idenix Pharmaceuticals, Inc., US (Idenix) to Merck & Co., US, and a gain of $0.4 billion from the divestment of the shareholding in LTS Lohmann Therapie-Systeme AG, Germany (LTS).

        Basic earnings per share from continuing operations decreased 33% (–17% cc) to $2.92, declining less than net income from continuing operations due to the lower number of average outstanding shares.

        Free Cash Flow from continuing operations decreased 15% to $9.3 billion, primarily due to negative currency impact on operations.

        Net income from discontinued operations amounted to $10.8 billion in 2015, which included $12.7 billion of pre-tax divestment gains and the operational results of the divested businesses until the respective dates of completion of the transactions, compared to a net loss of $447 million in 2014. For more information on discontinued operations see "—Factors Affecting Comparability of Year-On-Year Results of Operations", below and "Item 18. Financial Statements—Note 30".

        For the total Group, net income amounted to $17.8 billion in 2015 compared to $10.3 billion in 2014, impacted by the exceptional divestment gains included in net income from the discontinued operations. Basic earnings per share increased to $7.40 from $4.21 in the prior year and free cash flow for the total Group amounted to $9.0 billion.

Growth

        Across our divisions, our portfolio of growth products continued to support performance in 2015. Sales of growth products increased 17% to $16.6 billion, or 34% of net sales, demonstrating our ability to renew our product portfolio and helping offset the impact of patent expirations. In our Pharmaceuticals Division, sales of growth products increased 33% (cc) and accounted for 44% of net sales, up from 36% in 2014.

        Pharmaceutical growth products in 2015 included Gilenya ($2.8 billion, +21% cc), our oral therapy for multiple sclerosis; Tasigna ($1.6 billion, +16% cc), a treatment for chronic myeloid leukemia; and Afinitor ($1.6 billion, +10% cc), a treatment for several types of cancer.

        Although overall Alcon performance lagged in 2015, some products continued to do well. Alcon saw continued growth in sales of its innovative Dailies Total1 contact lenses, as well as double-digit growth in glaucoma fixed-dose combination products and Systane for dry eye. Sales of disposable cataract and vitreoretinal surgical supplies also grew.

        In the Sandoz Division, sales of biopharmaceuticals, including biosimilar follow-on versions of complex biologic drugs, rose 39% (cc) to $772 million globally.

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        Efforts to expand in emerging growth markets² such as those in Asia, Africa and Latin America continued to deliver results, although growth moderated as overall economic activity slowed in China, Brazil, India and elsewhere. Net sales in emerging markets rose 7% (cc) to $12.4 billion, led by Turkey, up 14% (cc), and Brazil, up 12% (cc).

Productivity

        Last year Novartis continued to find synergies across divisions in our ongoing effort to improve productivity. Total productivity gains reached $3.2 billion in 2015, 6% of net sales. Novartis Business Services (NBS), the cross-divisional services organization that ramped up last year, played a key role in achieving this result. NBS continues to scale up the offshoring of services to global service centers, while outsourcing selected services to third parties.

        The biggest savings came from our procurement efforts, through which we saved more than $1.7 billion on goods and services, or about 8% of the spending managed by Novartis procurement organizations.

        An ongoing effort begun in 2010 to optimize our global manufacturing network continues to yield results. In 2015, we announced plans to exit Sandoz manufacturing sites in Frankfurt and Gerlingen, Germany, as well as in Turbhe, India. We also closed a Pharmaceuticals Division facility in Resende, Brazil, divested an Alcon site in Kaysersberg, France, as well as a pharmaceutical site in Taboão da Serra, Brazil, and announced the downsizing of a Pharmaceuticals Division site in Ringaskiddy, Ireland. To date, 25 sites in our continuing operations have been or are being restructured or divested. These steps help us balance production capacity and further increase efficiency.

Net Sales by Segment

        The following table provides an overview of net sales to third parties by segment:

	Year ended Dec 31, 2015		Year ended Dec 31, 2014		Change in $			Change in constant currencies
	$ m		$ m		%			%
Pharmaceuticals		30,445		31,791		(4	)		6
Alcon		9,812		10,827		(9	)		(1	)
Sandoz		9,157		9,562		(4	)		7
Net sales to third parties from continuing operations		49,414		52,180		(5	)		5

Pharmaceuticals

        Pharmaceuticals delivered net sales of $30.4 billion (–4%, +6% in constant currencies, or cc) as increased volumes, including from the oncology portfolio acquired from GlaxoSmithKline (GSK) in 2015, countered the impact of greater generic competition, which reduced sales by 7.0 percentage points.

        Growth products generated $13.5 billion of division net sales, growing 33% (cc) compared to last year. These products—which include Gilenya, Tasigna, Ultibro, the combination of Tafinlar + Mekinist, Jakavi, Revolade and Cosentyx—contributed 44% of division net sales, compared to 36% in 2014.

        Sales in emerging growth markets increased 9% (cc) to $7.8 billion.

²

Growth products are products launched in 2010 or later, or products with exclusively until at least 2019 in key markets (EU, US, Japan), except Sandoz (launched in the last 24 months). Emerging growth markets are all markets except the US, Canada, Western Europe, Japan, Australia and New Zealand.

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        Highlights in 2015 included regulatory approval in the US and EU for Entresto (formerly LCZ696) for chronic heart failure; Farydak for multiple myeloma; and Tafinlar + Mekinist, the first combination therapy for metastatic melanoma. Cosentyx, which was successfully launched in the US and EU in 2015 to treat psoriasis, also received approval in Europe to treat psoriatic arthritis and ankylosing spondylitis.

Oncology

        Oncology sales rose 15% (+24% cc) to $13.5 billion, boosted by the newly acquired portfolio from GSK and continued growth in our existing products. By brand, growth drivers included Afinitor, up 10% (cc) to $1.6 billion; Tasigna, up 16% (cc) to $1.6 billion; and Jakavi, up 71% (cc) to $410 million.

Neuroscience

        Neuroscience sales were $3.9 billion (–4%, +5% cc), with Gilenya rising 12% (+21% cc) to $2.8 billion and more than offsetting declines in Exelon/Exelon Patch due to generic competition.

Retina

        Sales in Retina were $2.1 billion (–16%, –3% cc), driven mainly by lower sales of Lucentis, which faced increased competitive pressure in Japan and some European markets.

Immunology and Dermatology

        Sales in Immunology and Dermatology were $2.1 billion (0%, +11% cc). Cosentyx made a strong start after launching in February, reaching sales of $261 million. Additionally, Zortress/Certican rose 2% (+17% cc) to $335 million, and Ilaris increased 19% (+30% cc), helping offset declines in other products primarily stemming from generic competition.

Respiratory

        Respiratory sales were $1.6 billion (+1%, +17% cc). We had sales of $0.6 billion (+19%, +40% cc) for our portfolio of drugs for chronic obstructive pulmonary disease (COPD), including Onbrez Breezhaler/Arcapta Neohaler, Seebri Breezhaler and Ultibro Breezhaler. Sales of Xolair reached $0.8 billion (–3%, +14% cc), including as a treatment for chronic hives.

Cardio-Metabolic

Entresto was launched in the US in the third quarter and full-year sales reached $21 million. Galvus sales were $1.1 billion (–7%, +8% cc).

Established Medicines

        Established medicines such as Diovan ($1.3 billion, –40% cc) and Exforge ($1.0 billion, –15% cc) continued to see declines as a result of generic competition.

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TOP 20 PHARMACEUTICALS DIVISION PRODUCT NET SALES—2015

			US					Rest of world					Total
Brands	Business Franchise	Indication	$ m		% change in constant currencies			$ m		% change in constant currencies			$ m		% change in $			% change in constant currencies
Gleevec/Glivec	Oncology	Chronic myeloid leukemia and GIST		2,533		17			2,125		(5	)		4,658		(2	)		5
Gilenya	Neuroscience	Relapsing multiple sclerosis		1,497		26			1,279		17			2,776		12			21
Lucentis	Retina	Age-related macular degeneration							2,060		(2	)		2,060		(16	)		(2	)
Tasigna	Oncology	Chronic myeloid leukemia		661		22			971		12			1,632		7			16
Sandostatin	Oncology	Carcinoid tumors and Acromegaly		823		10			807		5			1,630		(1	)		7
Afinitor/Votubia	Oncology	Breast cancer / TSC		892		11			715		9			1,607		2			10
Diovan/Co—Diovan	Established Medicines	Hypertension		254		(74	)		1,030		(17	)		1,284		(45	)		(40	)
Galvus	Cardio-Metabolic	Diabetes							1,140		8			1,140		(7	)		8
Exforge	Established Medicines	Hypertension		67		(76	)		980		1			1,047		(25	)		(15	)
Exjade	Oncology	Chronic iron overload		365		19			552		3			917		(1	)		8
Xolair(1)	Respiratory	Asthma							755		14			755		(3	)		14
Exelon/Exelon Patch	Neuroscience	Alzheimer's disease		340		(30	)		388		(13	)		728		(28	)		(21	)
Neoral/Sandimmun(e)	Immunology and Dermatology	Transplantation		47		(15	)		523		(5	)		570		(17	)		(6	)
Votrient	Oncology	Renal cell carcinoma		287		nm			278		nm			565		nm			nm
Voltaren (excl. other divisions)	Established Medicines	Inflammation/pain							558		0			558		(12	)		0
Tafinlar/Mekinist	Oncology	Melanoma		267		nm			186		nm			453		nm			nm
Myfortic	Immunology and Dermatology	Transplantation		109		(27	)		332		0			441		(19	)		(8	)
Jakavi	Oncology	Myelofibrosis							410		71			410		47			71
Promacta/Revolade	Oncology	Immune thrombocytopenic purpura		196		nm			206		nm			402		nm			nm
Ritalin/Focalin	Established Medicines	Attention deficit/ hyperactivity disorder		226		(31	)		139		1			365		(26	)		(20	)
Top 20 products total				8,564		7			15,434		7			23,998		(3	)		7
Rest of portfolio				1,715		(2	)		4,732		4			6,447		(9	)		2
Total Division sales				10,279		5			20,166		6			30,445		(4	)		6

⁽¹⁾

Net sales reflect Xolair sales for all indications (e.g. including Xolair SAA and Xolair CSU, which are managed by the Immunology and Dermatology franchise).

nm = not meaningful

Gleevec/Glivec ($4.7 billion, +5% cc) is a treatment for adult patients with metastatic and/or unresectable KIT+ gastrointestinal stromal tumors (GIST), as an adjuvant treatment for certain adult patients following resection of KIT+ GIST, and as a targeted therapy for Philadelphia chromosome-positive chronic myeloid leukemia (Ph+ CML). Sales growth were driven mainly by the US, and more than compensated for the loss of patent exclusivity in some markets. In the US, Novartis Pharmaceuticals Corporation has settled its litigation with a subsidiary of Sun Pharmaceutical Industries Ltd. relating to Novartis patents covering the use of certain polymorphic forms of Gleevec/Glivec, which expire in 2019 (including pediatric exclusivity). The basic compound patent for Gleevec/Glivec expired in the US on July 4, 2015. As a result of the settlement, Novartis will permit Sun's subsidiary to market a generic version of Gleevec/Glivec in the US commencing on February 1, 2016.

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Gilenya ($2.8 billion, +21% cc), the first once-daily oral therapy to treat relapsing forms of multiple sclerosis (RMS), continued to outgrow the market, achieving double-digit growth in 2015 in recognition of strong trends towards oral treatments with higher efficacy. Growth was also fueled by an increasing acceptance of the role of high-efficacy treatments when used earlier in the course of the disease. Gilenya continues to see volume growth through new patient initiations in both the US and non-US markets. In the US, Gilenya is indicated for relapsing forms of MS. In the EU, Gilenya is indicated for adult patients with high disease activity despite treatment with at least one disease modifying agent, or rapidly evolving severe relapsing remitting MS. In an expanding oral market with multiple options, Gilenya is the only oral disease-modifying therapy (DMT) to impact the course of RMS with high efficacy across four key measures of disease activity: relapses, MRI lesions, brain shrinkage (brain volume loss) and disability progression. Gilenya has an overall positive benefit-risk profile with over ten years of safety experience. As of November 30, 2015, Gilenya has been used to treat approximately 134,000 patients in clinical trials and in a post-marketing setting, with a total patient exposure of approximately 289,000 patient years. Gilenya is currently approved in over 80 countries around the world. Gilenya is licensed from Mitsubishi Tanabe Pharma.

Lucentis ($2.1 billion, –2% cc) sales were impacted by increased competition in Japan and in some European markets, which offset growth opportunities in Emerging Markets. Lucentis maintained a strong ex-US market position across indications but was impacted by competitive pressures in the neovascular age-related macular degeneration (nAMD) and diabetic macular edema (DME) indications, partially offset by continued growth in macular edema secondary to central and branch retinal vein occlusion (CRVO and BRVO), and choroidal neovascularization secondary to pathologic myopia (mCNV) indications. Lucentis is an anti-VEGF therapy licensed in many countries for the treatment of the following five ocular indications: nAMD, DME, CRVO, BRVO, and mCNV. Lucentis is approved in more than 100 countries to treat patients with the first four conditions, and in more than 80 countries for mCNV. In 2015, Lucentis obtained reimbursement for DME and RVO in Australia. It is the only anti-VEGF treatment delivered in a pre-filled syringe and approved for a treat & extend regimen across all indications in Europe. Since its launch in 2006, there have been more than 3.7 million patient-treatment years of exposure for Lucentis with more than 22 million injections. Lucentis is an anti-VEGF therapy specifically designed for the eye, minimizing systemic exposure, that has demonstrated significant efficacy with individualized dosing in its five licensed indications and has a well-established safety profile supported by extensive clinical studies and real-world experience. Lucentis is licensed from Genentech, and Novartis holds the rights to commercialize the product outside the US. Genentech holds the rights to commercialize Lucentis in the US.

Tasigna ($1.6 billion, +16% cc) performance was driven by strong growth in the US and other markets. Tasigna is currently approved as a first-line therapy for newly diagnosed patients with Philadelphia chromosome-positive (Ph+) chronic myeloid leukemia (CML) in the chronic phase in more than 85 countries globally, including the US, EU, Japan and Switzerland, with additional submissions pending worldwide. Tasigna (nilotinib) is also approved in more than 110 countries as a second-line treatment for patients with Ph+ CML in chronic and/or accelerated phase who are resistant or intolerant to existing treatment, such as Gleevec/Glivec.

Sandostatin ($1.6 billion, +7% cc) continued to benefit from the increasing use of Sandostatin LAR (long acting release) in key markets and from the launch of the enhanced presentation (now approved in 69 countries) which includes a diluent, safety needle and vial adapter. Sandostatin is a somatostatin analogue used to treat patients with acromegaly as well as neuroendocrine tumors (NET). In NET, it is used for both the treatment of patients with symptoms of carcinoid syndrome and those with advanced NET of the midgut or unknown primary tumor location (currently approved in more than 60 countries).

Afinitor/Votubia ($1.6 billion, +10% cc) performance was driven by strong growth in the US, Japan and other markets. Afinitor is an oral inhibitor of the mTOR pathway approved in combination with exemestane for the treatment of patients with HR+/HER2– advanced breast cancer after failure with a

112

non-steroidal aromatase inhibitor (NSAI), for advanced renal cell carcinoma (RCC) following vascular endothelial growth factor-targeted therapy (after failure of sunitinib and sorafenib in the US) and for the treatment of advanced pancreatic neuroendocrine tumors (NET). Afinitor is also approved for treatment of patients with subependymal giant cell astrocytoma (SEGA) and renal angiomyolipoma associated with tuberous sclerosis complex (TSC), including as a dispersible tablet formulation in the US and EU for SEGA. Everolimus is also in Phase III development for patients with nonfunctional gastrointestinal and lung NET, HER2+ breast cancer, diffuse large B-cell lymphoma and TSC-related seizures. Everolimus, the active ingredient in Afinitor/Votubia, is available under the trade names Zortress/Certican for use in other non-oncology indications and is exclusively licensed to Abbott and sublicensed to Boston Scientific for use in drug-eluting stents.

Diovan Group ($1.3 billion, –40% cc), consisting of Diovan monotherapy and the combination product Co-Diovan/Diovan HCT, continues to retain a blockbuster status despite generic competition in most markets, including the US (following July 7, 2014 Diovan monotherapy generic entry), many EU countries and Japan (generic entry in June 2014). Sales continued to grow in Emerging Growth Markets, including China and selected countries in Latin America, Asia Pacific and Africa, partially compensating for loss of exclusivity in the US and the EU.

Galvus Group ($1.1 billion, +8% cc), includes Galvus, an oral treatment for type 2 diabetes, and Eucreas, a single-pill combination of vildagliptin (the active ingredient in Galvus) and metformin. Galvus delivered solid growth with major milestones including approval of the Galvus monotherapy indication in China in April 2015. In September 2015, the Japanese HA PMDA approved Eucreas (EquMet), the first single-pill combination of a DPP4 inhibitor and metformin approved in this market. The focus for Galvus remains on patients whose diabetes remains uncontrolled on metformin, earlier treatment intensification as well as on an expansion of usage in key segments such as elderly and renal-impaired patients. Galvus Group is currently approved in more than 125 countries.

Exforge Group ($1.0 billion, –15% cc) includes two medicines approved for the treatment of hypertension: Exforge, a single-pill combination of the angiotensin receptor blocker (ARB) valsartan and the calcium channel blocker amlodipine besylate; and ExforgeHCT, a single pill combining an ARB (valsartan), calcium channel blocker (amlodipine) and a diuretic (hydrochlorothiazide) three widely prescribed blood pressure treatments. Exforge lost exclusivity in October 2014 and ExforgeHCT in November 2014 in the US. Outside the US, Exforge HCT is growing across all regions, showing significantly high growth in emerging markets. Exforge continues to grow with double-digit growth in China and a number of emerging markets. Exforge is now available in more than 100 countries and ExforgeHCT is available in over 77 countries.

Exjade ($917 million, +8% cc), a once-daily dispersible tablet for chronic transfusional iron overload saw sales increases in the US and Asia augmented by the March 2015 approval in the US of Jadenu, an oral tablet formulation that can be swallowed or crushed, and was approved by the FDA in 2015. Regulatory applications for Jadenu have been submitted in the EU, Canada, Switzerland, and many other countries. Exjade, first approved in 2005 and now approved in more than 100 countries, is also approved for the treatment of chronic iron overload in patients with non-transfusion-dependent thalassemia in more than 70 countries, with additional regulatory reviews underway. Jadenu is also approved for the treatment of chronic iron overload in patients with non-transfusion-dependent thalassemia in the US.

Xolair ($755 million, +14% cc), a biologic drug for appropriate patients with severe persistent allergic asthma in Europe and moderate-to-severe persistent allergic asthma in the US, is currently approved in more than 90 countries. Its sales continued to grow strongly in Canada, Europe and Latin America. Xolair is also approved in the EU, Switzerland and over 40 other countries as a treatment for chronic spontaneous urticaria (CSU), also known as chronic idiopathic urticaria (CIU), for which it is approved in the US and now Canada and Australia. Novartis co-promotes Xolair with Genentech in the US and shares a portion of the operating income, but does not book US sales.

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Exelon/Exelon Patch ($728 million, –21% cc) sales declined due to generic competition for ExelonPatch in the EU and now in the US. ExelonPatch is approved for the treatment of mild-to-moderate Alzheimer's disease dementia (AD) in more than 90 countries, including more than 20 countries where it is also approved for Parkinson's disease dementia. ExelonPatch is also indicated for the treatment of patients with severe AD in 14 countries, including the US.

Neoral/Sandimmun ($570 million, –6% cc), a micro-emulsion formulation of cyclosporine, is an immunosuppressant to prevent organ rejection following a kidney, liver or heart transplant. Neoral is also approved for use in lung transplant in many countries outside of the US. Additionally, it is indicated for treating selected autoimmune disorders such as psoriasis and rheumatoid arthritis. First launched in 1995, Neoral is marketed in approximately 100 countries. Although sales are declining due to generic competition and mandatory price reductions, most notably in Europe and Japan, the decrease is not as rapid as has been the case in other therapeutic areas, due to the special characteristics of the solid organ transplant market.

Votrient ($565 million) is a small molecule tyrosine kinase inhibitor that targets a number of intracellular proteins to limit tumor growth and cell survival. Acquired from GSK in 2015, Votrient is approved in the US for the treatment of patients with advanced renal cell carcinoma (aRCC), and in the EU for first-line treatment of adult patients with aRCC and for patients who have received prior cytokine therapy for advanced disease. RCC is the most common type of kidney cancer in adults, and nearly one-fifth of patients have aRCC at the time of diagnosis. Votrient is also indicated for patients with advanced soft tissue sarcoma (STS) who have received prior chemotherapy. The efficacy of Votrient for the treatment of patients with adipocytic STS or gastrointestinal stromal tumors has not been demonstrated. STS is a type of cancer which can arise from a wide variety of soft tissues including muscle, fat, blood vessel and nerves. Votrient is approved in 99 countries worldwide for aRCC and in 87 countries for aSTS.

Voltaren/Cataflam ($558 million, 0% cc), is a leading non-steroidal anti-inflammatory drug (NSAID) for the relief of symptoms in rheumatic diseases such as rheumatoid arthritis and osteoarthritis, and for various other inflammatory and pain conditions. Voltaren/Cataflam was first registered in 1973 and is available in more than 140 countries. This product, which is subject to generic competition, is marketed by the Pharmaceuticals Division in a wide variety of dosage forms, including tablets, drops, suppositories, ampoules and topical therapy. In addition, in various countries, our Sandoz Division markets generic versions of the product and our Alcon Division markets Voltaren for ophthalmic indications.

Tafinlar + Mekinist ($453 million) achieved strong growth in sales. Acquired from GSK in 2015, this combination is the first of its kind for the treatment of patients with BRAF V600 mutation-positive unresectable or metastatic melanoma, as detected by a validated test, in the US, EU, Canada and several other markets. In August, the combination of Tafinlar + Mekinist was approved in Europe for the treatment of adult patients with unresectable or metastatic melanoma with a BRAF V600 mutation and in November, this combination received regular approval in the US based on the completion of two Phase III confirmatory trials. The combination was previously approved in the US under accelerated approval. Tafinlar targets the serine/threonine kinase BRAF in the RAS/RAF/MEK/ERK pathway and Mekinist targets the threonine/tyrosine kinases MEK1 and MEK2 in the MAP kinase pathway, resulting in dual blockade of this pathway, improving the clinical efficacy of the treatment. This is the first combination of BRAF/MEK inhibitors to achieve a median overall survival of more than two years in two Phase III studies in BRAF V600 mutation positive unresectable or metastatic melanoma patients. Tafinlar + Mekinist are also approved as single agents for the treatment of patients with unresectable or metastatic melanoma in more than 45 and 30 countries worldwide, respectively. In addition, Tafinlar also has Breakthrough Therapy designation from the FDA for treatment of non-small cell lung cancer (NSCLC) patients with BRAF V600E mutations who have received at least one prior line of platinum-containing chemotherapy. In July, the combination therapy Tafinlar + Mekinist also received Breakthrough Therapy designation from the FDA for NSCLC patients with BRAF V600E mutations.

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Myfortic ($441 million, –8% cc), a transplantation medicine, is available in more than 90 countries to prevent organ rejection in adult kidney transplant patients. Although it has experienced declining sales after the expected launch of generic competition in the US in early 2014, the decrease is not as rapid as has been the case in other therapeutic areas, due to the special characteristics of the solid organ transplant market. Myfortic continued to grow in some geographies where generic competition has not yet begun. Marketing authorizations for generic competitors have been granted in European countries.

Jakavi ($410 million, +71% cc) performance was driven by strong volume growth across multiple markets. Jakavi is an oral inhibitor of the JAK 1 and JAK 2 tyrosine kinases. It is the first JAK inhibitor indicated for the treatment of disease-related splenomegaly or symptoms in adult patients with primary myelofibrosis (also known as chronic idiopathic myelofibrosis), post-polycythemia vera myelofibrosis or post-essential thromboycythemia myelofibrosis. Jakavi is currently approved in more than 95 countries, including EU member states, Japan and Canada. In March 2015, the EC approved Jakavi for the treatment of adult patients with polycythemia vera (PV) who are resistant to or intolerant of hydroxyurea. Jakavi is the first targeted treatment approved by the EC for these patients. More than 45 countries have approved Jakavi in the PV indication, including Switzerland, Canada and Japan, and regulatory applications have been submitted in other countries. Novartis licensed ruxolitinib from Incyte Corporation for development and commercialization outside the US.

Promacta/Revolade ($402 million) performance was driven by strong growth in the US and other markets. Acquired from GSK in 2015, Promacta is marketed under the brand name Promacta in the US and Revolade in most countries outside the US. It is the only approved once-daily oral thrombopoietin receptor agonist. In August 2015, the US FDA approved an expanded use for Promacta to include children 1 year of age and older with chronic immune thrombocytopenia (ITP) who have had an insufficient response to corticosteroids, immunoglobulins or splenectomy. The updated label includes a new oral suspension formulation of Promacta that is designed for younger children who may not be able to swallow tablets. Revolade is currently under review for this same indication with the EMA. In December, Novartis received a positive CHMP opinion on a potential update to the adult chronic ITP indication with regards to the use of Revolade in non-splenectomised patients; the EMA decision is expected in February 2016. Revolade was approved by the European Commission in September 2015 for the treatment of adults with acquired severe aplastic anemia (SAA) who were either refractory to prior immunosuppressive therapy or heavily pretreated and are unsuitable for hematopoietic stem cell transplant.

Ritalin/Focalin ($365 million, –20% cc) is a treatment for attention deficit hyperactivity disorder (ADHD) in children. Ritalin and Ritalin LA are available in more than 70 and 30 countries, respectively, and are also indicated for narcolepsy. To date in 2015, Ritalin LA has been granted the adult ADHD indication in over 20 countries. Focalin and Focalin XR are available in the US and Focalin XR is additionally indicated for adults. Focalin XR is also approved in Switzerland. Ritalin Immediate Release has generic competition in most countries. Most strengths of Ritalin LA and Focalin are subject to generic competition in the US.

Alcon

        Alcon net sales in 2015 were $9.8 billion (–9%, –1% in constant currencies, or cc). Regionally, sales were flat in Japan and rose in Latin America and the Caribbean. In Europe, the Middle East and Africa, sales rose 1% (cc), with strong sales of recently launched contact lenses, including Dailies Total1 and Air Optix Colors, offset by declines in surgical equipment.

        Sales in North America declined 3%, mainly due to increased generic competition for some pharmaceutical products and soft surgical equipment sales. In Asia and Russia, sales declined 5% (cc), driven by a significant market slowdown, with weak performance in China, India and Southeast Asia.

        To accelerate growth, we are taking concerted action on two fronts. For the Surgical and Vision Care businesses, we have identified key actions as part of a growth plan. They include steps to optimize

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innovation in intraocular lenses (IOLs) for cataract surgery, prioritizing and investing in the development of promising new products, and improving the effectiveness of our sales force.

        In addition, we plan to strengthen our ophthalmic medicines business by transferring pharmaceutical products from Alcon to our Pharmaceuticals Division, combining expertise in pharmaceuticals development and marketing with the strong Alcon brand.

	Year ended Dec 31, 2015		Year ended Dec 31, 2014		Change in $			Constant currencies change
	$ m		$ m		%			%
Surgical
Cataract products		2,853		3,174		(10	)		(2	)
of which IOLs		1,099		1,264		(13	)		(4	)
Vitreoretinal products		594		615		(3	)		6
Refractive/other		251		284		(12	)		(5	)
Total		3,698		4,073		(9	)		(1	)
Ophthalmic Pharmaceuticals
Glaucoma		1,196		1,319		(9	)		2
Allergy/otic/nasal		780		887		(12	)		(8	)
Infection/inflammation		1,011		1,066		(5	)		2
Dry eye		583		608		(4	)		6
Other		243		331		(27	)		(15	)
Total		3,813		4,211		(9	)		0
Vision Care
Contact lenses		1,743		1,897		(8	)		1
Contact lens care		558		646		(14	)		(8	)
Total		2,301		2,543		(10	)		(2	)
Total net sales		9,812		10,827		(9	)		(1	)

Surgical

        Surgical franchise sales were $3.7 billion (–9%, –1% cc). Solid sales of cataract and vitreoretinal disposable surgical supplies were offset by competitive pressure on IOL sales, as well as a slowdown in equipment purchases in the US and emerging markets, particularly Asia. Launches in 2015 of our UltraSert pre-loaded and PanOptix trifocal IOLs in Europe, as well as regulatory approval of UltraSert pre-loaded IOLs in the US, provide an opportunity to renew growth in this segment.

Ophthalmic Pharmaceuticals

        Ophthalmic Pharmaceuticals sales were $3.8 billion (–9%, 0% cc). In glaucoma products, strong performance of fixed-dose combination products, including Azarga and Simbrinza, was offset by generic competition for monotherapies. Systane eye drops to treat the symptoms of dry eye saw sales grow in the US and Europe, the Middle East and Africa, with softer sales across emerging markets. Sales of allergy, nasal and ear medicines declined, driven by continued generic competition in the US.

Vision Care

        Vision Care sales were $2.3 billion (–10%, –2% cc). Contact lens sales reached $1.7 billion (–8%, +1% cc), with strong sales of innovative lenses, particularly Dailies Total1 and Air Optix Colors, offset by

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declines in older products. Sales of contact lens solutions were $0.6 billion (–14%, –8% cc), affected by ongoing market shifts to daily disposable lenses, as well as competitive pressure in the US.

Sandoz

        In 2015, Sandoz had net sales of $9.2 billion (–4%, +7% in constant currencies, or cc, from the prior year), driven by a 15.0 percentage-point increase in volume, more than offsetting 8.0 percentage points of price erosion. Performance was driven by strong sales growth in the US (+10% cc), Asia Pacific (+13% cc), Latin America (+18% cc), and Middle East and Africa (+13% cc). Sales in Western Europe grew 3% (cc), with Germany growing 5% (cc).

        Sandoz continued to strengthen its global leadership position in biopharmaceuticals, which include medicines that are difficult to develop and manufacture. In June, Sandoz launched Glatopa—the first generic competitor to Copaxone® 20 mg—in the US. And in September in the US, Sandoz also launched Zarxio, which is the first biosimilar approved by the US Food and Drug Administration (FDA) under new regulations.

	Year ended Dec 31, 2015		Year ended Dec 31, 2014		Change in $			Constant currencies change
	$ m		$ m		%			%
Retail Generics		7,199		7,933		(9	)		2
Biopharmaceuticals & Oncology Injectables		1,378		1,094		26			39
Anti-Infectives		580		535		9			18
Total		9,157		9,562		(4	)		7

Retail Generics

        In Retail Generics, Sandoz develops, manufactures and markets active ingredients and finished dosage forms of pharmaceuticals. This franchise includes the specialty areas of dermatology, respiratory and ophthalmics, as well as finished dosage forms of anti-infective products sold under the Sandoz name. Retail Generics sales worldwide were $7.2 billion (–9%, +2% cc). New product launches included US-authorized generics of our Pharmaceuticals Division's Exelon Patch and Exforge, as well as bivalirudin, an injectable anticoagulant.

Biopharmaceuticals and Oncology Injectables

        In Biopharmaceuticals, Sandoz develops, manufactures and markets protein- and biotechnology-based products known as biosimilars, as well as Glatopa. Sandoz also provides biotechnology manufacturing services to other companies. Sales of biopharmaceuticals rose 25% (+39% cc) to $772 million. Sandoz further strengthened its leadership in biosimilars in 2015 with the US approval of Zarxio (filgrastim), used to fight infection in cancer patients receiving chemotherapy.

        Sandoz is the global market leader in biosimilars with three products that continue to see strong growth in their respective categories: Omnitrope, a human growth hormone; Binocrit, an erythropoiesis-stimulating agent; and filgrastim under the brand names Zarzio outside the US and Zarxio in the US. We continued in 2015 to build our portfolio of biosimilars. The FDA and European Medicines Agency confirmed acceptance of our applications for etanercept, a proposed biosimilar to Amgen's Enbrel®, which treats autoimmune diseases such as rheumatoid arthritis and psoriasis. The FDA also accepted our applications for pegfilgrastim, a proposed biosimilar to Amgen's Neulasta®, used to reduce the chance of infection in cancer patients receiving chemotherapy. Sandoz has five biosimilars in Phase III development or registration preparation.

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        Sandoz also develops, manufactures and markets cytotoxic products for traditional cancer chemotherapy. The Oncology Injectables business now includes a portfolio of more than 25 products.

Anti-Infectives

        Sandoz manufactures pharmaceutical ingredients and intermediates—mainly antibiotics—for sale under the Sandoz name and to third-party customers. Total Anti-Infectives sales were $1.4 billion, up 9% (cc) driven by a strong flu season and restored production capacity after 2014 quality upgrades. Sales of finished dosage forms sold under the Sandoz name reached $860 million. Anti-Infectives sold to third parties for sale under their own name reached $580 million.

Operating Income from Continuing Operations

        Operating income from continuing operations was $9.0 billion (–19%,–2% cc), mainly due to amortization of the new oncology assets in Pharmaceuticals. The current year includes an exceptional expense of $400 million for a settlement of the specialty pharmacies case in the Southern District of New York, whereas the prior-year benefitted from a one-time commercial settlement gain of $302 million and $248 million gain from selling a Novartis Venture Fund investment. The negative currency impact of 17 percentage points was mainly due to the strong $ versus the euro, Japanese yen and emerging market currencies. Operating income margin in constant currencies decreased 1.4 percentage points; currency had a negative impact of 1.7 percentage points resulting in a net decrease of 3.1 percentage points to 18.2 percent of net sales.

        The following table provides an overview of operating income by segment:

	Year ended Dec 31, 2015			% of net sales		Year ended Dec 31, 2014			% of net sales		Change in $			Change in constant currencies
	$ m					$ m					%			%
Pharmaceuticals		7,597			25.0		8,471			26.6		(10	)		5
Alcon		794			8.1		1,597			14.8		(50	)		(20	)
Sandoz		1,005			11.0		1,088			11.4		(8	)		1
Corporate		(419	)				(67	)				nm			nm
Operating income from continuing operations		8,977			18.2		11,089			21.3		(19	)		(2	)

nm = not meaningful

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Core Operating Income key figures⁽¹⁾

	Year ended Dec 31, 2015			Year ended Dec 31, 2014			Change in $			Change in constant currencies
	$ m			$ m			%			%
Core gross profit from continuing operations		36,900			38,821			(5	)		5
Marketing & Sales		(11,729	)		(12,355	)		5			(5	)
Research & Development		(8,738	)		(8,723	)		0			(6	)
General & Administration		(2,389	)		(2,552	)		6			0
Other income		823			563			46			59
Other expense		(1,077	)		(1,281	)		16			7
Core operating income from continuing operations		13,790			14,473			(5	)		10
as % of net sales		27.9	%		27.7	%

⁽¹⁾

For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS Measures as Defined by Novartis".

        The adjustments made to operating income to arrive at core operating income from continuing operations amounted to $4.8 billion (2014: $3.4 billion). The increase was mainly driven by higher amortization of the new oncology assets in Pharmaceuticals, higher legal settlement expense and higher acquisition-related expense, whereas 2014 included a commercial settlement gain of $302 million, partially offset by the provision of $204 million for the US healthcare reform fee.

        Excluding these items, core operating income from continuing operations decreased 5% (+10% cc) to $13.8 billion. Core operating income margin in constant currencies increased 1.3 percentage points mainly due to higher sales and productivity initiatives; currency had a negative impact of 1.1 percentage points, resulting in a margin of 27.9% of net sales, compared to 27.7% in 2014.

        The following table provides an overview of core operating income by segment:

	Year ended Dec 31, 2015			% of net sales		Year ended Dec 31, 2014			% of net sales		Change in $			Change in constant currencies
	$ m					$ m					%			%
Pharmaceuticals		9,420			30.9		9,514			29.9		(1	)		14
Alcon		3,063			31.2		3,811			35.2		(20	)		(7	)
Sandoz		1,659			18.1		1,571			16.4		6			17
Corporate		(352	)				(423	)				17			11
Core operating income from continuing operations		13,790			27.9		14,473			27.7		(5	)		10

Pharmaceuticals

        Operating income was $7.6 billion (–10%, +5% cc) and included the effects of the acquisition of GSK's oncology portfolio, among other exceptional items.

        Core operating income, which excludes certain exceptional items, was $9.4 billion (–1%, +14% cc), helped by our ongoing efforts to improve productivity and control costs. Core operating income margin improved by 2.4 percentage points in constant currencies. However, that was offset by 1.4 percentage points of negative impact from currency exchange rates, yielding a core margin of 30.9% of net sales.

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Research and development

        The following table provides an overview on the reported and core Research and Development expense of the Pharmaceuticals Division:

	Year ended Dec 31, 2015			Year ended Dec 31, 2014			Change in $			Change in constant currencies
	$ m			$ m			%			%
Research and Exploratory Development		(2,565	)		(2,724	)		6			3
Confirmatory Development		(4,667	)		(4,607	)		(1	)		(7	)
Total Pharmaceuticals Division Research and Development expense		(7,232	)		(7,331	)		1			(3	)
as % of Pharmaceuticals net sales to third parties		23.8	%		23.1	%
Core Research and Exploratory Development(1)		(2,493	)		(2,654	)		6			3
Core Confirmatory Development(1)		(4,560	)		(4,343	)		(5	)		(11	)
Total Core Pharmaceuticals Division Research and Development expense		(7,053	)		(6,997	)		(1	)		(5	)
as % of Pharmaceuticals net sales to third parties		23.2	%		22.0	%

⁽¹⁾

Core excludes impairments, amortization and certain exceptional items.

        Pharmaceuticals Division Research and Exploratory Development expenditure amounted to $7.2 billion in 2015, a decrease of 1% (–3% cc) compared to 2014. Confirmatory Development expenditures increased by 1% (–7% cc) to $4.7 billion, compared to $4.6 billion in 2014, mainly driven by the additional development expense for the new oncology assets acquired from GSK.

        Core R&D expense in the Pharmaceuticals Division as percent of sales decreased by 0.1 percentage points in constant currencies, which was offset by negative currency movements of 1.3 percentage points mainly from the sales base, as the Core R&D expenses are primarily denominated in US dollars and Swiss francs, which resulted in a net increase of 1.2 percentage points to 23.2% of net sales.

Alcon

        Operating income was $0.8 billion (–50%,–20% cc).

        Core operating income, which excludes certain items, was $3.1 billion (–20%,–7% cc), impacted by lower sales, higher spending (primarily on marketing and sales), investments in product development, and increased provisions for bad debt in Asia. Core operating income margin declined 2.1 percentage points in constant currencies and currency exchange rates had a negative impact of 1.9 percentage points, yielding a core margin of 31.2% of net sales.

Sandoz

        Operating income was $1.0 billion (–8%, +1% cc).

        Core operating income, which excludes certain exceptional items, increased 6% (+17% cc) to $1.7 billion. Core operating income margin increased 1.5 percentage points in constant currencies and currency exchange rates had a positive impact of 0.2 percentage points, yielding a core margin of 18.1% of net sales.

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Corporate Income and Expense, Net

        Corporate income and expense amounted to a net expense of $419 million in 2015 compared to a net expense of $67 million in the prior year. The increased expense was mainly due to the $302 million commercial settlement gain and a $248 million gain from selling Novartis Venture Fund investments recorded in 2014, partially offset by the gain on the sale of real estate in Switzerland of $54 million, lower share-based compensation accruals and lower provisions in the captive insurance companies in 2015.

Non-Operating Income and Expense

        The following table provides an overview of non-operating income and expense:

	Year ended Dec 31, 2015			Year ended Dec 31, 2014			Change in $			Change in constant currencies
	$ m			$ m			%			%
Operating income from continuing operations		8,977			11,089			(19	)		(2	)
Income from associated companies		266			1,918			(86	)		(86	)
Interest expense		(655	)		(704	)		7			2
Other financial income and expense		(454	)		(31	)		nm			nm
Income before taxes from continuing operations		8,134			12,272			(34	)		(17	)
Taxes		(1,106	)		(1,545	)		28			10
Net income from continuing operations		7,028			10,727			(34	)		(18	)
Net income/loss from discontinued operations		10,766			(447	)		nm			nm
Net income		17,794			10,280			73			91
Basic EPS ($) from continuing operations		2.92			4.39			(33	)		(17	)
Basic EPS ($) from discontinued operations		4.48			(0.18	)		nm			nm
Total basic EPS ($)		7.40			4.21			76			94

nm = not meaningful

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        The following table provides an overview of core non-operating income and expense:

	Year ended Dec 31, 2015			Year ended Dec 31, 2014			Change in $			Change in constant currencies
	$ m			$ m			%			%
Core operating income from continuing operations		13,790			14,473			(5	)		10
Income from associated companies		981			943			4			4
Interest expense		(655	)		(704	)		7			2
Other financial income and expense		(24	)		(31	)		23			nm
Core income before taxes from continuing operations		14,092			14,681			(4	)		10
Taxes		(2,051	)		(2,028	)		(1	)		(16	)
Core net income from continuing operations		12,041			12,653			(5	)		9
Core net income/loss from discontinued operations		(256	)		102			nm			nm
Core net income		11,785			12,755			(8	)		6
Core basic EPS ($) from continuing operations		5.01			5.19			(3	)		10
Core basic EPS ($) from discontinued operations		(0.11	)		0.04			nm			nm
Core basic EPS ($)		4.90			5.23			(6	)		7

nm = not meaningful

Income from associated companies

        Income from associated companies from continuing operations amounted to $266 million in 2015, compared to $1.9 billion in 2014. The prior-year benefited from a pre-tax gain of $0.8 billion recognized on the sale of the shares of Idenix to Merck, a gain of $0.4 billion from the divestment of the shareholding in LTS and from the gain of $64 million recorded on the Novartis Venture Funds investments.

        In addition, the estimated income from Roche Holding AG declined from $599 million in the prior-year period to $343 million in 2014, due to an adjustment of $157 million recognized in the first quarter of 2015 when Roche published full year results, as well as a lower estimated income contribution from Roche for 2015 due to an announced restructuring.

        The estimated share in net results from the GSK Consumer Healthcare joint venture amounted to a loss of $17 million, as income from operations was more than offset by integration charges. This estimate will be adjusted based on actual results in the first quarter of 2016. In addition, in 2015, we finalized the purchase price allocation for the investment in the GSK Consumer Healthcare joint venture which is accounted for as associated company and recognized amortization of purchase price adjustments of $62 million, resulting in a total estimated loss of $79 million for our share in the net results from the GSK Consumer Healthcare joint venture for the year.

        Core income from associated companies increased to $981 million compared to $943 million in 2014. Our estimated share in core results from the consumer healthcare joint venture with GSK, which amounted to $213 million in 2015, was offset by decreases in our estimated share of core results from Roche (from $856 million to $766 million) and prior-year income from associated companies of the Novartis Venture Fund.

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Interest Expense and other financial income and expense

        Interest expense from continuing operations decreased by 7% (–2% cc) to $655 million from $704 million in the prior year.

        Other financial income and expense amounted to an expense of $454 million compared to $31 million in the prior-year period mainly on account of the exceptional charges of $410 million related to Venezuela due to foreign exchange losses of $211 million and monetary losses from hyperinflation accounting of $72 million and a loss of $127 million on the sale of PDVSA bonds received to settle a portion of intra-group payables.

        Core other financial income and expense, which exclude the exceptional charges of $410 million related to Venezuela, amounted to a net expense of $24 million, compared to $31 million in 2014.

Taxes

        The tax rate for continuing operations (taxes as percentage of pre-tax income) in 2015 increased to 13.6% from 12.6% in the prior year, as a result of a change in profit mix from lower to higher tax jurisdictions.

        The core tax rate from continuing operations (core tax as a percentage of core pre-tax income) increased to 14.6% from 13.8% in 2014, mainly as a result of a change in profit mix from lower to higher tax jurisdictions.

Net Income

        Net income from continuing operations of $7.0 billion was down 34% (–18% cc) declining more than operating income mainly due to the exceptional charges related to Venezuela in the current year and the prior-year gains of $0.8 billion from the sale of Idenix shares and $0.4 billion from the sale of LTS shares.

        Core net income from continuing operations of $12.0 billion was down 5% (+9% cc), in line with core operating income.

EPS

        Basic earnings per share (EPS) from continuing operations was $2.92 per share, down 33% (–17% cc), declining less than net income from continuing operations due to the lower number of outstanding shares.

        Core basic EPS from continuing operations was $5.01 (–3%, +10% cc), growing ahead of core net income due to lower average outstanding shares and lower minority interests.

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Discontinued Operations

	Year ended Dec 31, 2015			Year ended Dec 31, 2014
	$ m			$ m
Net sales to third parties from discontinued operations		601			5,816
Operating income/loss from discontinued operations		12,477			(353	)
Net income/loss from discontinued operations		10,766			(447	)
Attributable to:
Shareholders of Novartis AG		10,758			(444	)
Non-controlling interests		8			(3	)
Basic earnings per share ($) from discontinued operations		4.48			(0.18	)
Free cash flow from discontinued operations		(230	)		(172	)

        Operational results for discontinued operations in 2015 include the results from the Vaccines influenza business, prior to its divestment to CSL Limited on July 31, 2015, as well as results from the Vaccines non-influenza business and OTC until March 2, 2015. Operational results from the Animal Health business, which was divested on January 1, 2015 include only the divestment gain. The prior year included the results of all divested units during the full year.

        Discontinued operations also include the exceptional pre-tax gains of $12.7 billion from the divestment of Animal Health ($4.6 billion) and the transactions with GSK ($2.8 billion for the Vaccines non-influenza business and $5.9 billion arising from the contribution of Novartis OTC into the GSK Consumer Healthcare joint venture). In addition, the GSK transactions resulted in $0.6 billion of additional transaction-related costs that were expensed.

        Net sales to third parties of the discontinued operations in 2015 amounted to $0.6 billion compared to $5.8 billion in 2014.

        Operating income from discontinued operations in 2015 amounted to an income of $12.5 billion which was mainly driven by the exceptional pre-tax gains from the portfolio transformation. Excluding the divestment gains, the remaining operating loss from discontinued operations was $0.2 billion, representing the operating performance of the Vaccines influenza business up to July 31, 2015 as well as the Vaccines non-influenza business and OTC until their respective divestment dates, and is net of the partial reversal of $0.1 billion of the impairment of the assets of Vaccines influenza business recorded in 2014.

        The prior year operating loss of $353 million included an exceptional impairment charge of $1.1 billion for the Vaccines influenza business which was partially offset by an exceptional pre-tax gain of $0.9 billion from the divestment of our blood transfusion diagnostics unit.

        Net income from discontinued operations amounted to $10.8 billion in 2015 compared to a net loss $447 million in 2014. For more information on discontinued operations see "—Factors Affecting Comparability of Year-On-Year Results of Operations", below and "Item 18. Financial Statements—Note 30".

Total Group

        For the total Group, net income amounted to $17.8 billion compared to $10.3 billion in 2014, impacted by the exceptional divestment gains included in the net income from the discontinued operations. Basic earnings per share increased to $7.40 from $4.21.

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2014 Compared to 2013

Group Overview

        Following the announcement of the transactions with GlaxoSmithKline plc (GSK) and Eli Lilly and Company (Lilly) on April 22, 2014 (and the subsequent announcement of the transaction with CSL Limited (CSL)), in which we agreed to divest our Vaccines, OTC and Animal Health businesses to those companies, the businesses to be divested were accounted for as discontinued operations and were not included in our results from continuing operations for 2013 and 2014. In addition, on January 9, 2014, Novartis completed the divestment to Grifols S.A. of our former blood transfusion diagnostics unit, which had been included in our former Vaccines and Diagnostics Division. The results of this divested business were also accounted for as discontinued operations and not included in our results from continuing operations. See "—Factors Affecting Comparability Of Year-On-Year Results Of Operations."

Key figures

	Year ended Dec 31, 2014			Year ended Dec 31, 2013			Change in $			Change in constant currencies
	$ m			$ m			%			%
Net sales to third parties from continuing operations		52,180			51,869			1			3
Sales to discontinued segments		239			221			8			8
Net sales from continuing operations		52,419			52,090			1			3
Other revenues		1,215			626			94			94
Cost of goods sold		(17,345	)		(16,579	)		(5	)		(6	)
Gross profit from continuing operations		36,289			36,137			0			3
Marketing & Sales		(12,377	)		(12,638	)		2			0
Research & Development		(9,086	)		(9,071	)		0			0
General & Administration		(2,616	)		(2,603	)		0			(1	)
Other income		1,391			1,205			15			15
Other expense		(2,512	)		(2,047	)		(23	)		(23	)
Operating income from continuing operations		11,089			10,983			1			7
Return on net sales (%)		21.3			21.2
Income from associated companies		1,918			599			220			221
Interest expense		(704	)		(683	)		(3	)		(6	)
Other financial income and expense		(31	)		(92	)		66			31
Income before taxes from continuing operations		12,272			10,807			14			19
Taxes		(1,545	)		(1,498	)		(3	)		(8	)
Net income from continuing operations		10,727			9,309			15			21
Net income/loss from discontinued operations		(447	)		(17	)		nm			nm
Net income		10,280			9,292			11			17
Attributable to:
Shareholders of Novartis AG		10,210			9,175			11			18
Non-controlling interests		70			117			(40	)		(41	)
Basic earnings per share ($) from continuing operations		4.39			3.76			17			22
Basic earnings per share ($) from discontinued operations		(0.18	)		0.00			nm			nm
Total basic earnings per share ($)		4.21			3.76			12			18
Free cash flow from continuing operations		10,934			9,521			15
Free cash flow		10,762			9,945			8

nm = not meaningful

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        Novartis delivered solid financial performance in 2014, driven by our continued success with growth products and expansion in emerging growth markets, which helped offset the effects of generic competition of approximately $2.4 billion. As a result, we achieved net sales from continuing operations of $52.2 billion (+1%, +3% cc). Operating income from continuing operations amounted to $11.1 billion (+1%, +7% cc). Operating income margin was 21.3% of net sales. Net income from continuing operations rose 15% (+21% cc) to $10.7 billion. Earnings per share (EPS) from continuing operations rose 17% (+22% cc) to $4.39. In 2014, free cash flow from continuing operations increased by $1.4 billion to $10.9 billion, mainly due to higher cash flows from operating activities.

        In addition, to help investors' understanding of the performance of our business, we present our core results, which exclude the exceptional impact of significant disposals and acquisitions, as well as other significant exceptional items. In 2014, our core operating income from continuing operations increased 2% (+7% cc) to $14.5 billion. Core operating income margin increased 0.3 percentage points to 27.7% of net sales, as our efforts to enhance productivity helped to offset 0.8 percentage points of negative impact from changing currency exchange rates. Core net income from continuing operations was $12.7 billion, up 3% (+8% cc), and core basic earnings per share from continuing operations rose 4% (+9% cc) to $5.19.

Growth

        Across divisions, our portfolio of growth products and presence in emerging growth markets continued to fuel performance in 2014. Growth products comprise products launched in 2009 or later, or products with exclusivity until at least 2018 in key markets (EU, US, Japan) (except Sandoz, which includes only products launched in the last 24 months).

        Sales of growth products increased 18% to $18.6 billion, or 36% of net sales. In the Pharmaceuticals Division, growth products accounted for 43% of net sales, up from 37% in 2013—demonstrating how we are rejuvenating our portfolio and mitigating the impact of patent expirations on key products.

        Top-performing Pharmaceuticals products in 2014 included Gilenya ($2.5 billion, +30% cc), our oral therapy for multiple sclerosis; Afinitor ($1.6 billion, +22% cc), a treatment for several types of cancer including breast and kidney; and Tasigna ($1.5 billion, +24% cc), a treatment for chronic myeloid leukemia.

        At Alcon, surgical equipment was a key growth driver, following the launch in late 2013 of the Centurion vision system and continued growth of the LenSx femtosecond laser for cataract surgery. Disposable products for cataract and vitreoretinal surgery also showed strong growth.

        In the Sandoz Division, biosimilars—which are follow-on versions of complex biologic drugs—made a strong contribution to growth, with sales rising 23% (cc) to $514 million globally.

        In addition, efforts to expand our presence in emerging growth markets such as Asia, Africa and Latin America continued to show good results. Emerging growth markets comprise all markets except the US, Canada, Western Europe, Japan, Australia and New Zealand. Net sales in those markets rose 11% (cc) to $15.3 billion, led by China, up 15% (cc), and by Brazil, up 18% (cc).

Productivity

        Novartis made solid progress in 2014 in generating synergies across divisions to improve productivity. Overall savings reached approximately $2.9 billion, exceeding our target. In 2014, we also created Novartis Business Services (NBS), a shared services organization designed to enhance profitability by harmonizing and simplifying the provision of services to the divisions. NBS is expected to play a key role in accelerating our productivity gains.

        The most significant savings of $1.6 billion came from ongoing efforts in procurement to manage spending on goods and services across all our divisions. That represents 7% of the annual spending of $22 billion managed by the procurement organization.

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        An area where we made significant progress in 2014 was travel, where we reduced spending by about 23% across the company. We primarily achieved this by increasing the use of virtual meetings among Novartis colleagues, in lieu of travel. We aim to continue increasing the use of videoconferences and other technology for internal meetings to make these savings sustainable.

        We also made strides in managing capital spending for equipment at manufacturing sites worldwide. In 2014, we began adopting standard technical requirements for machinery across our divisions. For instance, we now have uniform specifications for tablet presses, a common type of equipment previously purchased individually by each manufacturing site. This standardization enabled us to negotiate better prices from our supplier and will help reduce future costs related to such things as commissioning new equipment and maintenance.

        Additionally, our multi-year plan begun in 2010 to optimize our global manufacturing network is on track. In 2014, we announced several further steps, including the closure of our pharmaceuticals manufacturing site in Suffern, New York, in the US and the planned sale of our pharmaceuticals manufacturing site in Taboão da Serra, Brazil—bringing the total number of production sites that have been or are being restructured or divested to 24. These changes are helping us balance capacity, reducing it where no longer needed and adding new capacity for the products and technologies of the future.

        We continued to find synergies to increase sales through our Customers First program, which delivered $1.6 billion in revenues in 2014, generating 2.8% of total Group net sales. This program aims to serve our customers more effectively by ensuring they have access to a full range of Novartis products from all divisions.

Net Sales by Segment

	Year ended Dec 31, 2014		Year ended Dec 31, 2013		Change in $			Change in constant currencies
	$ m		$ m		%			%
Pharmaceuticals		31,791		32,214		(1	)		1
Alcon		10,827		10,496		3			6
Sandoz		9,562		9,159		4			7
Net sales to third parties from continuing operations		52,180		51,869		1			3

Pharmaceuticals

        Pharmaceuticals delivered net sales of $31.8 billion (–1%, +1% in constant currencies, or cc) as strong sales of growth products countered the impact of greater generic competition for Diovan and other products, particularly in the US and Japan. Generic competition reduced sales by seven percentage points.

        Growth products generated $13.7 billion of division net sales, growing 17% (cc) compared to last year. These products—which include Gilenya, Afinitor, Tasigna, Galvus, Lucentis, Xolair, Jakavi and our portfolio of products for the treatment of chronic obstructive pulmonary disease (COPD)—contributed 43% of division net sales, compared to 37% in 2013.

        Sales in emerging growth markets increased 11% (cc) to $8.1 billion.

Oncology

        Oncology sales rose 4% (+6% cc) to $11.7 billion, despite increased generic competition for Zometa ($264 million,–55% cc). By brand, growth was driven mainly by Afinitor, up 22% (cc) to $1.6 billion; Tasigna, up 24% (cc) to $1.5 billion; and Jakavi, up 72% (cc) to $279 million.

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Primary Care

        Sales in Primary Care, which includes mainly cardiovascular, metabolic and respiratory products amounted to $8.0 billion in 2014, down 12% (–10% cc). Excluding older, established medicines such as Diovan ($2.3 billion,–32% cc), sales rose 13% (+16%) to $2.8 billion. The recently launched COPD portfolio, for example, which includes Onbrez Breezhaler/Arcapta Neohaler, Seebri Breezhaler, and Ultibro Breezhaler, grew 93% (cc) to $484 million. Other key products include the Galvus Group, up 6% (cc) to $1.2 billion; and Xolair, up 30% (cc) to $777 million.

Specialty Care

        Sales in Specialty Care, which includes our Neuroscience, Integrated Hospital Care and Ophthalmics products, amounted to $10.1 billion. Gilenya, our oral multiple sclerosis therapy, grew 30% (cc) to $2.5 billion, with strong volume growth through new patient initiations in the US and elsewhere. Sales of Lucentis, for ocular conditions, rose 5% (cc) to $2.4 billion, driven by increased use in new indications beyond wet age-related macular degeneration.

TOP 20 PHARMACEUTICALS DIVISION PRODUCT NET SALES—2014

			US					Rest of world					Total
Brands	Business Franchise	Indication	$ m		% change in constant currencies			$ m		% change in constant currencies			$ m		% change in $			% change in constant currencies
Gleevec/Glivec	Oncology	Chronic myeloid leukemia		2,170		12			2,576		(5	)		4,746		1			2
Gilenya	Neuroscience	Relapsing multiple sclerosis		1,190		16			1,287		45			2,477		28			30
Lucentis	Ophthalmics	Age-related macular degeneration							2,441		5			2,441		2			5
Diovan/Co-Diovan	Primary Care	Hypertension		960		(43	)		1,385		(22	)		2,345		(33	)		(32	)
Sandostatin	Oncology	Acromegaly		751		6			899		6			1,650		4			6
Afinitor/Votubia	Oncology	Breast cancer		805		16			770		29			1,575		20			22
Tasigna	Oncology	Chronic myeloid leukemia		540		26			989		23			1,529		21			24
Exforge	Primary Care	Hypertension		284		(20	)		1,112		4			1,396		(4	)		(2	)
Galvus	Primary Care	Diabetes							1,224		6			1,224		2			6
Exelon/Exelon Patch	Neuroscience	Alzheimer's disease		485		6			524		(6	)		1,009		(2	)		(1	)
Exjade	Oncology	Iron chelator		307		16			619		1			926		4			6
Xolair(1)	Primary Care	Asthma							777		30			777		27			30
Neoral/Sandimmun	Integrated Hospital Care	Transplantation		55		(2	)		629		(6	)		684		(9	)		(6	)
Voltaren (excl. other divisions)	Established medicines	Inflammation/pain							632		(3	)		632		(6	)		(3	)
Myfortic	Integrated Hospital Care	Transplantation		149		(45	)		394		14			543		(15	)		(11	)
Ritalin/Focalin	Established medicines	Attention deficit/ hyperactivity disorder		327		(25	)		165		8			492		(17	)		(16	)
Femara	Oncology	Breast cancer		27		42			353		0			380		(1	)		2
Comtan/Stalevo	Neuroscience	Parkinson's disease		19		(42	)		352		(1	)		371		(7	)		(4	)
Tegretol	Established medicines	Epilepsy		82		19			264		1			346		1			4
Zortress/Certican	Integrated Hospital Care	Transplantation		60		88			267		28			327		31			36
Top 20 products total				8,211		(3	)		17,659		4			25,870		0			2
Rest of portfolio				1,561		(13	)		4,360		0			5,921		(6	)		(4	)
Total Division sales				9,772		(5	)		22,019		3			31,791		(1	)		1

⁽¹⁾

Net sales reflect Xolair sales for all indications (i.e. Xolair SAA and Xolair CSU, which are managed by the Integrated Hospital Care franchise).

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Gleevec/Glivec ($4.7 billion, +2% cc) sales grew slightly in 2014. Gleevec/Glivec is a treatment for adult patients with metastatic and/or unresectable KIT+ gastrointestinal stromal tumors (GIST), as an adjuvant treatment for certain adult patients following resection of KIT+ GIST, and as a targeted therapy for Philadelphia chromosome-positive chronic myeloid leukemia (Ph+ CML). Sales were driven mainly by the US, and more than compensated for the loss of patent exclusivity in some markets. In the US, Novartis Pharmaceuticals Corporation has settled its litigation with a subsidiary of Sun Pharmaceutical Industries Ltd. relating to Novartis patents covering the use of certain polymorphic forms of Gleevec/Glivec, which expire in 2019 (including pediatric exclusivity). The basic compound patent for Gleevec/Glivec expires in the US on July 4, 2015. As a result of the settlement, Novartis will permit Sun's subsidiary to market a generic version of Gleevec/Glivec in the US beginning on February 1, 2016.

Gilenya ($2.5 billion, +30% cc), the first once-daily oral therapy to treat relapsing forms of multiple sclerosis (MS), continued to outgrow the market, achieving double-digit growth in 2014 in recognition of strong trends towards oral treatments with higher efficacy. Growth was also fueled by an increasing acceptance of the role of high-efficacy treatments when used earlier in the course of the disease. Gilenya continues to see volume growth through new patient initiations in both the US and non-US markets. In the US, Gilenya is indicated for relapsing forms of MS. In the EU, Gilenya is indicated for adult patients with high disease activity despite treatment with at least one disease modifying agent, or rapidly evolving severe relapsing remitting MS. Gilenya is currently approved in over 80 countries around the world. Gilenya is licensed from Mitsubishi Tanabe Pharma.

Lucentis ($2.4 billion, +5% cc) saw volume growth driven by the uptake in non-Age-Related macular degeneration (AMD) indications (such as visual impairment due to diabetic macular edema; macular edema secondary to central and branch retinal vein occlusion; and choroidal neovascularization secondary to pathologic myopia). In addition, the Lucentis pre-filled syringe was successfully launched in all key European countries, as well as Japan and Australia. Non-AMD indications contributed 41% of Lucentis sales in 2014, compared to 27% for 2013, and became a blockbuster in Q4. Emerging growth markets contributed 18% of Lucentis sales versus 16% last year. Emerging growth markets comprise all markets except the US, Canada, Western Europe, Japan, Australia and New Zealand. At the same time, Lucentis sales in the wet AMD indication, impacted by competition, are stabilizing in some markets. Lucentis is the only anti-VEGF therapy licensed in most countries for the treatment of the following ocular indications: wet AMD, visual impairment due to diabetic macular edema, visual impairment due to macular edema secondary to retinal vein occlusion and secondary to branch retinal vein occlusion, and visual impairment due to choroidal neovascularization secondary to pathologic myopia (mCNV). Lucentis is approved in more than 100 countries to treat patients with the first four conditions, and in more than 70 countries for mCNV. Genentech/Roche holds the rights to Lucentis in the US.

Diovan Group ($2.3 billion, –32% cc), consisting of Diovan monotherapy and the combination product Co-Diovan/Diovan HCT, saw a continued sales decline worldwide due to generic competition in most markets, including the US (following July 7, 2014 Diovan monotherapy generic entry), many EU countries and Japan (generic entry in June 2014), compounded in Japan by the impact of issues related to investigator initiated trials. Sales continued to grow in Emerging Growth Markets, including China and selected countries in Latin America, Asia Pacific and Africa.

Sandostatin ($1.7 billion, +6% cc) continued to benefit from the increasing use of Sandostatin LAR (long acting release) in key markets. Sandostatin is a somatostatin analogue used to treat patients with acromegaly as well as neuroendocrine tumors (NET). In NET, it is used for both the treatment of patients with symptoms of carcinoid syndrome and those with advanced NET of the midgut or unknown primary tumor location (currently approved in 47 countries). An enhanced presentation of Sandostatin LAR, which includes an improved diluent, safety needle and vial adapter, has been approved in 58 countries, with additional filings underway.

Afinitor/Votubia ($1.6 billion, +22% cc) performance was driven by strong growth in the US, Japan and other markets. Afinitor is an oral inhibitor of the mTOR pathway approved for the treatment of

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patients with HR+/HER2– advanced breast cancer after failure with a non-steroidal aromatase inhibitor, for advanced renal cell carcinoma following vascular endothelial growth factor-targeted therapy and for the treatment of advanced pancreatic neuroendocrine tumors. Afinitor is also approved for subependymal giant cell astrocytoma (SEGA) and renal angiomyolipoma associated with tuberous sclerosis complex (TSC). Everolimus, the active ingredient in Afinitor/Votubia, is also available in more than 60 countries for the treatment of renal angiomyolipomas and/or SEGA associated with TSC, including as a dispersible tablet formulation in the US and EU for SEGA. Everolimus, the active ingredient in Afinitor/Votubia, is available under the trade names Zortress/Certican for use in other non-oncology indications and is exclusively licensed to Abbott and sublicensed to Boston Scientific for use in drug-eluting stents.

Tasigna ($1.5 billion, +24% cc) performance was driven by strong growth in the US and other markets. Tasigna is a more effective, targeted therapy than Gleevec/Glivec for adult patients newly diagnosed with Ph+ CML in the chronic phase or for adult patients in the chronic or accelerated phase who are resistant or intolerant to at least one prior therapy including Gleevec/Glivec. It is currently approved as a first-line therapy for newly diagnosed patients with Ph+ CML in the chronic phase in more than 85 countries globally, including the US, EU, Japan and Switzerland, with additional submissions pending worldwide. Tasigna (nilotinib) is also approved in more than 110 countries as a second-line treatment for patients with Ph+ CML in chronic and/or accelerated phase who are resistant or intolerant to existing treatment, such as Gleevec/Glivec.

Exforge Group ($1.4 billion, –2% cc), includes two medicines approved for the treatment of hypertension: Exforge, a single-pill combination of the angiotensin receptor blocker (ARB) valsartan and the calcium channel blocker amlodipine besylate; and Exforge HCT, a single pill combining an ARB (valsartan), calcium channel blocker (amlodipine) and a diuretic (hydrochlorothiazide). Exforge lost exclusivity in October 2014 and Exforge HCT in November 2014 in the US. Outside the US, Exforge continues to grow, with double-digit growth in China and a number of emerging growth markets. Emerging growth markets comprise all markets except the US, Canada, Western Europe, Japan, Australia and New Zealand. Exforge is now available in more than 100 countries. Exforge HCT is available in over 60 countries.

Galvus Group ($1.2 billion, +6% cc), which includes Galvus, an oral treatment for type 2 diabetes, and Eucreas, a single-pill combination of vildagliptin (the active ingredient in Galvus) and metformin, continued to grow in 2014 despite the distribution stop in the German market on July 1, 2014. Sales for the first six months of 2014 in Germany were $57 million. Galvus delivered a solid performance with strong growth coming from emerging markets. The focus for Galvus remains on patients whose diabetes remains uncontrolled on metformin, as well as on an expansion of usage in new patient segments based on new indications. Galvus Group is currently approved in more than 120 countries.

Exelon/Exelon Patch ($1.0 billion, –1% cc) sales declined slightly, due to generic competition for Exelon Patch in the EU offsetting a solid performance for Exelon Patch in the US. Exelon Patch is approved for the treatment of mild-to-moderate Alzheimer's disease dementia (AD) in more than 90 countries, including more than 20 countries where it is also approved for Parkinson's disease dementia. Exelon Patch is also indicated for the treatment of patients with severe AD in 11 countries, including the US. In Europe, the high-dose patch (15 cm²) for mild-to-moderately severe AD was launched in several markets in 2013.

Exjade ($926 million, +6% cc), a once-daily oral therapy for chronic transfusional iron overload first approved in 2005 and now approved in more than 100 countries, saw sales increases in the US and Asia. Exjade is also approved for the treatment of chronic iron overload in patients with non-transfusion-dependent thalassemia in more than 70 countries.

Xolair ($777 million, +30% cc), a biologic drug for appropriate patients with severe persistent allergic asthma in Europe and moderate-to-severe persistent allergic asthma in the US, is currently approved in more than 90 countries as a treatment for moderate-to-severe or severe persistent allergic asthma. Its

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sales continued to grow strongly in Canada, Europe and Latin America. Xolair is also approved in the EU, Switzerland and 35 other countries as a treatment for chronic spontaneous urticaria, also known as chronic idiopathic urticaria, for which it is approved in the US and now Canada and Australia. Novartis co-promotes Xolair with Genentech/Roche in the US and shares a portion of the operating income, but does not book US sales.

Neoral/Sandimmun ($684 million, –6% cc), a micro-emulsion formulation of cyclosporine, is an immunosuppressant to prevent organ rejection following a kidney, liver or heart transplant. Neoral is also approved for use in lung transplant in many countries outside of the US. Additionally, it is indicated for treating selected autoimmune disorders such as psoriasis and rheumatoid arthritis. First launched in 1995, Neoral is marketed in approximately 100 countries. This product is subject to generic competition.

Voltaren/Cataflam ($632 million, –3% cc), is a leading non-steroidal anti-inflammatory drug (NSAID) for the relief of symptoms in rheumatic diseases such as rheumatoid arthritis and osteoarthritis, and for various other inflammatory and pain conditions. Voltaren/Cataflam was first registered in 1973 and is available in more than 140 countries. This product, which is subject to generic competition, is marketed by the Pharmaceuticals Division in a wide variety of dosage forms, including tablets, drops, suppositories, ampoules and topical therapy. In addition, in various countries, our Sandoz Division markets generic versions of Voltaren, our Alcon Division markets Voltaren for ophthalmic indications, and our OTC Division markets low-dose oral forms and the topical therapy of Voltaren as over-the-counter products. Total sales across all divisions of Voltaren/Cataflam (diclofenac) amounted to $1.6 billion in 2014 and grew 7.5% in constant currencies against the prior year.

Myfortic ($543 million, –11% cc), a transplantation medicine, is available in more than 90 countries to prevent organ rejection in adult kidney transplant patients. It has experienced a sales decline after the expected launch of generic competition in the US in early 2014. Myfortic continues to grow in geographies without generic competition.

Ritalin/Focalin ($492 million, –16% cc) is a treatment for attention deficit hyperactivity disorder (ADHD) in children. Ritalin and Ritalin LA are available in more than 70 and 30 countries, respectively, and are also indicated for narcolepsy. Ritalin LA has been granted in 2014 the "adult ADHD indication" in several countries (16 to date). Focalin and Focalin XR are available in the US and Focalin XR is additionally indicated for adults. Focalin XR is also approved in Switzerland. Ritalin Immediate Release has generic competition in most countries. Some strengths of Ritalin and Focalin are subject to generic competition in the US.

Femara ($380 million, +2% cc), a treatment for early stage and advanced breast cancer in postmenopausal women, experienced steady sales despite multiple generic entries in the US, Europe and other key markets.

Comtan/Stalevo ($371 million, –4% cc), indicated for the treatment of Parkinson's disease, saw sales decline in 2014 due to generic competition in some markets. Stalevo (carbidopa, levodopa and entacapone) is indicated for certain Parkinson's disease patients who experience end-of-dose motor fluctuations, known as "wearing off." In July 2014, Stalevo was granted marketing authorization for the treatment of Parkinson's disease in Japan. Stalevo is available in more than 90 countries. Comtan (entacapone) is also indicated for the treatment of Parkinson's disease patients who experience end-of-dose wearing off and is marketed in 42 countries. Both products are marketed by Novartis under a licensing agreement with the Orion Corporation.

Tegretol ($346 million, +4% cc) a treatment for epilepsy (partial seizures and generalized tonic-clonic seizures) and for several other neuro-psychiatric diseases including bipolar disorders or neuropathic pain, was launched in 1962. It is marketed in approximately 129 countries and, although it faces generic competition in most of them, sales continue to be very stable due to its established position as a gold-standard, first-line treatment. Tegretol is also listed as an 'essential medicine' by the World Health Organization.

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Zortress/Certican ($327 million, +36% cc), a transplantation medicine available in more than 90 countries to prevent organ rejection in adult heart and kidney transplant patients, continued to show strong growth in 2014. It is also approved in over 70 countries for liver transplant patients, including the US and EU countries. Everolimus, the active ingredient in Zortress/Certican, is marketed for other indications under the trade names Afinitor/Votubia. Everolimus is exclusively licensed to Abbott and sublicensed to Boston Scientific for use in drug-eluting stents.

Other Products of Significance

        HRT Range ($297 million, –8% cc), encompasses Vivelle-Dot/Estradot, Estalis/CombiPatch, Sequidot and Estracomb MX. Vivelle-Dot/Estradot, which makes up the bulk of the HRT Range sales, is a transdermal patch formulation of estradiol hemihydrate. This estrogen replacement therapy is used for the treatment of the symptoms of natural or surgically induced menopause and the prevention of postmenopausal osteoporosis. First launched in May 1999, Vivelle-Dot/Estradot is marketed in approximately 29 countries. This product is subject to generic competition outside the US.

Jakavi ($279 million, +72% cc), is an oral inhibitor of the JAK 1 and JAK 2 tyrosine kinases. It is the first JAK inhibitor indicated for the treatment of disease-related splenomegaly or symptoms in adult patients with primary myelofibrosis (also known as chronic idiopathic myelofibrosis), post-polycythemia vera myelofibrosis or post-essential thromboycythemia myelofibrosis. Jakavi is currently approved in more than 65 countries worldwide. Novartis licensed ruxolitinib from Incyte Corporation for development and commercialization outside the US.

Zometa ($264 million, –55% cc), which is used in an oncology setting to reduce or delay skeletal-related events in patients with bone metastases from solid tumors and multiple myeloma, continued to decline as anticipated in 2014 due to generic competition following patent expirations in 2013 on its active ingredient, zoledronic acid.

Trileptal ($265 million, +6% cc), a treatment for epilepsy partial seizures (and generalized tonic-clonic seizures in some countries) was launched in 1973. It is marketed in approximately 97 countries and, although it faces generic competition in most of them, sales are stable due to the continued sales growth outside the EU offsetting the price pressure from generics.

Alcon

        Alcon net sales in 2014 grew 3% (+6% in constant currencies, or cc) to $10.8 billion. Growth was driven by key product launches, such as Centurion and LenSx for cataract surgery, Azarga and Simbrinza for the treatment of glaucoma, Ilevro to treat ocular inflammation, as well as AirOptix Colors and the continued rollout of Dailies Total1 contact lenses.

        Regionally, sales were driven by strong performance in emerging growth markets, led by Asia (+13% cc), particularly in China (+23% cc) and Russia (+27% cc).

        Latin America delivered robust growth (+17% cc), driven by the Surgical and Ophthalmic Pharmaceuticals franchises.

        North America (+4% cc) accelerated its growth in the Surgical franchise, offset by softness in the Ophthalmic Pharmaceuticals franchise. Sales in Europe, the Middle East and Africa (+3% cc) were driven by moderate performance in the Surgical and Ophthalmic Pharmaceuticals franchises. Japan

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sales (+3% cc) grew moderately in the Surgical franchise, offsetting weaker growth in Ophthalmic Pharmaceuticals and Vision Care.

	Year ended Dec 31, 2014		Year ended Dec 31, 2013		Change in $			Constant currencies change
	$ m		$ m		%			%
Surgical
Cataract products		3,174		3,037		5			7
of which IOLs		1,264		1,297		(3	)		0
Vitreoretinal products		615		592		4			7
Refractive/other		284		268		6			8
Total		4,073		3,897		5			7
Ophthalmic Pharmaceuticals
Glaucoma		1,319		1,265		4			7
Allergy/otic/nasal		887		939		(6	)		(4	)
Infection/inflammation		1,066		1,019		5			7
Dry eye		608		558		9			12
Other		331		327		1			6
Total		4,211		4,108		3			5
Vision Care
Contact lenses		1,897		1,793		6			7
Contact lens care		646		698		(7	)		(5	)
Total		2,543		2,491		2			4
Total net sales		10,827		10,496		3			6

Surgical

        Surgical franchise sales rose 5% (+7% cc) to $4.1 billion. The increase was driven by strong equipment sales, led by the Centurion vision system for phacoemulsification cataract surgery, the continued growth of the LenSx femtosecond laser for refractive cataract surgery, strong sales of vitreoretinal and cataract disposable surgical equipment, as well as the launch of the Verion image-guided system.

        Alcon experienced a more modest increase in intraocular lens (IOL) sales, driven by strong competition in the US, Japan and EU.

Ophthalmic Pharmaceuticals

        Ophthalmic Pharmaceuticals sales grew 3% (+5% cc) to $4.2 billion despite a weak allergy season in the US. Sales were led by glaucoma products such as DuoTrav, Azarga and the newly-launched Simbrinza. Systane eye drops to treat the symptoms of dry eye saw double-digit growth.

        Within the Infection/Inflammation segment, sales growth (+7% cc) was driven by Ilevro and Durezol. Jetrea, a first-in-class treatment for symptomatic vitreomacular adhesion/traction, continued to gain regulatory approvals, notably in Latin America and Asia.

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Vision Care

        Vision Care sales increased 2% (+4% cc) to $2.5 billion. Contact lens sales rose 6% (+7% cc), driven by key launches of AirOptix Colors, Dailies AquaComfort Plus (DACP) Toric, and DACP Multifocal, as well as the continued rollout of Dailies Total1 worldwide.

        At the same time, contact lens care solutions declined (–7% cc), driven by market shifts to daily disposable lenses, as well as competitive pressure in the US.

Sandoz

        Sandoz had net sales of $9.6 billion in 2014, up 4% (+7% in constant currencies, or cc) from the prior year, driven by a 15 percentage points increase in volume, more than offsetting 8 percentage points of price erosion. Performance was driven by strong retail generics and biosimilars sales growth in Asia (excluding Japan) (+15% cc), the US (+14% cc), and Latin America (+10% cc). Sales growth in Western Europe (excluding Germany) was solid at 4% (cc).

        Sandoz continued to strengthen its global leadership position in differentiated generics, including medicines that are difficult to develop and manufacture. Differentiated generics accounted for 45% of Sandoz sales.

	Year ended Dec 31, 2014		Year ended Dec 31, 2013		Change in $			Constant currencies change
	$ m		$ m		%			%
Retail Generics		7,933		7,663		4			6
Biopharmaceuticals & Oncology Injectables		1,094		888		23			25
Anti-Infectives		535		608		(12	)		(12	)
Total		9,562		9,159		4			7

Retail Generics

        In Retail Generics, Sandoz develops, manufactures and markets active ingredients and finished dosage forms of pharmaceuticals. It includes the specialty areas of Dermatology, Respiratory and Ophthalmics. Retail Generics sales worldwide rose 4% (+6% cc) to $7.9 billion. US sales grew 10% (cc), dampened by customer consolidation. Sales in Western Europe (excluding Germany) rose 3% (cc), driven by strong growth in Italy, Nordics and the United Kingdom. German sales were down 1% (cc) due to weak market demand. Emerging growth markets grew strongly, driven by Asia (excluding Japan), up 14% (cc); Central and Eastern Europe, up 4% (cc); and Latin America, up 8% (cc).

Biopharmaceuticals & Oncology Injectables

        In Biopharmaceuticals, Sandoz develops, manufactures and markets protein- and other biotechnology-based products, which are known as biosimilars, or follow-on biologics. Sandoz also provides biotechnology manufacturing services to other companies. Sales of Biopharmaceuticals & Oncology Injectables rose 23% (+25% cc) to $1.1 billion. In 2014, Sandoz continued to strengthen its global leadership position in biosimilars. In May, Sandoz was the first to apply for approval of a biosimilar in the US under the new biosimilar pathway created in the Biologics Price Competition and Innovation Act of 2009, with filgrastim, which is used to decrease the incidence of infection among cancer patients receiving chemotherapy. In January 2015, a US Food and Drug Administration advisory body recommended approval. Sandoz leads the industry with six biosimilars in Phase III clinical trials or registration.

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        Three Sandoz biosimilar products occupy the number one position in market share in their respective categories—Omnitrope, a human growth hormone; Binocrit for anemia; and filgrastim under the brand name Zarzio. Biosimilars sales in 2014 amounted to $514 million, up 23% (cc) from the previous year, mainly due to continued strong growth across all our brands and regions.

        Sandoz also develops, manufactures and markets cytotoxic products for traditional cancer chemotherapy. The Oncology Injectables business now includes a portfolio of more than 25 products. Oncology Injectables sales in 2014 amounted to $477 million, up 29% (cc) from the previous year, mainly due to recent launches in the US.

Anti-Infectives

        In Anti-Infectives, Sandoz manufactures active pharmaceutical ingredients and intermediates—mainly antibiotics—for sale under the Sandoz name and by third-party customers. Anti-Infectives sales in 2014 amounted to $535 million, down 12% (cc) from the previous year, as production capacities were temporarily constrained due to quality upgrades.

Operating Income from Continuing Operations

        Operating income from continuing operations amounted to $11.1 billion (+1%, +7% cc). The negative currency impact of 6 percentage points was mainly due to the weakening of emerging market currencies (especially the ruble) and the yen against the US dollar. Operating income margin was 21.3% of net sales, which was 0.1 percentage points higher than the prior year. A 0.9 percentage point increase (in constant currencies) from the prior year, was offset by a negative currency impact of 0.8 percentage points.

        The following table provides an overview of operating income by segment:

	Year ended Dec 31, 2014			% of net sales		Year ended Dec 31, 2013			% of net sales		Change in $			Change in constant currencies
	$ m					$ m					%			%
Pharmaceuticals		8,471			26.6		9,376			29.1		(10	)		(5	)
Alcon		1,597			14.8		1,232			11.7		30			43
Sandoz		1,088			11.4		1,028			11.2		6			14
Corporate		(67	)				(653	)				nm			nm
Operating income from continuing operations		11,089			21.3		10,983			21.2		1			7

nm = not meaningful

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Core Operating Income key figures⁽¹⁾

	Year ended Dec 31, 2014			Year ended Dec 31, 2013			Change in $			Change in constant currencies
	$ m			$ m			%			%
Core gross profit from continuing operations		38,821			38,792			0			3
Marketing & Sales		(12,355	)		(12,611	)		2			0
Research & Development		(8,723	)		(8,885	)		2			2
General & Administration		(2,552	)		(2,578	)		1			0
Other income		563			648			(13	)		(13	)
Other expense		(1,281	)		(1,159	)		(11	)		(10	)
Core operating income from continuing operations		14,473			14,207			2			7
as % of net sales		27.7	%		27.4	%

⁽¹⁾

For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS Measures as Defined by Novartis".

        The adjustments made to operating income to arrive at core operating income from continuing operations amounted to $3.4 billion (2013: $3.2 billion). These adjustments include amortization of intangible assets of $2.7 billion; the exceptional non tax deductible US Healthcare Fee levy of $204 million in the year due to a change in regulations; impairment charges of $0.4 billion and net restructuring charges of $0.7 billion. These were partly offset by a $302 million commercial settlement gain; and a $248 million gain from selling a Novartis Venture Fund investment.

        Excluding these items, core operating income from continuing operations increased 2% (+7% cc) to $14.5 billion. Core operating income margin in constant currencies increased 1.1 percentage points; currency had a negative impact of 0.8 percentage points, resulting in a net increase of 0.3 percentage points to 27.7% of net sales. Additional comments on the changes in the core operating income by division, see "—Non IFRS Measures as Defined by Novartis".

        The following table provides an overview of core operating income by segment:

	Year ended Dec 31, 2014			% of net sales		Year ended Dec 31, 2013			% of net sales		Change in $		Change in constant currencies
	$ m					$ m					%		%
Pharmaceuticals		9,514			29.9		9,523			29.6		0		4
Alcon		3,811			35.2		3,694			35.2		3		8
Sandoz		1,571			16.4		1,541			16.8		2		7
Corporate		(423	)				(551	)				23		25
Core operating income from continuing operations		14,473			27.7		14,207			27.4		2		7

Pharmaceuticals

        Operating income was $8.5 billion (–10%,–5% cc), with the decline mainly due to restructuring and other exceptional charges.

        Core operating income, which excludes certain exceptional items, was $9.5 billion (0%, +4% cc). Core operating income margin improved by 0.3 percentage points to 29.9% of net sales, despite the negative effect of 0.8 percentage points of changing currency exchange rates.

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Research and development

        Research and development for continuing operations totaled $9.1 billion, in line with the prior-year level. As shown in the following table, in the Pharmaceuticals Division, Research and Exploratory Development expenditure amounted to $2.7 billion in 2014, up by 2% from 2013, and Confirmatory Development expenditures amounted to $4.6 billion, practically unchanged from 2013.

	Year ended Dec 31, 2014			Year ended Dec 31, 2013			Change in $			Change in constant currencies
	$ m			$ m			%			%
Research and Exploratory Development		(2,724	)		(2,664	)		(2	)		(2	)
Confirmatory Development		(4,607	)		(4,578	)		(1	)		(1	)
Total Pharmaceuticals Division Research and Development expense		(7,331	)		(7,242	)		(1	)		(1	)
as % of Pharmaceuticals net sales to third parties		23.1			22.5
Core Research and Exploratory Development(1)		(2,654	)		(2,611	)		(2	)		(1	)
Core Confirmatory Development(1)		(4,343	)		(4,550	)		5			4
Total Core Pharmaceuticals Division Research and Development expense		(6,997	)		(7,161	)		2			2
as % of Pharmaceuticals net sales to third parties		22.0	%		22.2	%

⁽¹⁾

Core excludes impairments, amortization and certain exceptional items.

Alcon

        Operating income increased 30% (+43% cc) to $1.6 billion, driven by operational performance, as well as the ending in 2013 of charges related to the acquisition of Alcon.

        Core operating income, which excludes certain items, rose +3% (+8% cc) to $3.8 billion. Core operating income margin increased 0.6 percentage points in constant currencies, however that was fully offset by a 0.6 percentage point negative currency effect, resulting in a stable core margin of 35.2% of sales.

Sandoz

        Operating income increased 6% (+14% cc) to $1.1 billion. Core operating income, which excludes certain exceptional items, was $1.6 billion (+2%, +7% cc), impacted by high price erosion. Core operating income margin decreased by 0.4 percentage points to 16.4% of net sales, mainly due to a negative impact of 0.5 percentage points due to changing currency exchange rates.

Corporate Income and Expense, Net

        Corporate income and expense of continuing operations amounted to a net expense of $67 million in 2014 compared to $653 million in the prior year, mainly due to a $456 million increase in other revenues principally related to the retained Vaccines intellectual property rights, including a $302 million commercial settlement gain and a $248 million gain from the sale of a Novartis Venture Fund investment.

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Non-Operating Income and Expense

        The following table provides an overview of non-operating income and expense:

	Year ended Dec 31, 2014			Year ended Dec 31, 2013			Change in $			Change in constant currencies
	$ m			$ m			%			%
Operating income from continuing operations		11,089			10,983			1			7
Income from associated companies		1,918			599			220			221
Interest expense		(704	)		(683	)		(3	)		(6	)
Other financial income and expense		(31	)		(92	)		66			31
Income before taxes from continuing operations		12,272			10,807			14			19
Taxes		(1,545	)		(1,498	)		(3	)		(8	)
Net income from continuing operations		10,727			9,309			15			21
Net loss from discontinued operations		(447	)		(17	)		nm			nm
Net income		10,280			9,292			11			17
Basic EPS ($) from continuing operations		4.39			3.76			17			22
Basic EPS ($) from discontinued operations		(0.18	)		0.00			nm			nm
Total basic EPS ($)		4.21			3.76			12			18

        The following table provides an overview of core non-operating income and expense:

	Year ended Dec 31, 2014			Year ended Dec 31, 2013			Change in $			Change in constant currencies
	$ m			$ m			%			%
Core operating income from continuing operations		14,473			14,207			2			7
Income from associated companies		943			876			8			8
Interest expense		(704	)		(683	)		(3	)		(6	)
Other financial income and expense		(31	)		(48	)		35			31
Core income before taxes from continuing operations		14,681			14,352			2			7
Taxes		(2,028	)		(2,057	)		1			(3	)
Core net income from continuing operations		12,653			12,295			3			8
Core net income from discontinued operations		102			238			(57	)		(34	)
Core net income		12,755			12,533			2			7
Core basic EPS ($) from continuing operations		5.19			4.99			4			9
Core basic EPS ($) from discontinued operations		0.04			0.10			nm			nm
Core basic EPS ($)		5.23			5.09			3			8

nm = not meaningful

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Income from associated companies

        Income from associated companies from continuing operations amounted to $1.9 billion in 2014, compared to $599 million in 2013. The increase was mainly due to the gains recognized on the sale of shares of LTS Lohmann Therapie-Systeme AG, Germany, (LTS) and on the sale of the shares of Idenix Pharmaceuticals, Inc., US, (Idenix) which amounted to $421 million and $812 million, respectively. An additional income of $64 million was recorded on investments in associated companies held by the Novartis Venture Funds, which have been accounted at fair value from January 1, 2014 onwards, consistent with other investments held by these Funds, instead of using the equity method of accounting. The contribution from the investment in Roche of $599 million was approximately in line with the prior-year level.

        Core income from associated companies from continuing operations increased to $943 million from $876 million in the prior-year period.

Interest Expense and other financial income and expense

        Interest expense from continuing operations increased slightly to $704 million from $683 million in the prior year. Other financial income and expense amounted to a net expense of $31 million, compared to $92 million in 2013, mainly as a result of hedging gains.

Taxes

        The tax rate for continuing operations in the full year of 2014 decreased to 12.6% from 13.9% in the prior year, mainly due to the impact of taxes on the various exceptional gains which occurred during the year.

        The core tax rate from continuing operations decreased slightly to 13.8% from 14.3% in 2013.

Net Income

        Net income from continuing operations of $10.7 billion was up 15% (+21% cc), growing ahead of operating income mainly due to higher income from associated companies, which included a gain of $0.8 billion from the sale of the shares of Idenix to Merck & Co., and a gain of $0.4 billion from the divestment of the shareholding in LTS, partly offset by an increase in tax expense.

        Core net income from continuing operations of $12.7 billion was up 3% (+8% cc), growing slightly ahead of core operating income (2%, 7% cc).

EPS

        Earnings per share (EPS) from continuing operations was $4.39 per share, up 17% (+22% cc), growing ahead of net income due to lower average outstanding shares and lower minority interests.

        Core EPS from continuing operations was $5.19 (+4%, +9% cc), growing ahead of core net income due to lower average outstanding shares and lower minority interests.

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Discontinued Operations

	Year ended Dec 31, 2014			Year ended Dec 31, 2013
	$ m			$ m
Net sales to third parties from discontinued operations		5,816			6,051
Operating loss from discontinued operations		(353	)		(73	)
Net loss from discontinued operations		(447	)		(17	)
Attributable to:
Shareholders of Novartis AG		(444	)		(14	)
Non-controlling interests		(3	)		(3	)
Basic earnings per share ($) from discontinued operations		(0.18	)		0
Free cash flow from discontinued operations		(172	)		424

        Net sales to third parties of the discontinued operations in 2014 declined –4% (–1% in cc) to $5.8 billion from $6.1 billion in 2013.

        Operating loss from discontinued operations amounted to $353 million in 2014 compared to $73 million in 2013. The operating loss of $353 million in 2014 included an exceptional impairment charge of $1.1 billion for the influenza vaccines business which was partially offset by an exceptional pre-tax gain of $0.9 billion from the divestment of our blood transfusion diagnostics unit.

        Net loss from discontinued operations amounted to $447 million in 2014 compared to a net loss $17 million in 2013.

Total Group

        For the total Group, net income amounted to $10.3 billion compared to $9.3 billion in 2013., impacted by the exceptional divestment gains included in the net income. Basic earnings per share increased to $4.21 from $3.76.

FACTORS AFFECTING COMPARABILITY OF YEAR-ON-YEAR RESULTS OF OPERATIONS

Significant transactions in 2015

        The comparability of the year-on-year results of our operations for the total Group can be significantly affected by acquisitions and divestments. The transactions of significance during 2015 and 2014 are mentioned below.

Acquisitions and Divestments in 2015

PORTFOLIO TRANSFORMATION TRANSACTIONS

Transaction with Eli Lilly and Company

        On January 1, 2015, Novartis closed its transaction with Eli Lilly and Company, USA (Lilly) announced in April 2014 to divest its Animal Health business for $5.4 billion in cash. This resulted in a pre-tax gain of $4.6 billion which is recorded in operating income from discontinued operations.

140

Transactions with GlaxoSmithKline plc

        On March 2, 2015, Novartis closed its transactions with GlaxoSmithKline plc, Great Britain (GSK) announced in April 2014 with the following consequences:

Pharmaceuticals—Acquisition of GSK oncology products

        Novartis acquired GSK's oncology products and certain related assets for an aggregate cash consideration of $16.0 billion. Up to $1.5 billion of this cash consideration at the acquisition date is contingent on certain development milestones. The fair value of this potentially refundable consideration is $0.1 billion. In addition, under the terms of the agreement, Novartis is granted a right of first negotiation over the co-development or commercialization of GSK's current and future oncology R&D pipeline, excluding oncology vaccines. The right of first negotiation is for a period of 12.5 years from the acquisition closing date. The purchase price allocation of the fair value of the consideration of $15.9 billion resulted in net identified assets of $13.5 billion and goodwill of $2.4 billion. Since the acquisition the business generated net sales of $1.8 billion. Management estimates net sales for the entire year 2015 would have amounted to $2.1 billion had the Oncology products been acquired at the beginning of the 2015 reporting period. The net results from operations on a reported basis since the acquisition date were not significant, mainly due to amortization of intangible assets.

Vaccines—Divestment

        Novartis has divested its Vaccines business (excluding its Vaccines influenza business) to GSK for up to $7.1 billion, plus royalties. The $7.1 billion consists of $5.25 billion paid at closing and up to $1.8 billion in future milestone payments. The fair value of the contingent future milestones and royalties is $1.0 billion, resulting in a fair value of consideration received of $6.25 billion. Included in this amount is a $450 million milestone payment received in late March 2015. The sale of this business resulted in a pre-tax gain of $2.8 billion which is recorded in operating income from discontinued operations.

        Novartis's Vaccines influenza business is excluded from the GSK Vaccines business acquisition. However, GSK entered into a future option arrangement with Novartis in relation to the Vaccines influenza business, pursuant to which Novartis could have unilaterally required GSK to acquire the entire or certain parts of its Vaccines influenza business for consideration of up to $250 million (the Influenza Put Option) if the divestment to CSL Limited, Australia (CSL), discussed below, had not been completed. The option period was 18 months from the closing date of the GSK transaction, but terminated with the sale of the Vaccines influenza business to CSL on July 31, 2015. Novartis paid GSK a fee of $5 million in consideration for the grant of the Influenza Put Option.

Consumer Health—Combination of Novartis OTC with GSK Consumer Healthcare in a joint venture

        Novartis and GSK agreed to create a combined consumer healthcare business through a joint venture between Novartis OTC and GSK Consumer Healthcare. On March 2, 2015, a new entity was formed via contribution of businesses from both Novartis and GSK. Novartis has a 36.5% interest in the newly created entity. Novartis has valued the contribution of 63.5% of its OTC Division in exchange for 36.5% of the GSK Consumer Healthcare business at fair value.

        Based on the estimates of the fair values exchanged, an investment in an associated company of $7.6 billion was recorded. The resulting pre-tax gain, net of transaction-related costs, of $5.9 billion is recorded in operating income from discontinued operations.

        Novartis has four of eleven seats on the joint venture entity's Board of Directors. Furthermore, Novartis has customary minority rights and also exit rights at a pre-defined, market-based pricing mechanism.

141

        The investment is accounted for using the equity method of accounting using estimated results for the last quarter of the year. Any differences between this estimate and actual results, when available, will be adjusted in the Group's 2016 consolidated financial statements.

Additional GSK related cost

        The GSK transaction resulted in $0.6 billion of additional transaction-related costs that were expensed.

Transaction with CSL

        On October 26, 2014, Novartis entered into an agreement with CSL to sell its Vaccines influenza business to CSL for $275 million. Entering into the separate divestment agreement with CSL resulted in the Vaccines influenza business being classified as a separate disposal group consisting of a group of cash generating units within the Vaccines Division, requiring the performance of a separate valuation of the Vaccines influenza business net assets. This triggered the recognition of an exceptional impairment charge in 2014 of $1.1 billion, as the estimated net book value of the Vaccines influenza business net assets was above the $275 million consideration.

        The transaction with CSL was completed on July 31, 2015, resulting in a partial reversal of the impairment recorded in 2014 in the amount of $0.1 billion, which is included in operating income from discontinued operations.

Other significant Transactions in 2015

Pharmaceuticals—Acquisition of Spinifex Pharmaceuticals, Inc.

        On June 29, 2015 Novartis entered into an agreement to acquire Spinifex Pharmaceuticals, Inc. (Spinifex), a US and Australian-based, privately held development stage company, focused on developing a peripheral approach to treat neuropathic pain. The transaction closed on July 24, 2015, and the total purchase consideration was $312 million. The amount consisted of an initial cash payment of $196 million and the net present value of the contingent consideration of $116 million due to previous Spinifex shareholders, which they are eligible to receive upon achievement of specified development and commercialization milestones. The purchase price allocation resulted in net identifiable assets of $263 million and goodwill of $49 million. Results of operations since the date of acquisition were not material.

Pharmaceuticals—Acquisition Admune Therapeutics LLC.

        On October 16, 2015, Novartis acquired Admune Therapeutics LLC (Admune), a US-based, privately held company, broadening Novartis' pipeline of cancer immunotherapies. The total purchase consideration amounted to $258 million. This amount consists of an initial cash payment of $140 million and the net present value of the contingent consideration of $118 million due to Admune's previous owners, which they are eligible to receive upon the achievement of specified development and commercialization milestones. The purchase price allocation resulted in net identifiable assets of $258 million. No goodwill was recognized. Results of operations since the date of acquisition were not material.

Acquisitions and Divestments in 2014

Vaccines—Divestment of blood transfusion diagnostics unit

        On January 9, 2014, Novartis completed the divestment of its blood transfusion diagnostics unit to the Spanish company Grifols S.A. for $1.7 billion in cash. The pre-tax gain on this transaction was approximately $0.9 billion and was recorded in operating income from discontinued operations.

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Pharmaceuticals—Acquisition of CoStim Pharmaceuticals, Inc.

        On February 17, 2014, Novartis acquired all of the outstanding shares of CoStim Pharmaceuticals Inc., a Cambridge, Massachusetts, US-based, privately held biotechnology company focused on harnessing the immune system to eliminate immune-blocking signals from cancer, for a total purchase consideration of $248 million (excluding cash acquired). This amount consists of an initial cash payment and the net present value of contingent consideration of $153 million due to previous CoStim shareholders, which they are eligible to receive upon the achievement of specified development and commercialization milestones. The purchase price allocation resulted in net identified assets of $152 million (excluding cash acquired) and goodwill of $96 million. Results of operations since the date of acquisition were not material.

Pharmaceuticals—Divestment of Idenix Pharmaceuticals, Inc. (Idenix) Shareholding

        On August 5, 2014, Merck & Co., USA completed a tender offer for Idenix. As a result, Novartis divested its 22% shareholding in Idenix and realized a gain of approximately $0.8 billion which was recorded in income from associated companies.

Alcon—Acquisition of WaveTec Vision Systems, Inc. (WaveTec)

        On October 16, 2014, Alcon acquired all of the outstanding shares of WaveTec, a privately held company, for $350 million in cash. The purchase price allocation resulted in net identified assets of $180 million and goodwill of $170 million. Results of operations since the date of acquisition were not material.

Corporate—Divestment of LTS Lohmann Therapie-Systeme AG (LTS) Shareholding

        On November 5, 2014, Novartis divested its 43% shareholding in LTS and realized a gain of approximately $0.4 billion which was recorded in income from associated companies.

Classification as continuing operations and discontinued operations

        Following the April 22, 2014 announcement of the portfolio transformation transactions with Lilly and GSK, as described above, Novartis reported the Group's financial statements for the current and prior years as "continuing operations" and "discontinued operations".

Continuing operations comprise the activities of the Pharmaceuticals, Alcon and Sandoz Divisions and the continuing Corporate activities. Continuing operations also include the results from Oncology assets acquired from GSK and the estimated results from the 36.5% interest in the GSK/Novartis consumer healthcare joint venture for the period from March 2, 2015 to December 31, 2015 (the latter reported as part of income from associated companies).

Discontinued operations include in 2015 the operational results from the Vaccines influenza business, prior to its divestment to CSL Limited on July 31, 2015, as well as results from the Vaccines non-influenza business and OTC business until March 2, 2015. Operational results from the Animal Health business, which was divested on January 1, 2015, include only the divestment gain.

        Discontinued operations in 2015 also include the exceptional pre-tax gain of $12.7 billion from the divestment of Animal Health ($4.6 billion) and the transactions with GSK ($2.8 billion for the Vaccines non-influenza business and $5.9 billion arising from the contribution of Novartis OTC into the GSK Consumer Healthcare joint venture). In addition the GSK transactions resulted in $0.6 billion of additional transaction-related expenses reported in Corporate discontinued operations.

        In 2014, discontinued operations include the results of the Vaccines influenza and non-influenza business, OTC and Animal Health for the full year. Results also included an exceptional impairment

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charge of $1.1 billion for the Vaccines influenza business, which was reduced by $0.1 billion in 2015 upon closing of the CSL transaction and an exceptional pre-tax gain of $0.9 billion arising from the $1.7 billion divestment of the blood transfusion diagnostics unit to Grifols S.A., completed on January 9, 2014.

        Excluded from discontinued operations are certain intellectual property rights and related other revenues of the Vaccines Division, which are retained by Novartis and are now reported under Corporate activities.

        As required by IFRS, results of the discontinued operations exclude any further depreciation and amortization related to discontinued operations from the date of the portfolio transformation announcement of April 22, 2014.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        Our significant accounting policies are set out in "Item 18. Financial Statements—Note 1", which are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

        Given the uncertainties inherent in our business activities, we must make certain estimates and assumptions that require difficult, subjective and complex judgments. Because of uncertainties inherent in such judgments, actual outcomes and results may differ from our assumptions and estimates, which could materially affect the Group's consolidated financial statements. Application of the following accounting policies requires certain assumptions and estimates that have the potential for the most significant impact on our consolidated financial statements.

Deductions from Revenues

        As is typical in the pharmaceuticals industry, our gross sales are subject to various deductions which are composed primarily of rebates and discounts to retail customers, government agencies, wholesalers, health insurance companies and managed healthcare organizations. These deductions represent estimates of the related obligations, requiring the use of judgment when estimating the effect of these sales deductions on gross sales for a reporting period. These adjustments are deducted from gross sales to arrive at net sales.

        The following summarizes the nature of some of these deductions and how the deduction is estimated. After recording these, net sales represent our best estimate of the cash that we expect to ultimately collect. The US market has the most complex arrangements related to revenue deductions.

United States specific healthcare plans and program rebates

        The United States Medicaid Drug Rebate Program is administered by State governments using State and Federal funds to provide assistance to certain vulnerable and needy individuals and families. Calculating the rebates to be paid related to this Program involves interpreting relevant regulations, which are subject to challenge or change in interpretative guidance by government authorities. Provisions for estimating Medicaid rebates are calculated using a combination of historical experience, product and population growth, product price increases and the mix of contracts and specific terms in the individual State agreements. These provisions are adjusted based on established processes and experiences from filing data with individual States.

        The United States Federal Medicare Program, which funds healthcare benefits to individuals age 65 or older, provides prescription drug benefits under Part D of the program. This benefit is provided through private prescription drug plans. Provisions for estimating Medicare Part D rebates are calculated based on the terms of individual plan agreements, product sales and population growth, product price increases and the mix of contracts, and are adjusted periodically.

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        We offer rebates to key managed healthcare plans in an effort to sustain and increase sales of our products. These rebate programs provide payors a rebate after they have demonstrated they have met all terms and conditions set forth in their contract with us. These rebates are estimated based on the terms of individual agreements, historical experience and projected product growth rates. We adjust provisions related to these rebates periodically to reflect actual experience.

        There is often a time lag of several months between us recording the revenue deductions and our final accounting for them.

Non-United States specific healthcare plans and program rebates

        In certain countries other than the US, we provide rebates to governments and other entities. These rebates are often mandated by laws or government regulations.

        In several countries we enter into innovative pay-for-performance arrangements with certain healthcare providers, especially in Europe and Australia. Under these agreements, we may be required to make refunds to the healthcare providers or to provide additional medicines free of charge if anticipated treatment outcomes do not meet predefined targets. Potential refunds and the delivery of additional medicines at no cost are estimated and recorded as a deduction of revenue at the time the related revenues are recorded. Estimates are based on historical experience and clinical data. In cases where historical experience and clinical data are not sufficient for a reliable estimation of the outcome, revenue recognition would be deferred until such history would be available. In addition, we offer global patient assistant programs.

        There is often a time lag of several months between us recording the revenue deductions and our final accounting for them.

Non-healthcare plans and program rebates, returns and other deductions

        Charge-backs occur where our subsidiaries have arrangements with indirect customers to sell products at prices that are lower than the price charged to wholesalers. A charge-back represents the difference between the invoice price to the wholesaler and the indirect customer's contract price. We account for vendor charge-backs by reducing revenue by an amount equal to our estimate of charge-backs attributable to a sale and they are generally settled within one to three months of incurring the liability. Provisions for estimated charge-backs are calculated using a combination of factors such as historical experience, product growth rates, payments, level of inventory in the distribution channel, the terms of individual agreements and our estimate of the claims processing time lag.

        We offer rebates to purchasing organizations and other direct and indirect customers to sustain and increase market share for our products. Since rebates are contractually agreed upon, rebates are estimated based on the terms of the individual agreements, historical experience, and projected product growth rates.

        When we sell a product providing a customer the right to return it, we record a provision for estimated sales returns based on our sales returns policy and historical rates. Other factors considered include actual product recalls, expected marketplace changes, the remaining shelf life of the product, and the expected entry of generic products. In 2015, sales returns amounted to approximately 1% of gross product sales. If sufficient experience is not available, sales are only recorded based on evidence of product consumption or when the right of return has expired.

        We enter into distribution service agreements with major wholesalers, which provide a financial disincentive for the wholesalers to purchase product quantities in excess of current customer demand. Where possible, we adjust shipping patterns for our products to maintain wholesalers' inventories level consistent with underlying patient demand.

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        We offer cash discounts to customers to encourage prompt payment. Cash discounts are estimated and accrued at the time of invoicing and deducted from revenue.

        Following a decrease in the price of a product, we generally grant customers a "shelf stock adjustment" for a customer's existing inventory for the relevant product. Provisions for shelf stock adjustments, which are primarily relevant within the Sandoz Division, are determined at the time of the price decline or at the point of sale, if the impact of a price decline on the products sold can be reasonably estimated based on the customer's inventory levels of the relevant product.

        Other sales discounts, such as consumer coupons and co-pay discount cards, are offered in some markets. The estimated amount of these discounts are recorded at the time of sale, or when the coupon is issued, and are estimated utilizing historical experience and the specific terms for each program. If a discount for a probable future transaction is offered as part of a sales transaction then an appropriate portion of revenue is deferred to cover this estimated obligation.

        We adjust provisions for revenue deductions periodically to reflect actual experience. To evaluate the adequacy of provision balances, we use internal and external estimates of the level of inventory in the distribution channel, actual claims data received and the time lag for processing rebate claims. Management also estimates the level of inventory of the relevant product held by retailers and in transit. External data sources include reports of wholesalers and third-party market data purchased by Novartis.

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        The following table shows the worldwide extent of our revenue deductions provisions and related payment experiences for the Pharmaceuticals, Alcon and Sandoz divisions:

PROVISIONS FOR REVENUE DEDUCTIONS

									Income statement charge
			Effect of currency translation and business combinations											Change in provisions offset against gross trade receivables
	Revenue deductions provisions at January 1																Revenue deductions provisions at December 31
						Payments/ utilizations			Adjustments of prior years			Current year
	$ m		$ m			$ m			$ m			$ m		$ m			$ m
2015
US-specific healthcare plans and program rebates		1,097					(2,823	)		(90	)		2,981					1,165
Non-US-specific healthcare plans and program rebates		1,015		(109	)		(1,716	)		(3	)		1,846		(9	)		1,024
Non-healthcare plans and program-related rebates, returns and other deductions		1,421		(69	)		(10,679	)		(124	)		10,993		59			1,601
Total continuing operations 2015		3,533		(178	)		(15,218	)		(217	)		15,820		50			3,790
2014
US-specific healthcare plans and program rebates		1,376					(3,118	)		(186	)		3,025					1,097
Non-US-specific healthcare plans and program rebates		1,145		(124	)		(1,743	)		(19	)		1,787		(31	)		1,015
Non-healthcare plans and program-related rebates, returns and other deductions		1,427		(83	)		(9,046	)		(52	)		9,564		(389	)		1,421
Total continuing operations 2014		3,948		(207	)		(13,907	)		(257	)		14,376		(420	)		3,533
2013
US-specific healthcare plans and program rebates		1,434					(2,990	)		(74	)		3,006					1,376
Non-US-specific healthcare plans and program rebates		942		10			(1,634	)		(45	)		1,935		(63	)		1,145
Non-healthcare plans and program-related rebates, returns and other deductions		1,444		(10	)		(7,745	)		(34	)		7,934		(162	)		1,427
Total continuing operations 2013		3,820		0			(12,369	)		(153	)		12,875		(225	)		3,948

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        The table below shows the gross to net sales reconciliation for our Pharmaceuticals Division:

GROSS TO NET SALES RECONCILIATION

	Income statement charge
	Charged through revenue deduction provisions			Charged directly without being recorded in revenue deduction provisions			Total			In % of gross sales
	$ m			$ m			$ m
2015
Pharmaceuticals gross sales subject to deductions								37,853			100.0
US-specific healthcare plans and program rebates		(1,422	)					(1,422	)		(3.8	)
Non-US-specific healthcare plans and program rebates		(1,150	)		(779	)		(1,929	)		(5.1	)
Non-healthcare plans and program-related rebates, returns and other deductions		(2,241	)		(1,816	)		(4,057	)		(10.7	)
Total Pharmaceuticals gross to net sales adjustments		(4,813	)		(2,595	)		(7,408	)		(19.6	)
Pharmaceuticals net sales 2015								30,445			80.4
2014
Pharmaceuticals gross sales subject to deductions								39,529			100.0
US-specific healthcare plans and program rebates		(1,800	)					(1,800	)		(4.6	)
Non-US-specific healthcare plans and program rebates		(1,200	)		(877	)		(2,077	)		(5.3	)
Non-healthcare plans and program-related rebates, returns and other deductions		(1,873	)		(1,989	)		(3,862	)		(9.8	)
Total Pharmaceuticals gross to net sales adjustments		(4,873	)		(2,866	)		(7,739	)		(19.6	)
Pharmaceuticals net sales 2014								31,790			80.4
2013
Pharmaceuticals gross sales subject to deductions								40,188			100.0
US-specific healthcare plans and program rebates		(2,125	)					(2,125	)		(5.3	)
Non-US-specific healthcare plans and program rebates		(1,368	)		(802	)		(2,170	)		(5.4	)
Non-healthcare plans and program-related rebates, returns and other deductions		(1,731	)		(1,948	)		(3,679	)		(9.2	)
Total Pharmaceuticals gross to net sales adjustments		(5,224	)		(2,750	)		(7,974	)		(19.8	)
Pharmaceuticals net sales 2013								32,214			80.2

Impairment of Goodwill, Intangible Assets and Property, Plant and Equipment

        We review long-lived intangible assets and property, plant and equipment for impairment whenever events or changes in circumstance indicate that the asset's balance sheet carrying amount may not be recoverable. Goodwill, the Alcon brand-name and other currently not amortized intangible assets are reviewed for impairment at least annually.

        An asset is generally considered impaired when its balance sheet carrying amount exceeds its estimated recoverable amount, which is defined as the higher of its fair value less costs of disposal and its value in use. Usually, Novartis adopts the fair value less costs of disposal method for its impairment evaluation. In most cases no directly observable market inputs are available to measure the fair value less

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costs of disposal. Therefore an estimate of fair value less costs of disposal is derived indirectly and is based on net present value techniques utilizing post-tax cash flows and discount rates. In the limited cases where the value in use method is applied, net present value techniques are utilized using pre-tax cash flows and discount rates.

        Fair value reflects estimates of assumptions that market participants would be expected to use when pricing the asset and for this purpose management considers the range of economic conditions that are expected to exist over the remaining useful life of the asset. The estimates used in calculating net present values are highly sensitive, and depend on assumptions specific to the nature of the Group's activities with regard to:

–

amount and timing of projected future cash flows;

–

future tax rates;

–

behavior of competitors (launch of competing products, marketing initiatives, etc.); and

–

appropriate discount rate.

        Due to the above factors and those further described in "Item 18. Financial Statements—Note 1", actual cash flows and values could vary significantly from forecasted future cash flows and related values derived using discounting techniques.

        The recoverable amount of cash-generating units and related goodwill is usually based on the fair value less costs of disposal derived from applying discounted future cash flows based on the key assumptions in the following table:

	Pharmaceuticals		Alcon		Sandoz
	%		%		%
Cash flows growth rate assumptions after forecast period		1		3		0 to 2
Discount rate (post-tax)		6		6		6

        In 2015, intangible asset impairment charges for continuing operations of $206 million were recognized, of which $120 million were recorded in the Alcon Division and $86 million in total in the Pharmaceuticals and Sandoz divisions.

        In 2014, intangible asset impairment charges of continuing operations amounted to $347 million ($302 million in the Pharmaceuticals Division and $45 million in total in the Sandoz and Alcon divisions).

        In 2015, the reversal of impairment charges recorded in prior years amounted to $40 million (2014: $70 million).

        Goodwill and other intangible assets represent a significant part of our consolidated balance sheet, primarily due to acquisitions. Although no significant additional impairments are currently anticipated, impairment evaluation could lead to material impairment charges in the future. For more information, see "Item 18. Financial Statements—Note 11".

        Additionally, net impairment charges for property, plant and equipment from continuing operations during 2015 amounted to $68 million (2014: $44 million).

Trade Receivables

        Trade receivables are initially recognized at their invoiced amounts including any related sales taxes less adjustments for estimated revenue deductions such as rebates, charge backs and cash discounts.

        Provisions for doubtful trade receivables are established once there is an indication that it is likely that a loss will be incurred. These provisions represent the difference between the trade receivable's

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carrying amount in the consolidated balance sheet and the estimated net collectible amount. Significant financial difficulties of a customer, such as probability of bankruptcy, financial reorganization, default or delinquency in payments are considered indicators that recovery of the trade receivable is doubtful. Trade receivable balances include sales to drug wholesalers, retailers, private health systems, government agencies, managed care providers, pharmacy benefit managers and government-supported healthcare systems. Novartis continues to monitor sovereign debt issues and economic conditions in Greece, Italy, Portugal, Spain and other countries, and evaluates trade receivables in these countries for potential collection risks. Substantially all of the trade receivables overdue from such countries are due directly from local governments or from government-funded entities. Deteriorating credit and economic conditions and other factors in these countries have resulted in, and may continue to result in an increase in the average length of time that it takes to collect these trade receivables and may require Novartis to re-evaluate the collectability of these trade receivables in future periods.

Contingent Consideration

        In a business combination or divestment of a business, it is necessary to recognize contingent future payments to previous or from new owners representing contractually defined potential amounts as a liability or asset. Usually for Novartis these are linked to milestone or royalty payments related to certain assets and are recognized as a financial liability or asset at their fair value which is then re-measured at each subsequent reporting date. These estimations typically depend on factors such as technical milestones or market performance and are adjusted for the probability of their likelihood of payment and if material, appropriately discounted to reflect the impact of time. Changes in the fair value of contingent liabilities in subsequent periods are recognized in the consolidated income statement in "Cost of goods sold" for currently marketed products and in "Research & Development" for IPR&D. Changes in contingent assets are recognized in "Other income and expense". The effect of unwinding the discount over time is recognized in "Interest expense" in the consolidated income statement. Novartis does not recognize contingent consideration associated with asset purchases outside of a business combination that are conditional upon future events which are within its control until such time as there is an unconditional obligation. If the contingent consideration is outside the control of Novartis, a liability is recognized once it becomes probable that the contingent consideration will become due. In both cases, if appropriate, a corresponding asset is recorded.

Impairment of Associated Companies Accounted for at Equity

        Novartis considers investments in associated companies for impairment evaluation whenever there is a quoted share price indicating a fair value less than the per-share balance sheet carrying value for the investment. For unquoted investments in associated companies, recent financial information is taken into account to assess whether an impairment evaluation is necessary.

        If the recoverable amount of the investment is estimated to be lower than the balance sheet carrying amount an impairment charge is recognized for the difference in the consolidated income statement under "Income from associated companies".

Retirement and Other Post-Employment Benefit Plans

        We sponsor pension and other post-employment benefit plans in various forms that cover a significant portion of our current and former associates. For post-employment plans with defined benefit obligations, we are required to make significant assumptions and estimates about future events in calculating the expense and the present value of the liability related to these plans. These include assumptions about the interest rates we apply to estimate future defined benefit obligations and net periodic pension expense as well as rates of future pension increases. In addition, our actuarial consultants provide our management with historical statistical information such as withdrawal and mortality rates in connection with these estimates.

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        Assumptions and estimates used by the Group may differ materially from the actual results we experience due to changing market and economic conditions, higher or lower withdrawal rates, and longer or shorter life spans of participants among other factors. For example, in 2015, a decrease in the interest rate we apply in determining the present value of the defined benefit obligations of one quarter of one percent would have increased our year-end defined benefit pension obligation for plans in Switzerland, US, UK, Germany and Japan, which represent 95% of the Group total defined benefit pension obligation, by approximately $0.8 billion. Similarly, if the 2015 interest rate had been one quarter of one percentage point lower than actually assumed, net periodic pension cost for pension plans in these countries, which represent about 88% of the Group's total net periodic pension cost for pension plans, would have increased by approximately $22 million. Depending on events, such differences could have a material effect on our total equity. For more information on obligations under retirement and other post-employment benefit plans and underlying actuarial assumptions, see "Item 18. Financial Statements—Note 25".

Contingencies

        A number of Group companies are involved in various government investigations and legal proceedings (intellectual property, sales and marketing practices, product liability, commercial, employment and wrongful discharge, environmental claims, etc.) arising out of the normal conduct of their businesses. For more information, see "Item 18. Financial Statements—Note 20".

        We record accruals for contingencies when it is probable that a liability has been incurred and the amount can be reliably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. For significant product liability cases the accrual is actuarially determined based on factors such as past experience, amount and number of claims reported, and estimates of claims incurred but not yet reported. Expected legal defense costs are accrued when the amount can be reliably estimated.

        In some instances, the inherent uncertainty of litigation, the resources required to defend against governmental actions, the potential impact on our reputation, and the potential for exclusion from government reimbursement programs in the US and other countries have contributed to decisions by Novartis and other companies in our industry to enter into settlement agreements with governmental authorities in the absence of an acknowledgement of legal liability. These settlements have had in the past, and may continue in the future, to involve large cash payments, including potential repayment of amounts that were allegedly improperly obtained and other penalties including treble damages. In addition, settlements of governmental healthcare fraud cases often require companies to enter into corporate integrity agreements, which are intended to regulate company behavior for a period of years. Our affiliate Novartis Pharmaceuticals Corporation is a party to such an agreement, which will expire in 2020. Also, matters underlying governmental investigations and settlements may be the subject of separate private litigation.

        Provisions are recorded for environmental remediation costs when expenditure on remedial work is probable and the cost can be reliably estimated. Remediation costs are provided for under "Non-current liabilities" in the Group's consolidated balance sheet.

        Provisions relating to estimated future expenditure for liabilities do not usually reflect any insurance or other claims or recoveries, since these are only recognized as assets when the amount is reasonably estimable and collection is virtually certain.

Research & Development

        Internal Research & Development costs are fully charged to the consolidated income statement in the period in which they are incurred. We consider that regulatory and other uncertainties inherent in the development of new products preclude the capitalization of internal development expenses as an

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intangible asset usually until marketing approval from the regulatory authority is obtained in a relevant major market, such as for the US, the EU, Switzerland or Japan.

Healthcare Contributions

        In many countries our subsidiaries are required to make contributions to the countries' healthcare costs as part of programs other than the ones mentioned above under deductions from revenues. The amounts to be paid depend on various criteria such as the subsidiary's market share or sales volume compared to certain targets. Considerable judgment is required in estimating these contributions as not all data is available when the estimates need to be made.

        The largest of these healthcare contributions relates to the US Healthcare Reform fee, which was introduced in 2011. This fee is an annual levy to be paid by US pharmaceutical companies, including various Novartis subsidiaries, based on each company's qualifying sales as a percentage of the prior year's government-funded program sales. This pharmaceutical fee levy is recognized in "Other expense".

        On July 25, 2014, the US Department of the Treasury and the US Internal Revenue Service issued final guidance on this pharmaceutical fee levy which stipulated that instead of a liability being estimated and recognized immediately with the first qualifying sale in the following fee year, as had been industry practice, the levy is owed in the year in which the sales occur.

        As a result of this final guidance, in 2014, "Other expense" includes the recurring non-tax deductible annual expense of approximately $200 million for the 2014 pharmaceutical fee levy, as well as the non-tax deductible expense of $204 million for the 2013 pharmaceutical fee levy. $204 million of this charge has been considered as an additional exceptional charge in 2014 since it results from the change in timing of recognition of the pharmaceutical fee levy as required by the final guidance.

        In addition, effective 2013, the US government also implemented a medical device sales tax which is levied on the Alcon Division's US sales of products which are considered surgical devices under the law. This medical device tax is initially included in the cost of inventory as, for Alcon, the tax is usually levied on intercompany sales. It is expensed as cost of goods sold when the inventory is sold to third parties.

Taxes

        We prepare and file our tax returns based on an interpretation of tax laws and regulations, and record estimates based on these judgments and interpretations. Our tax returns are subject to examination by the competent taxing authorities, which may result in an assessment being made requiring payments of additional tax, interest or penalties. Inherent uncertainties exist in our estimates of our tax positions. We believe that our estimated amounts for current and deferred tax assets or liabilities, including any amounts related to any uncertain tax positions, are appropriate based on currently known facts and circumstances.

New Accounting Pronouncements

        See "Item 18. Financial Statements—Note 1".

Internal Control Over Financial Reporting

        The Group's management has assessed the effectiveness of internal control over financial reporting. The Group's independent statutory auditor also issued an opinion on the effectiveness of internal control over financial reporting. Both the Group's management and its external auditors concluded that the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015.

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FACTORS AFFECTING RESULTS OF OPERATIONS

        Long-term demographic trends and changing lifestyles are driving increased demand for healthcare around the world, while advances in science and technology are opening new frontiers in patient treatments. In the coming years, these trends are expected to drive steady growth overall in the healthcare market and accelerate growth in key segments of our business. At the same time, the current business and regulatory environment poses significant risks and potential impediments to our growth and to the growth of the healthcare industry.

Transformational Changes Fueling Demand

Aging population and shifting behaviors

        Scientific advances and increased access to healthcare are contributing to a rise in life expectancy, increasing the proportion of elderly people worldwide. According to United Nations projections, the number of people over the age of 60 is expected to rise by 500 million, reaching 1.4 billion, by 2030.

        The aging of the world's population has contributed to an increase in chronic illnesses that are prevalent among the elderly, such as cancer, heart disease, respiratory ailments, diabetes and eye disease. A global shift toward more sedentary lifestyles is also increasing demand for healthcare. In the last 20 years, obesity rates have doubled among adults and tripled among children.

        Novartis has developed new treatments to address some of these growing health threats and we plan to continue research and development activities in these areas.

        In 2015, for example, Novartis received approval from the US Food and Drug Administration (FDA) and the European Commission for Entresto in chronic heart failure with reduced ejection fraction, which affects more than two million people in the United States and more than five million people in Europe. Regulatory decisions were based on the PARADIGM-HF study, which showed a 20% reduction in cardiovascular deaths versus an ACE inhibitor, the current standard of care in heart failure.

Global rise in healthcare spending

        Increased demand for healthcare around the world has translated into rising healthcare costs. If growth in healthcare spending were to continue at the current pace, global outlays could more than double by 2025 to $15 trillion. At the same time, economic uncertainty and tight budgets are prompting many governments, healthcare insurers and consumers to look for ways to moderate spending.

        In the context of these trends, we believe that our portfolio spanning pharmaceuticals, generics and eye care, is well-positioned to meet the evolving needs of patients and healthcare systems. For example, the use of generic medicines and biosimilars helps reduce healthcare costs and free up resources for new innovative medicines. Indeed, the global biosimilars market is expected to reach $35 billion by 2020 from an estimated $1.3 billion in 2013, according to a report by Allied Market Research. Our Sandoz Division is a global leader in biosimilars, with three products on the market in Europe and ten major filings (including etanercept and pegfilgrastim, which were submitted in 2015) planned in the next three years. In 2015, Sandoz became the first company to win approval for a biosimilar in the United States under the pathway created by the Biologics Price Competition and Innovation Act.

Scientific advances opening new opportunities

        As scientific research has become more sophisticated, we have developed a better understanding of the genetic basis of diseases. This has given rise to a new generation of innovative therapies that could more effectively target the underlying causes of disease.

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        For example, our investigational therapy CTL019 works by reprogramming a patient's own T-cells to hunt cancer cells that express specific proteins. After they have been reprogrammed, the T cells are re-introduced into the patient's blood; they proliferate and bind to the targeted cancer cells and destroy them.

        Therapies like these have the potential to transform the treatment of disease. We believe that our ability to leverage scientific advances to generate innovative new treatments will enable us to create value over the long-term for society, patients and shareholders.

Convergence of healthcare and technology

        From molecular diagnostics to clinical trial recruitment to real world data and analytics, technology continues to play an increasingly important role in the pharmaceutical industry. This is attracting new entrants to the sector. For instance, venture funding grew 200% for digital health companies between 2012 and 2014. Established technology companies such as Google are also using their expertise to expand into healthcare.

        While new entrants may shift the competitive landscape, the growing role of technology in healthcare presents an opportunity to pharmaceutical companies like Novartis. Google, for example, is collaborating with our Alcon Division to develop an accommodating contact or intraocular lens for people living with presbyopia. Through the collaboration, we are marrying Google's expertise in miniaturized electronics and microfabrication with Alcon's expertise in the physiology of the eye, as well as clinical development and commercialization of contact and intraocular lenses, to advance a product that has the potential to make reading glasses obsolete.

        We also formed a joint investment company with Qualcomm Ventures to support early stage companies with technologies, products or services that "go beyond the pill" to benefit physicians and patients. We recognize the potential of technology to enhance our ability to deliver the right medicine to the right patient at the right time, and seek to partner with experts in emerging technologies to build our expertise in these areas.

Increasingly Challenging Business Environment

Patent expirations and product competition

        It is common for pharmaceutical companies to face generic erosion when their products lose patent or other intellectual property protection, and Novartis is no exception. The products of our Pharmaceuticals and Alcon Divisions are generally protected by patent or other intellectual property rights, allowing us to exclusively market those products. The loss of exclusivity has had, and will continue to have, an adverse effect on our results. In 2015, the impact of generic competition on our net sales amounted to $2.2 billion.

        Like other players in the pharmaceutical industry, some of our products have begun to face considerable competition due to the expiration of patent or other intellectual property protection. For example:

–

We already face generic competition in Japan and some EU countries for Gleevec/Glivec. In the US, we have resolved patent litigation with certain generic manufacturers. We licensed to a subsidiary of Sun Pharmaceutical Industries the right to market a generic version of Gleevec in the US as of February 1, 2016. In the EU, our Glivec intellectual property rights are also being challenged by generic manufacturers.

–

Diovan and Co-Diovan/Diovan HCT, which had long been our best-selling product, has generic competitors for Diovan in the US, EU and Japan and for Co-Diovan/Diovan HCT in the US and EU. In Japan, Novartis resolved patent litigation with a generic manufacturer. Patent protection for Co-Diovan will expire in Japan in 2016.

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        To counter the impact of patent expirations, we continuously invest in research and development to rejuvenate our portfolio. For example, in 2015, we invested 18% of total net sales in research and development. One measure of the output of our efforts is the performance of our Growth Products—products launched in a key market (EU, US, Japan) in 2010 or later, or products with exclusivity in key markets until at least 2019 (except Sandoz, which includes only products launched in the last 24 months). These products accounted for 34% of total net sales in 2015, up 17% from the previous year.

        Moreover, while patent expirations present a significant challenge to our Pharmaceuticals and Alcon divisions, they also create an opportunity for Sandoz, our generics business. With our global footprint and advanced technical expertise, we expect Sandoz to help offset the financial impact of generic competition on our branded portfolio.

Heightened regulatory and safety hurdles

        Our ability to grow is dependent on our ability to bring new products to market. In recent years, health regulators have raised the bar on product innovation. They are increasingly focused on the benefit-risk profile of pharmaceutical products, emphasizing product safety and improvements over older products in the same therapeutic class. These developments have led to requests for more clinical trial data, the inclusion of significantly higher numbers of patients in those trials, and more detailed analyses of trial outcomes. As a result, the long and expensive process of obtaining regulatory approvals for pharmaceutical products has become even more challenging.

        In addition, approved drugs have increasingly been subject to requirements such as risk management plans, comparative effectiveness studies, health technology assessments and post-approval Phase IV clinical trials, making the maintenance of regulatory approvals and achievement of reimbursement for our products increasingly expensive. In addition, these requirements further heighten the risk of recalls, product withdrawals, or loss of market share.

        Despite this risk, however, we expect that our focus on accelerating innovation in areas of unmet medical need and demonstrating real improvement in patient outcomes will allow Novartis to continue to bring effective and safe medicines to market.

Increasing pressure on pricing

        Against the backdrop of steadily rising healthcare costs, there has been increased scrutiny on drug pricing by governments, media and consumers. Following the launch of Gilead's Sovaldi® in hepatitis C, media focused on the price tag and lawsuits were filed against the company, alleging price-gouging. In 2015, the pricing debate reached a new level of intensity when Turing Pharmaceuticals acquired the rights to the decades-old medicine Daraprim® and raised the price by 5,000%.

        We expect scrutiny on prices to continue in 2016 as political pressures mount and healthcare payors around the globe—including government-controlled health authorities, insurance companies and managed care organizations—step up initiatives to reduce the overall cost of healthcare, restrict access to higher-priced new medicines, increase the use of generics and impose overall price cuts.

        In this environment, we believe that it is more important than ever to demonstrate the value that true innovation brings to the healthcare system. For example, with our psoriasis medicine Cosentyx, we demonstrated superiority to Stelara® in a head-to-head study, but still adopted a similar price for our product. Similarly, with Entresto, an independent organization called the Institute for Clinical and Economic Review found that its US list price was "well-aligned with the degree of benefit it brings to patients." Furthermore, we expressed a willingness to work with our customers on flexible, performance-based pricing models, where we would only be fully compensated if the drug succeeded in meeting certain targets, such as reducing heart failure hospitalizations and associated costs.

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        To manage pricing pressure, we aim to invest in access to real-world data and analytics, explore new technologies and patient management services, and partner with payors to develop and scale outcomes-based commercial models.

Potential liability arising from legal proceedings and government investigations

        In recent years, there has been a trend of increasing government investigations and litigation against companies operating in our industry, including in the US and other countries. We are obligated to comply with the laws of all countries in which we operate, with new requirements imposed on us as government and public expectations of corporate behavior develop. We have a significant global compliance program in place, and devote substantial time and resources to ensure that our business is conducted in a legal and publicly acceptable manner. Despite our efforts, any failure to comply with the law could lead to substantial liabilities that may not be covered by insurance and could affect our business and reputation.

        Governments and regulatory authorities worldwide are also increasingly challenging practices previously considered to be legal and responding to such challenges and new regulations is costly. Such investigations may affect our reputation, create a risk of potential exclusion from government reimbursement programs in the US and other countries, and may lead to costly litigation.

        These factors have contributed to recent trends in the pharmaceutical industry to enter into settlement agreements with governmental authorities around the world prior to any formal decision by the authorities. For example, in 2015, our affiliate Novartis Pharmaceuticals Corporation settled litigation in the Southern District of New York related to interactions with specialty pharmacies from 2004 to 2013. The settlement included payments totalling $390 million plus additional legal expenses to plaintiffs, and an agreement to amend and extend for five years an existing corporate integrity agreement (CIA) with the Office of Inspector General of the US Department of Health and Human Services. This resolution and the new CIA obligations provide clear guidelines as we continue to work with independent specialty pharmacies in support of patient care.

Risk of liability and supply disruption from manufacturing issues

        The manufacture of our products is both highly regulated and complex, which introduces a greater chance for disruptions and liabilities. Government authorities closely regulate our manufacturing processes, and if those processes fail to meet the necessary requirements, then there is a risk that our production facilities could be shut down. Disturbances in our supply chain can lead to product shortages, significant loss in sales revenue, and litigation. Furthermore, any manufacturing issue compromising supply or quality could have serious consequences for the health of our patients.

        Beyond regulatory requirements, many of our products involve technically complex manufacturing processes or require a supply of highly specialized raw materials. For example, biologic products, produced from living plant or animal micro-organisms, comprise a significant portion of the portfolio across the Group. For biologic-based products, even slight deviations at any point in the production process could lead to production failures or recalls. The Group's portfolio also includes a number of sterile products, such as oncology treatments, which are technically complex to manufacture and require strict environmental controls. There is a greater chance of production failures and supply interruptions for these products.

        Given the complexity of our manufacturing processes, we have had a multi-year effort in place to ensure adherence to a single high quality standard across the Group. This effort continued to yield steady improvement in 2015: regulatory agencies carried out 192 inspections of Novartis facilities worldwide last year, with 189 or 98.4% resulting in a good or acceptable outcome, in line with prior year. In addition, in September the FDA closed out the May 2013 Warning Letter issued for our Sandoz site in Unterach, Austria.

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        Despite this progress, more work remains to be done. In October 2015, the FDA issued a Warning Letter to our Sandoz Division concerning its Indian sites in Kalwe and Turbhe. The letter related to documentation practices in Kalwe and sterile manufacturing practices in Turbhe that were identified during an inspection in August 2014. Novartis took action immediately and has addressed a majority of the issues.

Risk assessment and disclosures

        The Risk Committee of the Board ensures the Group has implemented an appropriate and effective risk management system and process. It reviews with management and internal audit the identification, prioritization and management of the risks, the accountabilities and roles of the functions involved with risk management, the risk portfolio and the related actions implemented by management. The Risk Committee informs the Board of Directors on a periodic basis.

        The Group Risk Office coordinates and aligns the risk management processes, and reports to the Risk Committee on a regular basis on risk assessment and risk management. Organizational and process measures have been designed to identify and mitigate risks at an early stage. Organizationally, the responsibility for risk assessment and management is allocated to the divisions, with specialized Corporate functions—such as Group Finance, Group Quality Assurance, Corporate Health, Safety and Environment, Business Continuity Management, Integrity and Compliance, and the Business Practices Office—providing support and controlling the effectiveness of the risk management by the divisions and functions in these respective areas.

        Financial risk management is described in more detail, see "Item 18. Financial Statements—Note 29".

NON-IFRS MEASURES AS DEFINED BY NOVARTIS

        Novartis uses certain non-IFRS metrics when measuring performance, especially when measuring current year results against prior periods, including core results, constant currencies, free cash flow and net debt.

        Despite the use of these measures by management in setting goals and measuring the Group's performance, these are non-IFRS measures that have no standardized meaning prescribed by IFRS. As a result, such measures have limits in their usefulness to investors.

        Because of their non-standardized definitions, the non-IFRS measures (unlike IFRS measures) may not be comparable to the calculation of similar measures of other companies. These non-IFRS measures are presented solely to permit investors to more fully understand how the Group's management assesses underlying performance. These non-IFRS measures are not, and should not be viewed as, a substitute for IFRS measures.

        As an internal measure of Group performance, these non-IFRS measures have limitations, and the Group's performance management process is not solely restricted to these metrics.

Core Results

        The Group's core results—including core operating income, core net income and core earnings per share—exclude the amortization of intangible assets, impairment charges, expenses relating to divestments, the integration of acquisitions and restructuring charges that exceed a threshold of $25 million, as well as other income and expense items that management deems exceptional and that are or are expected to accumulate within the year to be over a $25 million threshold.

        Novartis believes that investor understanding of the Group's performance is enhanced by disclosing core measures of performance because, since they exclude items which can vary significantly from year to

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year, the core measures enable better comparison of business performance across years. For this same reason, Novartis uses these core measures in addition to IFRS and other measures as important factors in assessing the Group's performance.

        The following are examples of how these core measures are utilized:

–

In addition to monthly reports containing financial information prepared under IFRS, senior management receives a monthly analysis incorporating these core measures.

–

Annual budgets are prepared for both IFRS and core measures.

        A limitation of the core measures is that they provide a view of the Group's operations without including all events during a period, such as the effects of an acquisition or amortization of purchased intangible assets.

Constant Currencies

        Changes in the relative values of non-US currencies to the US dollar can affect the Group's financial results and financial position. To provide additional information that may be useful to investors, including changes in sales volume, we present information about our net sales and various values relating to operating and net income that are adjusted for such foreign currency effects.

        Constant currency calculations have the goal of eliminating two exchange rate effects so that an estimate can be made of underlying changes in the consolidated income statement excluding the impact of fluctuations in exchange rates:

–

the impact of translating the income statements of consolidated entities from their non-$ functional currencies to $; and

–

the impact of exchange rate movements on the major transactions of consolidated entities performed in currencies other than their functional currency.

        We calculate constant currency measures by translating the current year's foreign currency values for sales and other income statement items into $ using the average exchange rates from the prior year and comparing them to the prior year values in $.

        We use these constant currency measures in evaluating the Group's performance, since they may assist us in evaluating our ongoing performance from year to year. However, in performing our evaluation, we also consider equivalent measures of performance which are not affected by changes in the relative value of currencies.

Growth Rate Calculation

        For ease of understanding, Novartis uses a sign convention for its growth rates such that a reduction in operating expenses or losses compared to the prior year is shown as a positive growth.

Free Cash Flow

        Novartis defines free cash flow as cash flow from operating activities and cash flow associated with the purchase or sale of property, plant and equipment, intangible, other non-current and financial assets. Cash flows in connection with the acquisition or divestment of subsidiaries, associated companies and non-controlling interests in subsidiaries are not taken into account to determine free cash flow.

        Free cash flow is presented as additional information because Novartis considers it to be a useful indicator of the Group's ability to operate without reliance on additional borrowing or use of existing cash. Free cash flow is a measure of the net cash generated that is available for debt repayment, investment in strategic opportunities and for returning to shareholders. Novartis uses free cash flow in internal

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comparisons of results from the Group's divisions. Free cash flow is not intended to be a substitute measure for cash flow from operating activities (as determined under IFRS).

Net debt

        Novartis defines net debt as current and non-current financial debt less cash and cash equivalents, current investments and derivative financial instruments. Net debt is presented as additional information because management believes it is a useful supplemental indicator of the Group's ability to pay dividends, to meet financial commitments and to invest in new strategic opportunities, including strengthening its balance sheet.

Novartis Cash Value Added

        The Novartis Cash Value Added (NCVA) is a metric that is based on what the company assesses to be its cash flow return less a capital charge on gross operating assets. NCVA is used as the primary internal financial measure for determining payouts under the new Long-Term Performance Plan (LTPP) introduced in 2014. More information on NCVA is presented as part of the Compensation report, see "Item 6.B Compensation".

Novartis Economic Value Added

        Novartis utilizes its own definition for measuring Novartis Economic Value Added (NVA), which is utilized for determining payouts under the Old Long-Term Performance Plan (OLTPP). The following table shows NVA for 2015 and 2014:

	Year ended Dec 31, 2015			Year ended Dec 31, 2014			Change in $
	$ m			$ m			%
Operating income from continuing operations		8,977			11,089			(19	)
Income from associated companies		266			1,918			(86	)
Operating interest		(298	)		(306	)		3
Operating tax		(1,937	)		(2,565	)		24
Capital charge		(6,164	)		(5,938	)		(4	)
Novartis Economic Value Added from continuing operations		844			4,198			(80	)
Novartis Economic Value Added from discontinued operations		10,808			(678	)		nm
Total Novartis Economic Value Added		11,652			3,520			231

        Operating interest is the internal charge on average working capital based on the short-term borrowing rules of the entity owning them.

        Operating tax is the internal tax charge for each entity applying the applicable tax rate to the operational profit before tax unadjusted for tax-disallowed items or tax loss carryforwards.

        The capital charge is the notional interest charge on the average non-current assets of operations based on an internally calculated weighted average cost of capital for the Group.

        The NVA for continuing operations decreased to $844 million in 2015 from $4.2 billion in the prior-year, mainly on account of the negative currency effect on operating income and lower income from associated companies, which included in the prior year exceptional one-time gains from the sale of the shares of Idenix ($0.8 billion) and LTS ($0.4 billion).

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        The NVA for discontinued operations in 2015 was mainly driven by the $12.7 billion exceptional pre-tax gains form the portfolio transformation transactions with GSK and Lilly.

Additional Information

EBITDA

        Novartis defines earnings before interest, tax, depreciation and amortization (EBITDA) as operating income from continuing operations excluding depreciation of property, plant and equipment (including any related impairment charges) and amortization of intangible assets (including any related impairment charges).

	2015		2014		Change
	$ m		$ m		$ m
Operating income from continuing operations		8,977		11,089		(2,112	)
Depreciation of property, plant & equipment		1,470		1,586		(116	)
Amortization of intangible assets		3,755		2,775		980
Impairments of property, plant & equipment and intangible assets		246		321		(75	)
EBITDA from continuing operations		14,448		15,771		(1,323	)

Enterprise Value

        Enterprise value represents the total amount that shareholders and debt holders have invested in Novartis, less the Group's liquidity.

	Dec 31, 2015			Dec 31, 2014			Change
	$ m			$ m			$ m
Market capitalization		208,321			223,728			(15,407	)
Non-controlling interests		76			78			(2	)
Financial debts and derivatives		21,931			20,411			1,520
Liquidity		(5,447	)		(13,862	)		8,415
Enterprise value		224,881			230,355			(5,474	)
Enterprise value/EBITDA		16			15

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2015, 2014 AND 2013 RECONCILIATION OF IFRS RESULTS TO CORE RESULTS—GROUP

2015	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Acquisition or divestment related items, including restructuring and integration charges(3)			Other exceptional items(4)			Core results
	$ m			$ m		$ m			$ m			$ m			$ m
Gross profit from continuing operations		32,983			3,666		126						125			36,900
Operating income from continuing operations		8,977			3,709		369			182			553			13,790
Income before taxes from continuing operations		8,134			4,132		369			182			1,275			14,092
Taxes from continuing operations(5)		(1,106	)													(2,051	)
Net income from continuing operations		7,028														12,041
Net income/loss from discontinued operations(6)		10,766														(256	)
Net income		17,794														11,785
Basic EPS from continuing operations ($)(7)		2.92														5.01
Basic EPS from discontinued operations ($)(7)		4.48														(0.11	)
Total basic EPS ($)(7)		7.40														4.90
The following are adjustments to arrive at Core Gross Profit from continuing operations
Other revenues		947											(28	)		919
Cost of goods sold		(17,404	)		3,666		126						153			(13,459	)
The following are adjustments to arrive at Core Operating Income from continuing operations
Marketing & Sales		(11,772	)										43			(11,729	)
Research & Development		(8,935	)		43		40						114			(8,738	)
General & Administration		(2,475	)										86			(2,389	)
Other income		2,049					(56	)		(283	)		(887	)		823
Other expense		(2,873	)				259			465			1,072			(1,077	)
The following are adjustments to arrive at Core Income before taxes from continuing operations
Income from associated companies		266			423								292			981
Other financial income and expense		(454	)										430			(24	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms; Income from associated companies includes $423 million for the Novartis share of the estimated Roche core items.

⁽²⁾

Impairments: Cost of goods sold, Research & Development and Other expense consist principally of net impairment charges or reversals related to intangible assets, property, plant and equipment, and financial assets; Other income includes a reversal of an impairment related to property, plant and equipment.

⁽³⁾

Acquisition or divestment related items, including restructuring and integration charges: Other income and Other expense include items related to the portfolio transformation.

⁽⁴⁾

Other exceptional items: Other revenues and Other income include additional gains from product divestments; Cost of goods sold and Other expense include charges for the Group-wide rationalization of manufacturing sites; Cost of goods sold also includes an inventory write-off; Marketing & Sales, Research & Development and Other expense include other restructuring charges; Research & Development also includes expenses related to product acquisitions; General & Administration includes charges for transforming IT and finance processes and expenses related to setup costs for Novartis Business Services; Other income also includes a gain of $110 million from a Swiss pension plan amendment and items related to portfolio transformation; Other expense also includes legal settlement provisions; Income from associated companies includes $292 million for the Novartis share of the estimated OTC joint venture core items; Other financial income and expense includes a charge of $410 million related to Venezuela consisting of foreign exchange losses ($211 million), the loss on the sale of PDVSA bonds ($127 million) and the monetary loss due to hyperinflation ($72 million).

⁽⁵⁾

Taxes on the adjustments between IFRS and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax

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impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on exceptional items although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments for continuing operations of $6.0 billion to arrive at the core results before tax amounts to $945 million. The average tax rate on the adjustments for continuing operations is 15.9%.

⁽⁶⁾

For details on discontinued operations reconciliation from IFRS to core net income, see "—Non-IFRS Measures as Defined by Novartis".

⁽⁷⁾

Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

2014	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Acquisition or divestment related items, including restructuring and integration charges(3)		Other exceptional items(4)			Core results
	$ m			$ m		$ m			$ m		$ m			$ m
Gross profit from continuing operations		36,289			2,692		(21	)				(139	)		38,821
Operating income from continuing operations		11,089			2,743		433			33		175			14,473
Income before taxes from continuing operations		12,272			3,000		434			33		(1,058	)		14,681
Taxes from continuing operations(5)		(1,545	)												(2,028	)
Net income from continuing operations		10,727													12,653
Net income/loss from discontinued operations(6)		(447	)												102
Net income		10,280													12,755
Basic EPS from continuing operations ($)(7)		4.39													5.19
Basic EPS from discontinued operations ($)(7)		(0.18	)												0.04
Total basic EPS ($)(7)		4.21													5.23
The following are adjustments to arrive at Core Gross Profit from continuing operations
Other revenues		1,215										(302	)		913
Cost of goods sold		(17,345	)		2,692		(21	)				163			(14,511	)
The following are adjustments to arrive at Core Operating Income from continuing operations
Marketing & Sales		(12,377	)									22			(12,355	)
Research & Development		(9,086	)		48		298					17			(8,723	)
General & Administration		(2,616	)									64			(2,552	)
Other income		1,391					(15	)				(813	)		563
Other expense		(2,512	)		3		171			33		1,024			(1,281	)
The following are adjustments to arrive at Core Income before taxes from continuing operations
Income from associated companies		1,918			257		1					(1,233	)		943

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms; Other expense includes amortization of intangible assets; Income from associated companies includes $257 million for the Novartis share of the estimated Roche core items.

⁽²⁾

Impairments: Cost of goods sold, Research & Development, Other income and Other expense consist principally of net impairment charges or reversals related to intangible assets, property, plant and equipment and financial assets.

⁽³⁾

Acquisition or divestment related items, restructuring and integration charges: Other expense includes costs related to the portfolio transformation.

⁽⁴⁾

Other exceptional items: Other revenues includes an amount for a commercial settlement; Cost of goods sold includes charges for the Group-wide rationalization of manufacturing sites; Marketing & Sales, Research & Development and General & Administration include charges for transforming IT and finance processes; Other income includes product related divestment gains and gains in the Novartis Venture Fund, an insurance recovery net of a deferred amount, a partial reversal of a legal expense provision, a reduction in restructuring provisions, and the impact from a post-retirement medical plan amendment;

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Other expense includes restructuring provision charges, charges for transforming IT and finance processes, an expense related to Lucentis in Italy, the expense of $204 million related to the advancement of the timing of recording the US Healthcare Fee liability as a result of final regulations. Income from associated companies includes gains from the divestment of Idenix and LTS Lohmann Therapie-Systeme AG shareholdings.

⁽⁵⁾

Taxes on the adjustments between IFRS and core results of continuing operations take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on exceptional items although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of $2.4 billion to arrive at the core results before tax amounts to $483 million. This results in the average tax rate on the adjustments being 20.0%.

⁽⁶⁾

For details on discontinued operations reconciliation from IFRS to core net income, see "—Non-IFRS Measures as Defined by Novartis".

⁽⁷⁾

Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

2013	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Acquisition or divestment related items, including restructuring and integration charges(3)		Other exceptional items(4)			Core results
	$ m			$ m		$ m			$ m		$ m			$ m
Gross profit from continuing operations		36,137			2,615		20					20			38,792
Operating income from continuing operations		10,983			2,680		210			331		3			14,207
Income before taxes from continuing operations		10,807			2,939		210			349		47			14,352
Taxes from continuing operations(5)		(1,498	)												(2,057	)
Net income from continuing operations		9,309													12,295
Net income/loss from discontinued operations(6)		(17	)												238
Net income		9,292													12,533
EPS from continuing operations ($)(7)		3.76													4.99
EPS from discontinued operations ($)(7)															0.10
EPS ($)(7)		3.76													5.09
The following are adjustments to arrive at Core Gross Profit from continuing operations
Cost of goods sold		(16,579	)		2,615		20					20			(13,924	)
The following are adjustments to arrive at Core Operating Income from continuing operations
Marketing & Sales		(12,638	)									27			(12,611	)
Research & Development		(9,071	)		61		86					39			(8,885	)
General & Administration		(2,603	)									25			(2,578	)
Other income		1,205					(52	)				(505	)		648
Other expense		(2,047	)		4		156			331		397			(1,159	)
The following are adjustments to arrive at Core Income before taxes from continuing operations
Income from associated companies		599			259					18					876
Other financial income and expense		(92	)									44			(48	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms; Other expense includes amortization of intangible assets; Income from associated companies includes $259 million for the Novartis share of the estimated Roche core items.

⁽²⁾

Impairments: Cost of goods sold, Research & Development, Other income and Other expense include principally net impairment charges or reversals related to intangible assets and property, plant and equipment, mainly related to the Group-wide rationalization of manufacturing sites.

163

⁽³⁾

Acquisition or divestment related items, restructuring and integration charges: Other expense includes Alcon integration costs. Income from associated companies includes restructuring charges related to Roche.

⁽⁴⁾

Other exceptional items: Cost of goods sold, Other income and Other expense include restructuring charges related to the Group-wide rationalization of manufacturing sites; Marketing & Sales includes charges related to termination of a co-promotional contract; Research & Development also includes a net increase of contingent consideration liabilities related to acquisitions; General & Administration includes exceptional IT-related costs; Other income includes divestment gains, a reversal of a Corporate provision, income from post-retirement medical plan amendments and reduction in restructuring charge provisions; Other expense includes a restructuring provision charge, provisions for legal matters, and charges for transforming IT and finance processes; Other financial income and expense includes devaluation losses of $44 million related to Venezuela.

⁽⁵⁾

Taxes on the adjustments between IFRS and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on exceptional items although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of $3.5 billion to arrive at the core results before tax amounts to $559 million. This results in the average tax rate on the adjustments is 15.8%.

⁽⁶⁾

For details on discontinued operations reconciliation from IFRS to core net income, see "—Non-IFRS Measures as Defined by Novartis".

⁽⁷⁾

Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

2015, 2014 AND 2013 RECONCILIATION OF IFRS RESULTS TO CORE RESULTS—PHARMACEUTICALS

2015	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Acquisition or divestment related items, including restructuring and integration charges(3)			Other exceptional items(4)			Core results
	$ m			$ m		$ m			$ m			$ m			$ m
Gross profit		23,993			1,262		(20	)					88			25,323
Operating income		7,597			1,290		12			192			329			9,420
The following are adjustments to arrive at Core Gross Profit
Other revenues		790											(28	)		762
Cost of goods sold		(7,379	)		1,262		(20	)					116			(6,021	)
The following are adjustments to arrive at Core Operating Income
Marketing & Sales		(7,789	)										43			(7,746	)
Research & Development		(7,232	)		28		39						112			(7,053	)
Other income		1,145					(56	)		(22	)		(743	)		324
Other expense		(1,583	)				49			214			829			(491	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Cost of goods sold and Other income include a reversal of intangible asset impairments; Research & Development includes impairment charges for in process projects and termination of collaboration and license agreements; Other expense includes impairment charges related to property, plant and equipment and financial assets.

⁽³⁾

Acquisition or divestment related items, including restructuring and integration charges: Other income and Other expense include income and costs related to the portfolio transformation.

⁽⁴⁾

Other exceptional items: Other revenues and Other income include additional gains from product divestments; Cost of goods sold and Other expense include net restructuring charges related to the Group-wide rationalization of manufacturing sites; Cost of goods sold also includes an inventory write-off; Marketing & Sales, Research & Development and Other expense include other restructuring charges; Research & Development also includes expenses related to product acquisitions; Other income also includes a gain from a Swiss pension plan amendment; Other expense also includes legal settlement provisions.

164

2014	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Acquisition or divestment related items, including restructuring and integration charges(3)		Other exceptional items(4)			Core results
	$ m			$ m		$ m			$ m		$ m			$ m
Gross profit		25,793			238		(58	)				127			26,100
Operating income		8,471			276		266			33		468			9,514
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(6,889	)		238		(58	)				127			(6,582	)
The following are adjustments to arrive at Core Operating Income
Marketing & Sales		(8,178	)									2			(8,176	)
Research & Development		(7,331	)		38		289					7			(6,997	)
General & Administration		(1,009	)									1			(1,008	)
Other income		734					(13	)				(451	)		270
Other expense		(1,538	)				48			33		782			(675	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Cost of good sold includes partial reversal of previously impaired production assets, partly offset by the impairment of intangible assets related to a marketed product; Research & Development includes impairment charges for in process projects and termination of collaboration and license agreements; Other income relates to impairment reversals of property, plant and equipment; Other expense includes impairment charges related to property, plant and equipment and financial assets.

⁽³⁾

Acquisition or divestment related items, including restructuring and integration charges: Other expense includes costs related to the acquisition of GSK oncology assets.

⁽⁴⁾

Other exceptional items: Cost of goods sold, Research & Development and Marketing & Sales include net restructuring charges related to the Group-wide rationalization of manufacturing sites; Other income includes an insurance recovery from Corporate related to exchange risks, gains related to the rationalization of manufacturing sites, the impact from a post-retirement medical plan amendment, as well as additional gains from divestments announced in prior periods; Other expense include restructuring charges, an expense related to Lucentis in Italy and an expense of $157 million related to the advancement of the timing of recording the US Healthcare Fee liability as a result of final regulations.

165

2013	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Other exceptional items(3)			Core results
	$ m			$ m		$ m			$ m			$ m
Gross profit		26,258			228					6			26,492
Operating income		9,376			278		74			(205	)		9,523
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(6,655	)		228					6			(6,421	)
The following are adjustments to arrive at Core Operating Income
Marketing & Sales		(8,514	)							27			(8,487	)
Research & Development		(7,242	)		50		29			2			(7,161	)
Other income		699					(46	)		(390	)		263
Other expense		(774	)				91			150			(533	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Research & Development includes impairment charges for in process projects; Other income includes charges related to the reversal of impairment charges related to aliskiren production equipment for which an alternative use has been found; Other expense includes impairment charges related to property, plant and equipment.

⁽³⁾

Other exceptional items: Cost of goods sold includes principally restructuring charges related to the Group-wide rationalization of manufacturing sites offset by a provision reduction related to aliskiren; Marketing & Sales includes charges related to termination of a co-promotional contract; Research & Development includes restructuring charges; Other income includes principally divestment gains and a reduction in restructuring charge provisions; Other expense includes restructuring charges and provisions for legal matters.

166

2015, 2014 AND 2013 RECONCILIATION OF IFRS RESULTS TO CORE RESULTS—ALCON

2015	IFRS results			Amortization of intangible assets(1)		Impairments(2)		Other exceptional items(3)			Core results
	$ m			$ m		$ m		$ m			$ m
Gross profit		4,729			2,049		119		4			6,901
Operating income		794			2,063		121		85			3,063
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(5,153	)		2,049		119		4			(2,981	)
The following are adjustments to arrive at Core Operating Income
Research & Development		(926	)		14		1		2			(909	)
General & Administration		(544	)						32			(512	)
Other income		58							(13	)		45
Other expense		(125	)				1		60			(64	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Cost of goods sold includes impairment charges related to intangible assets; Research & Development and Other expense include impairment charges related to property, plant and equipment.

⁽³⁾

Other exceptional items: Cost of goods sold includes net restructuring charges related to the Group-wide rationalization of manufacturing sites; Research & Development includes non capitalized costs for the US; General & Administration includes charges for transforming IT and finance processes; Other income includes a gain from a Swiss pension plan amendment and a partial reversal of restructuring charges; Other expense includes other restructuring charges and a legal settlement.

167

2014	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Other exceptional items(3)			Core results
	$ m			$ m		$ m			$ m			$ m
Gross profit		5,717			2,056					26			7,799
Operating income		1,597			2,064		6			144			3,811
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(5,193	)		2,056					26			(3,111	)
The following are adjustments to arrive at Core Operating Income
Marketing & Sales		(2,474	)							20			(2,454	)
Research & Development		(928	)		8		7			10			(903	)
General & Administration		(613	)							45			(568	)
Other income		79					(1	)		(52	)		26
Other expense		(184	)							95			(89	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Research & Development includes impairment charges for in process projects; Other income includes a reversal of impairment charges related to property, plant and equipment.

⁽³⁾

Other exceptional items: Cost of goods sold and Other expense include net restructuring charges related to the Group-wide rationalization of manufacturing sites; Marketing & Sales and General & Administration include charges for transforming IT and finance processes; Research & Development includes a net increase of contingent consideration liabilities related to acquisitions; Other income includes the reversal of restructuring charges related to the Group-wide rationalization of manufacturing sites, as well as the impact from a post-retirement medical plan amendment; Other expense also includes an expense of $29 million related to the advancement of the timing of recording the US Healthcare Fee liability as a result of final regulations.

168

2013	IFRS results			Amortization of intangible assets(1)		Impairments(2)		Acquisition or divestment related items, restructuring and integration charges(3)		Other exceptional items(4)			Core results
	$ m			$ m		$ m		$ m		$ m			$ m
Gross profit		5,673			1,980						12			7,665
Operating income		1,232			1,989		61		330		82			3,694
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(4,900	)		1,980						12			(2,908	)
The following are adjustments to arrive at Core Operating Income
Research & Development		(1,042	)		9		57				37			(939	)
General & Administration		(589	)								25			(564	)
Other income		79									(40	)		39
Other expense		(437	)				4		330		48			(55	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Research & Development includes impairment charges related to in process projects; Other expense includes impairment charges related to property, plant and equipment.

⁽³⁾

Acquisition or divestment related items, restructuring and integration charges: Other expense reflects acquisition-related Alcon integration and restructuring charges.

⁽⁴⁾

Other exceptional items: Cost of goods sold includes net restructuring charges related to the Group-wide rationalization of manufacturing sites offset by the release of a contingent consideration liability related to recent acquisitions; Research & Development includes a net increase of contingent consideration liabilities related to acquisitions; General & Administration includes exceptional IT costs; Other income includes the impact of an income from a post-retirement medical plan amendment; Other expense includes net restructuring charges related to European commercial operations and the Group-wide rationalization of manufacturing sites.

169

2015, 2014 AND 2013 RECONCILIATION OF IFRS RESULTS TO CORE RESULTS—SANDOZ

2015	IFRS results			Amortization of intangible assets(1)		Impairments(2)		Acquisition or divestment related items, including restructuring and integration charges(3)			Other exceptional items(4)			Core results
	$ m			$ m		$ m		$ m			$ m			$ m
Gross profit		3,985			355		27					33			4,400
Operating income		1,005			356		124					174			1,659
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(5,325	)		355		27					33			(4,910	)
The following are adjustments to arrive at Core Operating Income
Research & Development		(777	)		1										(776	)
Other income		109							(1	)		(4	)		104
Other expense		(381	)				97		1			145			(138	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold include recurring amortization of acquired rights to in-market products and other production-related intangible assets.

⁽²⁾

Impairments: Cost of goods sold includes impairments of intangible assets; Other expense includes impairment charges related to property, plant and equipment.

⁽³⁾

Acquisition or divestment related items, including restructuring and integration charges: Other income and Other expense include items related to the portfolio transformation.

⁽⁴⁾

Other exceptional items: Cost of goods sold includes marketable intangible assets not capitalized; Cost of goods sold and Other expense include net restructuring charges related to the Group-wide rationalization of manufacturing sites; Other income includes a gain from a Swiss pension plan amendment; Other expense also includes a legal settlement.

170

2014	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Other exceptional items(3)			Core results
	$ m			$ m		$ m			$ m			$ m
Gross profit		4,109			398		37			10			4,554
Operating income		1,088			400		47			36			1,571
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(5,751	)		398		37			10			(5,306	)
The following are adjustments to arrive at Core Operating Income
Research & Development		(827	)		2		2						(823	)
Other income		97					(1	)		(3	)		93
Other expense		(190	)				9			29			(152	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Cost of goods sold and Research & Development include charges related to impairment of intangible assets; Other income includes a reversal of impairment charges related to property, plant and equipment; Other expense includes impairment charges related to property, plant and equipment and financial assets.

⁽³⁾

Other exceptional items: Cost of goods sold and Other expense include net restructuring charges; Other income includes the reversal of restructuring charges; Other expense also includes an expense of $18 million related to the advancement of the timing of recording the US Healthcare Fee liability as a result of final regulations.

2013	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Other exceptional items(3)		Core results
	$ m			$ m		$ m					$ m$ m
Gross profit		3,995			407		20			2		4,424
Operating income		1,028			409		17			87		1,541
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(5,476	)		407		20			2		(5,047	)
The following are adjustments to arrive at Core Operating Income
Research & Development		(787	)		2							(785	)
Other income		106					(6	)				100
Other expense		(240	)				3			85		(152	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Cost of goods sold includes impairment charges related to intangible assets; Other income includes a reversal of impairment charges related to property, plant and equipment; Other expense includes impairment charges related to property, plant and equipment.

⁽³⁾

Other exceptional items: Cost of goods sold includes net restructuring charges related to the Group-wide rationalization of manufacturing sites; Other expense includes provisions for legal matters.

171

2015, 2014 AND 2013 RECONCILIATION OF IFRS RESULTS TO CORE RESULTS—CORPORATE

2015	IFRS results			Impairments(1)		Acquisition or divestment related items, including restructuring and integration charges(2)			Other exceptional items(3)			Core results
	$ m					$ m			$ m			$ m$ m
Gross profit		276											276
Operating loss		(419	)		112		(10	)		(35	)		(352	)
The following are adjustments to arrive at Core Operating Loss
General & Administration		(648	)							54			(594	)
Other income		737					(260	)		(127	)		350
Other expense		(784	)		112		250			38			(384	)

⁽¹⁾

Impairments: Other expense includes impairment charges related to property, plant and equipment and financial assets.

⁽²⁾

Acquisition or divestment related items, including restructuring and integration charges: Other income and Other expense include items related to the portfolio transformation.

⁽³⁾

Other exceptional items: General & Administration and Other expense include expenses related to setup costs for Novartis Business Services; Other income includes a gain from a Swiss pension plan amendment, a reversal of a provision and items related to portfolio transformation; Other expense also includes a credit for a legal settlement charged to the divisions.

2014	IFRS results			Amortization of intangible assets(1)		Impairments(2)		Other exceptional items(3)			Core results
	$ m			$ m		$ m					$ m$ m
Gross profit		670							(302	)		368
Operating loss		(67	)		3		114		(473	)		(423	)
The following are adjustments to arrive at Core Gross Profit
Other revenues		540							(302	)		238
The following are adjustments to arrive at Core Operating Loss
General & Administration		(618	)						18			(600	)
Other income		481							(307	)		174
Other expense		(600	)		3		114		118			(365	)

⁽¹⁾

Amortization of intangible assets: Other expense includes amortization of intangible assets.

⁽²⁾

Impairments: Other expense includes impairment charges related to property, plant and equipment and financial assets.

⁽³⁾

Other exceptional items: Other revenues includes an amount for a commercial settlement; General & Administration includes expenses related to setup costs for Novartis Business Services; Other income includes an insurance recovery transferred to Pharmaceuticals net of a deferred amount and gains in the Novartis Venture Fund; Other expense includes charges for transforming IT and finance processes, as well as a provision for a legal settlement.

172

2013	IFRS results			Amortization of intangible assets(1)		Impairments(2)		Acquisition or divestment related items, restructuring and integration charges(3)		Other exceptional items(4)			Core results
	$ m			$ m		$ m		$ m		$ m			$ m
Gross profit		211												211
Operating loss		(653	)		4		58		1		39			(551	)
The following are adjustments to arrive at Core Operating Loss
Other income		321									(75	)		246
Other expense		(596	)		4		58		1		114			(419	)

⁽¹⁾

Amortization of intangible assets: Other expense includes amortization of intangible assets

⁽²⁾

Impairments: Other expense includes impairment charges related to property, plant and equipment and to a financial asset.

⁽³⁾

Acquisition or divestment related items, restructuring and integration charges: Other expense reflects Alcon integration costs.

⁽⁴⁾

Other exceptional items: Other income includes a reversal of a provision; Other expense includes charges for transforming IT and finance processes.

2015, 2014 AND 2013 RECONCILIATION OF IFRS RESULTS TO CORE RESULTS—DISCONTINUED OPERATIONS

							Acquisition or divestment related items, including restructuring and integration charges(2)
	IFRS results									Other exceptional items(3)			Core results
2015				Impairments(1)
	$ m			$ m			$ m			$ m			$ m
Gross profit		267									6			273
Operating income/loss		12,477			(83	)		(12,627	)		8			(225	)
Income/loss before taxes		12,479			(83	)		(12,627	)		8			(223	)
Taxes(4)		(1,713	)											(33	)
Net income/loss		10,766												(256	)
EPS ($)(5)		4.48												(0.11	)
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(376	)								6			(370	)
The following are adjustments to arrive at Core Operating Loss
Other income		13,420						(13,310	)		(1	)		109
Other expense		(727	)		(83	)		683			3			(124	)

⁽¹⁾

Impairments: Other expense includes the partial reversal of the influenza Vaccines business impairment charge recorded in 2014.

173

⁽²⁾

Acquisition or divestment related items, including restructuring and integration charges: Other income includes gains from the divestment of Animal Health ($4.6 billion) and from the transactions with GSK ($2.8 billion for the non-influenza Vaccines business and $5.9 billion resulting from the contribution of the former Novartis OTC division into the GSK consumer healthcare joint venture in exchange for 36.5% interest in this newly created entity); Other expense includes additional transaction related expenses of $0.6 billion and other portfolio transformation related costs.

⁽³⁾

Other exceptional items: Cost of goods sold, Other income and Other expense include restructuring charges.

⁽⁴⁾

Taxes on the adjustments between IFRS and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. There is usually a tax impact on exceptional items although this is not always the case for items arising from legal settlements in certain jurisdictions. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of $12.7 billion to arrive at the core results before tax amounts to $1.7 billion. The average tax rate on the adjustments is 13.2%.

⁽⁵⁾

Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

2014	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Acquisition or divestment related items, including restructuring and integration charges(3)			Other exceptional items(4)			Core results
	$ m			$ m		$ m			$ m			$ m			$ m
Gross profit		2,886			65		302						19			3,272
Operating loss/income		(353	)		73		1,141			(680	)		(38	)		143
Loss/income before taxes		(351	)		73		1,141			(680	)		(38	)		145
Taxes(5)		(96	)													(43	)
Net loss/income		(447	)													102
EPS ($)(6)		(0.18	)													0.04
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(3,073	)		65		302						19			(2,687	)
The following are adjustments to arrive at Core Operating Income
Research & Development		(857	)		8											(849	)
Other income		1,007					(1	)		(876	)		(89	)		41
Other expense		(1,146	)				840			196			32			(78	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets up to the portfolio transformation annoucement date; Research & Development includes the recurring amortization of acquired rights for technology platforms up to the portfolio transformation annoucement date.

⁽²⁾

Impairments: Cost of goods sold and Other expense include the $1.1 billion impairment charge as a result of the proposed sale of the influenza vaccines business; Other income includes a reduction of an impairment charge for property, plant and equipment; Other expense relates to an additional impairment charge in Corporate, for an in-process project which is pending divestment as a result of the proposed portfolio transformation transactions.

⁽³⁾

Acquisition or divestment related items, including restructuring and integration charges: Other income includes the gain on the disposal of the blood transfusion diagnostics unit on January 9, 2014; Other expense includes professional service fees related to the portfolio transformation divestment activities.

⁽⁴⁾

Other exceptional items: Cost of goods sold and Other expense include restructuring charges related to the Group-wide rationalization of manufacturing sites; Other income includes the gain on the sale of a divested product, which was sold as a result of the proposed portfolio transformation transaction, the reversal of restructuring charges related to the Group-wide rationalization of manufacturing sites, the partial reversal of a legal expense provision, and

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the impact from a post-retirement medical plan amendment; Other expense also includes the write-off of a receivable as a result of the proposed portfolio transformation transactions.

⁽⁵⁾

Taxes on the adjustments between IFRS and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. There is usually a tax impact on exceptional items although this is not always the case for items arising from legal settlements in certain jurisdictions. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of $496 million to arrive at the core results before tax amounts to $53 million. The average tax rate on the adjustments is 10.7%.

⁽⁶⁾

Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

2013	IFRS results			Amortization of intangible assets(1)		Impairments(2)			Other exceptional items(3)			Core results
	$ m			$ m		$ m			$ m			$ m
Gross profit		3,086			250		8			21			3,365
Operating loss/income		(73	)		275		49			27			278
Loss/income before taxes		(72	)		275		49			27			279
Taxes(4)		55											(41	)
Net loss/income		(17	)										238
EPS ($)(5)		0											0.10
The following are adjustments to arrive at Core Gross Profit
Cost of goods sold		(3,322	)		250		9			21			(3,042	)
The following are adjustments to arrive at Core Operating Loss
Research & Development		(781	)		24								(757	)
Other income		174					(1	)		(1	)		172
Other expense		(184	)		1		41			7			(135	)

⁽¹⁾

Amortization of intangible assets: Cost of goods sold includes recurring amortization of acquired rights to in-market products and other production-related intangible assets; Research & Development includes the recurring amortization of acquired rights for technology platforms.

⁽²⁾

Impairments: Cost of goods sold includes impairment charges related to intangible assets; Other income includes a reduction of an impairment charge; Other expense includes impairment charges for financial assets and property, plant and equipment and impairments related to the Group-wide rationalization of manufacturing sites.

⁽³⁾

Other exceptional items: Cost of goods sold and Other expense include restructuring charges related to the Group-wide rationalization of manufacturing sites; Other income includes reversal of charges related to the Group-wide rationalization of manufacturing sites.

⁽⁴⁾

Taxes on the adjustments between IFRS and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. There is usually a tax impact on exceptional items although this is not always the case for items arising from legal settlements in certain jurisdictions. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of $351 million to arrive at the core results before tax amounts to $96 million. The average tax rate on the adjustments is 27.4%.

⁽⁵⁾

Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

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        2015 and 2014 Reconciliation of segment operating income to Core Results

	Pharmaceuticals						Alcon						Sandoz						Corporate						Total Group
	2015			2014			2015			2014			2015			2014			2015			2014			2015			2014
	$ millions			$ millions			$ millions			$ millions			$ millions			$ millions			$ millions			$ millions			$ millions			$ millions
IFRS Operating income from continuing operations		7,597			8,471			794			1,597			1,005			1,088			(419	)		(67	)		8,977			11,089
Amortization of intangible assets		1,290			276			2,063			2,064			356			400						3			3,709			2,743
Impairments
Intangible assets		19			231			120			7			27			39									166			277
Property, plant & equipment related to the Group-wide rationalization of manufacturing sites		6			23									83												89			23
Other property, plant & equipment		(45	)		(8	)		1			(1	)		14			7			21			23			(9	)		21
Financial assets		32			20												1			91			91			123			112
Total impairment charges		12			266			121			6			124			47			112			114			369			433
Acquisition or divestment related items
—Income		(22	)											(1	)					(260	)					(283	)
—Expense		214			33									1						250						465			33
Total acquisition or divestment related items, net		192			33															(10	)					182			33
Other exceptional items
Exceptional divestment gains		(626	)		(237	)														(54	)		(294	)		(680	)		(531	)
Restructuring items
—Income		(27	)		(56	)		(7	)		(24	)					(3	)		(5	)					(39	)		(83	)
—Expense		391			632			60			95			121			21			57			1			629			749
Legal-related items
—Expense		578			125			4						40						(30	)		30			592			155
Additional exceptional income		(119	)		(158	)		(5	)		(29	)		(2	)					(68	)		(315	)		(194	)		(502	)
Additional exceptional expense		132			162			33			102			15			18			65			105			245			387
Total other exceptional items		329			468			85			144			174			36			(35	)		(473	)		553			175
Total adjustments		1,823			1,043			2,269			2,214			654			483			67			(356	)		4,813			3,384
Core operating income from continuing operations		9,420			9,514			3,063			3,811			1,659			1,571			(352	)		(423	)		13,790			14,473
as % of net sales		30.9	%		29.9	%		31.2	%		35.2	%		18.1	%		16.4	%								27.9	%		27.7	%
Income from associated companies					812									2			4			264			1,102			266			1,918
Core adjustments to income from associated companies, net of tax					(812	)														715			(163	)		715			(975	)
Interest expense																										(655	)		(704	)
Other financial income and expense(1)																										(24	)		(31	)
Taxes (adjusted for above items)																										(2,051	)		(2,028	)
Core net income from continuing operations																										12,041			12,653
Core net loss/income from discontinued operations(2)																										(256	)		102
Core net income																										11,785			12,755
Core net income attributable to shareholders																										11,774			12,685
Core basic EPS from continuing operations ($)(3)																										5.01			5.19
Core basic EPS from discontinued operations ($)(3)																										(0.11	)		0.04
Total core basic EPS ($)(3)																										4.90			5.23

⁽¹⁾

Adjustments for charges of $0.4 billion are related to Venezuela subsidiaries.

⁽²⁾

For details on discontinued operations reconciliation from IFRS to core net income, please see "—Non-IFRS Measures as Defined by Novartis".

⁽³⁾

Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

176

        2014 and 2013 Reconciliation of segment operating income to Core Results

	Pharmaceuticals						Alcon						Sandoz						Corporate						Total Group
	2014			2013			2014			2013			2014			2013			2014			2013			2014			2013
	$ m			$ m			$ m			$ m			$ m			$ m			$ m			$ m			$ m			$ m
IFRS Operating income from continuing operations		8,471			9,376			1,597			1,232			1,088			1,028			(67	)		(653	)		11,089			10,983
Amortization of intangible assets		276			278			2,064			1,989			400			409			3			4			2,743			2,680
Impairments
Intangible assets		231			29			7			57			39			20									277			106
Property, plant & equipment related to the Group-wide rationalization of manufacturing sites		23			1																					23			1
Other property, plant & equipment		(8	)		28			(1	)		4			7			(3	)		23			17			21			46
Financial assets		20			16									1						91			41			112			57
Total impairment charges		266			74			6			61			47			17			114			58			433			210
Acquisition or divestment related items
—Expense		33									330												1			33			331
Total acquisition or divestment related items, net		33									330												1			33			331
Other exceptional items
Exceptional divestment gains		(237	)		(313	)														(294	)					(531	)		(313	)
Restructuring items
—Income		(56	)		(40	)		(24	)					(3	)											(83	)		(40	)
—Expense		632			122			95			77			21			2			1						749			201
Legal-related items
—Expense		125			33												85			30						155			118
Additional exceptional income		(158	)		(70	)		(29	)		(56	)					(4	)		(315	)		(75	)		(502	)		(205	)
Additional exceptional expense		162			63			102			61			18			4			105			114			387			242
Total other exceptional items		468			(205	)		144			82			36			87			(473	)		39			175			3
Total adjustments		1,043			147			2,214			2,462			483			513			(356	)		102			3,384			3,224
Core operating income from continuing operations		9,514			9,523			3,811			3,694			1,571			1,541			(423	)		(551	)		14,473			14,207
as % of net sales		29.9	%		29.6	%		35.2	%		35.2	%		16.4	%		16.8	%								27.7	%		27.4	%
Income from associated companies		812												4			2			1,102			597			1,918			599
Core adjustments to income from associated companies, net of tax		(812	)																	(163	)		277			(975	)		277
Interest expense																										(704	)		(683	)
Other financial income and expense(1)																										(31	)		(48	)
Taxes (adjusted for above items)																										(2,028	)		(2,057	)
Core net income from continuing operations																										12,653			12,295
Core net income from discontinued operations(2)																										102			238
Core net income																										12,755			12,533
Core net income attributable to shareholders																										12,685			12,416
Core basic EPS from continuing operations ($)(3)																										5.19			4.99
Core basic EPS from discontinued operations ($)(3)																										0.04			0.10
Total core basic EPS ($)(3)																										5.23			5.09

⁽¹⁾

2013 adjusted for $44 million of devaluation loss.

⁽²⁾

For details on discontinued operations reconciliation from IFRS to core net income, please see "—Non-IFRS Measures as Defined by Novartis".

⁽³⁾

Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

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5.B Liquidity and Capital Resources

        The following tables summarize the Group's cash flow and net debt.

	2015			2014			2013
	$ m			$ m			$ m
Cash flows from operating activities from continuing operations		12,085			13,898			12,617
Cash flows used in investing activities from continuing operations		(19,666	)		(8	)		(3,219	)
Cash flows from operating and investing activities from discontinued operations		8,694			888			424
Cash flows used in financing activities		(9,176	)		(8,147	)		(8,769	)
Currency translation effect on cash and cash equivalents		(286	)		(295	)		82
Net change in cash and cash equivalents		(8,349	)		6,336			1,135
Change in marketable securities, commodities, time deposits and derivative financial instruments		(66	)		(1,696	)		(32	)
Change in current and non-current financial debts and derivative financial instruments		(1,520	)		(2,393	)		1,708
Change in net debt		(9,935	)		2,247			2,811
Net debt at January 1		(6,549	)		(8,796	)		(11,607	)
Net debt at December 31		(16,484	)		(6,549	)		(8,796	)

CASH FLOW

Financial year 2015

        Cash flow from operating activities of continuing operations decreased to $12.1 billion from $13.9 billion in 2014.

        The decrease was primarily due to the negative currency impact on operations. The prior year also included higher proceeds from commercial settlements.

        The cash outflow for investing activities from continuing operations amounted to $19.7 billion in 2015. This was primarily due to the outflow of $16.5 billion for acquisitions of businesses, mainly the oncology business from GSK for $16.0 billion, the net outflow of $2.8 billion for the purchase of property, plant and equipment, intangible and other non-current assets and the net outflow of $0.3 billion from the change in marketable securities.

        In 2014, cash flows used in investing activities from continuing operations was a small net outflow of $8 million. This was primarily due to net outflows of $0.3 billion from the acquisition of businesses, $3.0 billion mainly from purchase of property, plant and equipment, offset by $1.4 billion of proceeds from the sale of investments in associated companies, particularly LTS Lohmann Therapie-Systeme AG and Idenix Pharmaceuticals, Inc. and $1.9 billion proceeds from the net sale of other marketable securities, including maturing long-term deposits.

        The cash flows used in financing activities amounted to $9.2 billion, compared to $8.1 billion in 2014. The 2015 amount includes a cash outflow of $6.6 billion for the dividend payment and $4.5 billion for treasury share transactions, net. The net inflow from the increase in current and non-current financial debt of $2.0 billion was mainly due to the issuance of three Swiss franc denominated bonds for a total amount of $1.5 billion in the first half of 2015, the issuance of two US dollar denominated bonds totaling $3.0 billion in the fourth quarter 2015 and the increase in commercial paper outstanding of $0.4 billion, partially offset by the repayment at maturity of a US dollar denominated bond of $2.0 billion and a Swiss franc denominated bond of $0.9 billion. In 2014, the cash outflows included $6.8 billion for the dividend

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payment and $4.5 billion for treasury share transactions, net. These outflows were partially offset by increase in the current and non-current financial debt of $3.3 billion.

        The net cash inflows from discontinued operations of $8.7 billion in 2015 were mainly driven by the net proceeds of $8.9 billion from the divestments in connection with the portfolio transformation transactions. In 2014, the net cash inflow of $0.9 billion consisted mainly of proceeds from the divestment of the blood transfusion diagnostics unit to Grifols S.A.

Financial year 2014

        Cash flow from operating activities of continuing operations increased to $13.9 billion from $12.6 billion in 2013, an increase of $1.3 billion. This was primarily due to higher operating income adjusted for non-cash items, despite negative currency effects and increased hedging gains, partially offset by payments for legal settlements and restructuring.

        In 2014, cash flow used in investing activities of continuing operations was a small net outflow of $8 million compared to an outflow of $3.2 billion in 2013. In 2014, there were proceeds from the sale of investments in associated companies included, in particular LTS Lohmann Therapie-Systeme AG and Idenix Pharmaceuticals, Inc. of $0.6 billion and $0.8 billion respectively and of $1.9 billion from the net sale of other marketable securities including maturing long-term deposits. These inflows were offset by outflows of $2.6 billion for property, plant and equipment and a net amount of $0.7 billion for acquisition of businesses mainly the acquisition of WaveTec ($0.4 billion) and other non-current assets, primarily intangible assets. The prior year outflow for investing activities of $3.2 billion was primarily related to investments in property, plant and equipment of $2.9 billion and a net outflow of $0.3 billion for the acquisition of businesses and other non-current assets, mainly intangible assets.

        In 2014, cash inflows from investing activities of discontinued operations amounted to $ 0.9 billion, mainly on account of the net proceeds from the divestment of the blood transfusion diagnostics unit to Grifols S.A.

        The cash flows used in financing activities amounted to $8.1 billion, compared to $8.8 billion, in 2013. The 2014 amount includes the dividend payment of $6.8 billion, net treasury share transactions of $4.5 billion and a net increase in financial debt of $3.3 billion, principally due to the issuance of four bonds totaling $5.5 billion reduced by the repayment at maturity of a bond of $2.0 billion. In 2013, the dividend payment amounted to $6.1 billion, net treasury share transactions were $1.2 billion and financial debt decreased by a net amount of $1.3 billion.

Financial year 2013

        In 2013, cash flow from operating activities of continuing operations amounted to $12.6 billion compared to $13.8 billion in the prior year, mainly due to lower operating income and higher working capital requirements.

        In 2013, cash flow used in investing activities of continuing operations was $3.2 billion compared to $ 5.4 billion in the prior year. It includes investments in property, plant and equipment, which amounted to $2.9 billion compared to $2.5 billion in the prior year. These expenditures represent 5.6% and 4.8% of net sales in 2013 and 2012, respectively. The prior year cash flow used in investing activities of continuing operations included higher net investments in marketable securities of $1.1 billion and $1.7 billion for the acquisition of businesses mainly for the acquisition of Fougera Pharmaceuticals, Inc.

        In 2013 the cash flow used in investing activities of discontinued operations amounted to $0.1 billion compared to $0.3 billion in the prior year, mainly on account of net investments in property, plant and equipment.

        In 2013, cash flow used in financing activities amounted to $8.8 billion compared to $6.7 billion in 2012. The 2013 amount included a dividend payment of $6.1 billion, compared to $6.0 billion in 2012.

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There was a further $2.7 billion cash outflow in 2013, mainly related to net repayments of financial debts of $1.3 billion as well as a net outflow of $1.2 billion for treasury share purchases. This net outflow results from $2.9 billion spent on the acquisition of treasury shares and $1.7 billion of proceeds mainly from exercised options. In 2012, besides the dividend payment the cash flow used in financing activities mainly includes a net repayment of financial debts of $0.5 billion and a net cash outflow of $0.1 billion for treasury share transactions.

NET DEBT

        Net debt constitutes a non-IFRS financial measure, which means that it should not be interpreted as a measure determined under International Financial Reporting Standards (IFRS). Net debt is presented as additional information as it is a useful indicator of the Group's ability to meet financial commitments and to invest in new strategic opportunities, including strengthening its balance sheet.

Financial year 2015

        Total financial debt, including derivatives, amounted to $21.9 billion at December 31, 2015 compared to $20.4 billion at December 31, 2014.

        Non-current financial debt increased by $2.5 billion to $16.3 billion at December 31, 2015, from $13.8 billion at December 31, 2014. The increase was mainly due to the issuance of three Swiss franc denominated bonds for a total amount of $1.5 billion and the issuance of two US dollar denominated bonds for a total of $3.0 billion, partially offset by the reclassification to current financial debt of a euro denominated bond of $1.6 billion.

        Current financial debt decreased by $1.0 billion to $5.6 billion at December 31, 2015, from $6.6 billion at December 31, 2014. The decrease was mainly due to repayment at maturity of a US dollar denominated bond of $2.0 billion and a Swiss franc denominated bond of $0.9 billion, partially offset by the reclassification from non-current financial debt of the $1.6 billion euro denominated bond mentioned above.

        Overall current financial debt consists of the current portion of non-current debt of $1.7 billion and other short-term borrowings (including derivatives and commercial paper) of $3.9 billion. Group net debt increased to $16.5 billion at the end of 2015 compared to $6.5 billion at the end of 2014.

        Novartis has two US commercial paper programs under which it can issue up to $9 billion in the aggregate of unsecured commercial paper notes. Novartis also has a Japanese commercial paper program under which it can issue up to JPY 150 billion (approximately $1.25 billion) of unsecured commercial paper notes. Commercial paper notes totaling $1.1 billion under these three programs were outstanding as per December 31, 2015. Novartis further has a committed credit facility of $6 billion, entered into on September 23, 2015. This credit facility is provided by a syndicate of banks and is intended to be used as a backstop for the US commercial paper programs. It matures in September 2020 and was undrawn as per December 31, 2015.

        The long-term credit rating for the company continues to be double-A (Moody's Aa3; Standard & Poor's AA–; Fitch AA).

Financial year 2014

        In 2014, the total financial debt, including derivatives, increased by $2.4 billion, and amounted to $20.4 billion compared to $18.0 billion in 2013.

        Non-current financial debt amounted to $13.8 billion which is a net increase of $2.6 billion compared to 2013, mainly due to the issuance of four bonds and additional long-term debt totaling $5.5 billion. This is partly offset by $2.9 billion bond and loan reclassification to current financial debt for the portion which

180

is due within the next twelve months. Non-current financial debt consists of bonds of $13.2 billion and other non-current financial debt of $0.6 billion.

        Current financial debt decreased by $0.2 billion from $6.8 billion at December 31, 2013 to $6.6 billion at December 31, 2014, mainly due to a decrease of commercial paper and other financial debt, including derivatives, totaling $0.6 billion. This was partially offset by the reclassification of non-current financial debt of $3.0 billion, combined with repayments in 2014 of non-current financial debts amounting to $2.6 billion, totaling to a net increase of $0.4 billion.

        Overall current financial debt consists of commercial paper of $0.6 billion, the current portion of non-current debt of $3.0 billion and other short-term borrowings (including derivatives) of $3.0 billion.

        Net debt decreased to $6.5 billion at the end of 2014 compared to $8.8 billion at the end of 2013.

        An overview of our current financial debt and related interest rates is set forth below:

	December 31		Average interest rate at year end		Average balance during the year		Average interest rate during the year		Maximum balance during the year
	$ m		%		$ m		%		$ m
2015
Interest-bearing accounts of associates payable on demand		1,645		0.62		1,720		0.59		1,803
Other bank and financial debt		1,185		5.98		1,280		5.54		2,785
Commercial paper		1,085		0.62		3,545		0.19		5,686
Current portion of non-current financial debt		1,659		na		1,916		na		3,044
Fair value of derivative financial instruments		30		na		79		na		188
Total current financial debt		5,604				8,540				13,506
2014
Interest-bearing accounts of associates payable on demand		1,651		1.00		1,792		1.00		1,891
Other bank and financial debt		1,272		5.32		1,537		4.40		2,074
Commercial paper		648		0.26		1,260		0.13		3,076
Current portion of non-current financial debt		2,989		na		2,565		na		3,500
Fair value of derivative financial instruments		52		na		50		na		92
Total current financial debt		6,612				7,204				10,633

na = not applicable or available

        Interest bearing accounts of associates payable on demand relate to employee deposits in CHF from the compensation of associates employed by Swiss entities (December 31, 2015 interest rate: 0.5%). Other bank and financial debt refer to usual lending and overdraft facilities.

181

        The maturity schedule of our net debt is as follows:

December 31, 2015	Due within one month			Due later than one month but less than three months			Due later than three months but less than one year			Due later than one year but less than five years			Due after five years			Total
	$ m			$ m			$ m			$ m			$ m			$ m
Current assets
Marketable securities and time deposits		22			11			200			247			62			542
Commodities														86			86
Derivative financial instruments and accrued interest		40			67			38									145
Cash and cash equivalents		4,674															4,674
Total current financial assets		4,736			78			238			247			148			5,447
Non-current liabilities
Financial debt											(4,664	)		(11,663	)		(16,327	)
Financial debt—undiscounted											(4,676	)		(11,797	)		(16,473	)
Total non-current financial debt											(4,664	)		(11,663	)		(16,327	)
Current liabilities
Financial debt		(3,258	)		(289	)		(2,027	)								(5,574	)
Financial debt—undiscounted		(3,258	)		(289	)		(2,028	)								(5,575	)
Derivative financial instruments		(8	)		(20	)		(2	)								(30	)
Total current financial debt		(3,266	)		(309	)		(2,029	)								(5,604	)
Net debt		1,470			(231	)		(1,791	)		(4,417	)		(11,515	)		(16,484	)

December 31, 2014	Due within one month			Due later than one month but less than three months			Due later than three months but less than one year			Due later than one year but less than five years			Due after five years			Total
	$ m			$ m			$ m			$ m			$ m			$ m
Current assets
Marketable securities and time deposits		21			68			37			181			76			383
Commodities		97															97
Derivative financial instruments and accrued interest		161			126			72									359
Cash and cash equivalents		9,623			3,400												13,023
Total current financial assets		9,902			3,594			109			181			76			13,862
Non-current liabilities
Financial debt											(5,423	)		(8,376	)		(13,799	)
Financial debt—undiscounted											(5,434	)		(8,470	)		(13,904	)
Total non-current financial debt											(5,423	)		(8,376	)		(13,799	)
Current liabilities
Financial debt		(2,678	)		(335	)		(3,547	)								(6,560	)
Financial debt—undiscounted		(2,678	)		(335	)		(3,549	)								(6,562	)
Derivative financial instruments		(18	)		(32	)		(2	)								(52	)
Total current financial debt		(2,696	)		(367	)		(3,549	)								(6,612	)
Net debt		7,206			3,227			(3,440	)		(5,242	)		(8,300	)		(6,549	)

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        The following table provides a breakdown of liquidity and financial debt by currency as of December 31:

LIQUIDITY AND FINANCIAL DEBT BY CURRENCY

	Liquidity in % 2015(1)		Liquidity in % 2014(1)		Financial debt in % 2015(2)		Financial debt in % 2014(2)
$		50		80		64		59
EUR		16		1		14		17
CHF		13		10		14		13
JPY		1				5		8
Other		20		9		3		3
		100		100		100		100

⁽¹⁾

Liquidity includes cash and cash equivalents, marketable securities, commodities and time deposits.

⁽²⁾

Financial debt includes non-current and current financial debt.

EFFECTS OF CURRENCY FLUCTUATIONS

        We transact our business in many currencies other than the US dollar, our reporting currency.

        The following provides an overview of net sales and operating expenses for our continuing operations based on IFRS values for 2015, 2014 and 2013 for currencies most important to the Group:

	2015				2014				2013
Currency	Net sales		Operating expenses		Net sales		Operating expenses		Net sales		Operating expenses
	%		%		%		%		%		%
US dollar ($)		40		42		36		39		36		40
Euro (EUR)		24		23		26		25		26		25
Swiss franc (CHF)		2		13		2		13		2		12
Japanese yen (JPY)		6		4		7		5		8		5
Chinese yuan (CNY)		4		3		3		3		3		3
British pound (GBP)		3		3		3		2		2		2
Canadian dollar (CAD)		3		1		3		1		3		1
Brazilian real (BRL)		2		2		2		2		2		2
Australian dollar (AUD)		2		1		2		1		2		1
Russian ruble (RUB)		1		1		2		1		2		1
Other currencies		13		7		14		8		14		8

        Operating expenses in the above table include Cost of goods sold, Marketing & Sales, Research & Development, General & Administration, Other income and Other expense.

        We prepare our consolidated financial statements in US dollars. As a result, fluctuations in the exchange rates between the US dollar and other currencies can have a significant effect on both the Group's results of operations as well as on the reported value of our assets, liabilities and cash flows. This in turn may significantly affect reported earnings (both positively and negatively) and the comparability of period-to-period results of operations.

        For purposes of our consolidated balance sheets, we translate assets and liabilities denominated in other currencies into US dollars at the prevailing market exchange rates as of the relevant balance sheet

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date. For purposes of the Group's consolidated income and cash flow statements, revenue, expense and cash flow items in local currencies are translated into US dollars at average exchange rates prevailing during the relevant period. As a result, even if the amounts or values of these items remain unchanged in the respective local currency, changes in exchange rates have an impact on the amounts or values of these items in our consolidated financial statements.

        Because our expenditures in Swiss francs are significantly higher than our revenues in Swiss francs, volatility in the value of the Swiss franc can have a significant impact on the reported value of our earnings, assets and liabilities, and the timing and extent of such volatility can be difficult to predict. In addition, there is a risk that certain countries could take steps which could significantly impact the value of their currencies.

        There is also a risk that certain countries could devalue their currency. If this occurs, then it could impact the effective prices we would be able to charge for our products and also have an adverse impact on both our consolidated income statement and balance sheet. The Group is exposed to a potential adverse devaluation risk on its intercompany funding and total investment in certain subsidiaries operating in countries with exchange controls.

        The most significant country in this respect is Venezuela, where the Group is exposed to potential devaluation losses in the income statement on its total intercompany balances with its subsidiaries in Venezuela, which at December 31, 2015 amounted to $0.3 billion. The Group also has an equivalent of approximately $0.2 billion of cash in local currency, which is only slowly being approved for remittance outside of the country and which is subject to loss of purchase power due to high inflation in the country.

        Subsidiaries whose functional currencies have experienced a cumulative inflation rate of more than 100% over the past three years apply the rules of IAS 29 "Financial Reporting in Hyperinflationary Economies". Gains and losses incurred upon adjusting the carrying amounts of non-monetary assets and liabilities for inflation are recognized in the income statement. The subsidiaries in Venezuela restate non-monetary items in the balance sheet in line with the requirements of IAS 29. The corresponding monetary loss of $72 million is included in the 2015 financial results.

        In 2014 and through October 2015, the exchange rate used by the Group for consolidation of the financial statements of its Venezuela subsidiaries was the official exchange rate for the Venezuela bolivar (VEF) of VEF 6.3/$, which is available for imports of specific goods and services of national priority, including medicines and medical supplies, as published by the Centro Nacional de Comercio Exterior (CENCOEX, formerly CADIVI).

        In November 2015, a Venezuela subsidiary of the Group agreed with CENCOEX to settle a substantial part of our intercompany trade payables dated on or before December 31, 2014 in a transaction that required the Venezuela subsidiary to purchase a $ denominated bond at par value issued by Petróleos de Venezuela (PDVSA), with a coupon rate of 6% per annum maturing in 2024. In Venezuela there are differing official exchange rates against the $ and for the settlement of these intercompany trade payables, through the purchase of the $ bond, CENCOEX set the exchange rate at VEF 11.0/$. As a result, from November 2015 the Group changed its exchange rate used for the consolidation of the financial statements of its Venezuela subsidiaries. The use of the new exchange rate by the Venezuela subsidiaries resulted in a $211 million loss from the re-measurement of the intra-Group and third party liabilities.

        As agreed with CENCOEX, the Venezuela subsidiary purchased the PDVSA bond on December 9, 2015. The bond was sold on December 11, 2015. The proceeds from the sale of this bond were $73 million resulting in a loss of $127 million.

        We seek to manage currency exposure by engaging in hedging transactions where management deems appropriate, after taking into account the natural hedging afforded by our global business activity. For 2015, we entered into various contracts that change in value with movements in foreign exchange rates in

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order to preserve the value of assets, commitments and expected transactions. We use forward contracts and foreign currency options to hedge. For more information on how these transactions affect our consolidated financial statements and on how foreign exchange rate exposure is managed, see "Item 18. Financial Statements—Notes 1, 5, 16 and 29".

        In 2015, the US dollar significantly increased in value against most currencies. In particular, the average value of the euro, Japanese yen and emerging market currencies (especially the Brazilian real and Russian ruble) decreased in 2015 against the $ dollar. In January 2015, following an announcement by the Swiss National Bank that it was discontinuing its minimum exchange rate with the euro, the value of the Swiss franc increased versus the euro and the $.

        The following table sets forth the foreign exchange rates of the US dollar ($) against key currencies used for foreign currency translation when preparing the Group's consolidated financial statements:

	Average for year
								Year-end
					Change in %							Change in %
$ per unit	2015		2014					2015		2014
AUD		0.753		0.903		(17	)		0.731		0.819		(11	)
BRL		0.305		0.426		(28	)		0.253		0.376		(33	)
CAD		0.784		0.906		(13	)		0.721		0.861		(16	)
CHF		1.040		1.094		(5	)		1.011		1.010		0
CNY		0.159		0.162		(2	)		0.154		0.161		(4	)
EUR		1.110		1.329		(16	)		1.093		1.215		(10	)
GBP		1.529		1.648		(7	)		1.483		1.556		(5	)
JPY (100)		0.826		0.947		(13	)		0.831		0.836		(1	)
RUB (100)		1.649		2.649		(38	)		1.362		1.722		(21	)

	Average for year
								Year-end
					Change in %							Change in %
$ per unit	2014		2013					2014		2013
AUD		0.903		0.968		(7	)		0.819		0.892		(8	)
BRL		0.426		0.465		(8	)		0.376		0.424		(11	)
CAD		0.906		0.971		(7	)		0.861		0.939		(8	)
CHF		1.094		1.079		1			1.010		1.124		(10	)
CNY		0.162		0.163		(1	)		0.161		0.165		(2	)
EUR		1.329		1.328		0			1.215		1.378		(12	)
GBP		1.648		1.564		5			1.556		1.653		(6	)
JPY (100)		0.947		1.026		(8	)		0.836		0.952		(12	)
RUB (100)		2.649		3.142		(16	)		1.722		3.044		(43	)

        The following table provides a summary of the currency impact on key Group figures due to their conversion into $, the Group's reporting currency, of the financial data from entities reporting in non-US dollars. Constant currency (cc) calculations apply the exchange rates of the prior year to the current year financial data for entities reporting in non-US dollars.

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CURRENCY IMPACT ON KEY FIGURES

	Change in constant currencies % 2015			Change in $ % 2015			Percentage point currency impact 2015			Change in constant currencies % 2014		Change in $ % 2014		Percentage point currency impact 2014
Net sales from continuing operations		5			(5	)		(10	)		3		1		(2	)
Operating income from continuing operations		(2	)		(19	)		(17	)		7		1		(6	)
Net income from continuing operations		(18	)		(34	)		(16	)		21		15		(6	)
Core operating income from continuing operations		10			(5	)		(15	)		7		2		(5	)
Core net income from continuing operations		9			(5	)		(14	)		8		3		(5	)

        For additional information on the effects of currency fluctuations, see "Item 18. Financial Statements—note 29".

FREE CASH FLOW

        Novartis defines free cash flow as cash flow from operating activities and cash flow associated with the purchase or sale of property, plant and equipment, intangible, other non-current and financial assets. Cash flows in connection with the acquisition or divestment of subsidiaries, associated companies and non-controlling interests in subsidiaries are not taken into account to determine free cash flow. The free

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cash flow measure is a non-IFRS measure, see "—Non-IFRS Measures as Defined by Novartis" above. The following is a summary of the free cash flow:

	2015			2014			2013
	$ m			$ m			$ m
Operating income from continuing operations		8,977			11,089			10,983
Reversal of non-cash items
Depreciation, amortization and impairments		5,575			4,751			4,462
Change in provisions and other non-current liabilities		1,642			1,490			736
Other		(96	)		122			307
Operating income adjusted for non-cash items		16,098			17,452			16,488
Interest and other financial receipts		1,180			1,067			539
Interest and other financial payments		(669	)		(692	)		(631	)
Taxes paid		(2,454	)		(2,179	)		(2,054	)
Payments out of provisions and other net cash movements in non-current liabilities		(1,207	)		(1,125	)		(947	)
Change in inventory and trade receivables less trade payables		(617	)		(731	)		(588	)
Change in other net current assets and other operating cash flow items		(246	)		106			(190	)
Cash flows from operating activities from continuing operations		12,085			13,898			12,617
Purchase of property, plant & equipment		(2,367	)		(2,624	)		(2,903	)
Purchase of intangible assets		(1,138	)		(780	)		(475	)
Purchase of financial assets		(264	)		(239	)		(152	)
Purchase of other non-current assets		(82	)		(60	)		(38	)
Proceeds from sales of property, plant & equipment		237			60			48
Proceeds from sales of intangible assets		621			246			96
Proceeds from sales of financial assets		166			431			313
Proceeds from sales of other non-current assets		1			2			15
Free cash flow from continuing operations		9,259			10,934			9,521
Free cash flow from discontinued operations		(230	)		(172	)		424
Free cash flow		9,029			10,762			9,945

Financial year 2015

        In 2015, free cash flow from continuing operations decreased by 15% to $9.3 billion compared to $10.9 billion in 2014. This decrease was primarily due to the negative currency impact on operations. The prior year also included higher proceeds from Novartis Venture Fund divestments and commercial settlements. Total free cash flow including the continuing and discontinued operations was $9.0 billion in 2015 compared to $10.8 billion in 2014.

Financial year 2014

        The free cash flow from continuing operations increased by $1.4 billion to $10.9 billion. This was primarily due to higher cash flows from operating activities, which mainly benefited from higher operating income adjusted for non-cash items, despite negative currency effects and increased hedging gains, partially offset by higher investments in intangible assets.

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        In 2014, free cash flow of the total Group increased by $0.8 billion to $10.8 billion compared to $9.9 billion in 2013.

Financial year 2013

        In 2013, free cash flow from continuing operations amounted to $9.5 billion which was 15% below the prior year. Aside from the significant currency impact, major reasons for the decline were increased trade receivables and higher capital investments in manufacturing and research facilities.

        In 2013, the total Group free cash flow of $9.9 billion was 13% below the prior year.

        The total Group free cash flow was primarily used for the dividend payments to shareholders of $6.1 billion as well as a $1.3 billion net repayment of financial debt and for treasury share purchases of net $1.2 billion.

        This allocation reflected management's intention to optimize shareholder returns whilst at the same time reinvesting surplus funds in the business to promote future growth.

CONDENSED CONSOLIDATED BALANCE SHEETS

	Dec 31, 2015		Dec 31, 2014		Change
	$ m		$ m		$ m
Assets
Property, plant & equipment		15,982		15,983		(1	)
Goodwill		31,174		29,311		1,863
Intangible assets other than goodwill		34,217		23,832		10,385
Financial and other non-current assets		27,338		18,700		8,638
Total non-current assets		108,711		87,826		20,885
Inventories		6,226		6,093		133
Trade receivables		8,180		8,275		(95	)
Other current assets		2,992		2,530		462
Cash, marketable securities, commodities, time deposits and derivative financial instruments		5,447		13,862		(8,415	)
Assets related to discontinued operations(1)		0		6,801		(6,801	)
Total current assets		22,845		37,561		(14,716	)
Total assets		131,556		125,387		6,169
Equity and liabilities
Total equity		77,122		70,844		6,278
Financial debts		16,327		13,799		2,528
Other non-current liabilities		14,399		13,771		628
Total non-current liabilities		30,726		27,570		3,156
Trade payables		5,668		5,419		249
Financial debts and derivatives		5,604		6,612		(1,008	)
Other current liabilities		12,436		12,524		(88	)
Liabilities related to discontinued operations(1)		0		2,418		(2,418	)
Total current liabilities		23,708		26,973		(3,265	)
Total liabilities		54,434		54,543		(109	)
Total equity and liabilities		131,556		125,387		6,169

⁽¹⁾

For details of discontinued operations in the consolidated balance sheet, refer to "Item 18. Financial Statements—Note 30".

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        Total non-current assets of $108.7 billion at December 31, 2015 increased by $20.9 billion compared to December 31, 2014. Intangible assets other than goodwill increased by $10.4 billion to $34.2 billion, mainly on account of the new oncology assets acquired from GSK, which added product rights amounting to $13.0 billion to the intangible assets of the Group. This increase was partially offset by the amortization of intangible assets of $3.8 billion. Goodwill increased by $1.9 billion to $31.2 billion, mainly on account of the goodwill of $2.4 billion recorded on the new oncology assets, partially offset by currency translation adjustments of $0.6 billion.

        Financial and other non-current assets increased by $8.6 billion to $27.3 billion, mainly on account of the 36.5% investment in the GSK consumer healthcare joint venture of $7.6 billion, while investments in property, plant and equipment were in line with the prior year.

        Total current assets decreased by $14.7 billion to $22.8 billion at December 31, 2015, as cash and cash equivalents decreased by $8.4 billion to $5.4 billion, mainly on account of the net cash outflows from the portfolio transformation transactions as well as the dividend payment. The assets related to discontinued operations and held for sale reduced by $6.8 billion as a result of the closing of the portfolio transformation transactions in 2015. Trade receivables, inventories and other current assets were in line with the prior year.

        Based on our current incurred loss provisioning approach, we consider that our doubtful debt provisions are adequate. However, we intend to continue to monitor the level of trade receivables in Greece, Italy, Portugal and Spain (the "GIPS countries"). Should there be a substantial deterioration in our economic exposure with respect to those countries, we may increase our level of provisions by moving to an expected loss provisioning approach or may change the terms of trade on which we operate.

        The following table provides an overview of our aging analysis of our trade receivables as of December 31, 2015 and 2014:

	2015			2014
	$ m			$ m
Not overdue		7,318			7,406
Past due for not more than one month		265			334
Past due for more than one month but less than three months		255			275
Past due for more than three months but less than six months		193			174
Past due for more than six months but less than one year		156			102
Past due for more than one year		135			140
Provisions for doubtful trade receivables		(142	)		(156	)
Total trade receivables, net		8,180			8,275

        With regard to the GIPS countries, the majority of the outstanding trade receivables from these countries are due directly from local governments or from government-funded entities. The gross trade receivables from GIPS countries at December 31, 2015 amount to $920 million (2014: $915 million), of which $58 million are past due for more than one year (2014: $69 million) and for which provisions of $37 million have been recorded (2014: $48 million). At December 31, 2015 amounts past due for more than one year are not significant in any of the GIPS countries on a standalone basis.

        There is also a risk that certain countries could devalue their currency. The most significant exposure for Novartis in this respect is in Venezuela, which is described in more detail, see "—Effects of currency fluctuations" above.

        Trade payables, other current and non-current liabilities of $32.5 billion increased by $0.8 billion compared to $31.7 billion at December 31, 2014. This change was due to an increase in other non-current liabilities of $0.6 billion and an increase in trade payables of $0.2 billion. The liabilities related to

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discontinued operations and held for sale reduced by $2.4 billion as a result of the closing of the portfolio transformation transactions in 2015.

        Included in other current liabilities are $1.7 billion relating to outstanding taxes. While there is some uncertainty about the final taxes to be assessed in our major countries, we consider this uncertainty to be limited since our tax assessments are generally relatively current. In our key countries Switzerland and the US, assessments have been agreed by the tax authorities up to 2010 in Switzerland and in the US up to 2009, with the exception of one open US position in 2007.

        The Group's equity increased by $6.3 billion to $77.1 billion at December 31, 2015, compared to $70.8 billion at December 31, 2014. The increase was on account of our net income of $17.8 billion, share-based compensation of $0.8 billion and the settlement of the obligation under the share repurchase agreement of $0.7 billion. The increase was partially offset by the $6.6 billion dividend payment, net purchases of treasury shares of $4.5 billion, unfavorable currency translation differences of $1.7 billion and net actuarial losses from defined benefit plans of $0.1 billion.

        The Group's liquidity amounted to $5.4 billion at December 31, 2015, compared to $13.9 billion at December 31, 2014, and net debt increased over the same period by $10.0 billion to $16.5 billion. The debt/equity ratio decreased to 0.28:1 at December 31, 2015 compared to 0.29:1 at December 31, 2014.

SUMMARY OF EQUITY MOVEMENTS ATTRIBUTABLE TO NOVARTIS AG SHAREHOLDERS

	Number of outstanding shares (in millions)									Issued share capital and reserves attributable to Novartis AG shareholders
	2015			2014			Change			2015			2014			Change
										$ m			$ m			$ m
Balance at beginning of year		2,398.6			2,426.1			(27.5	)		70,766			74,343			(3,577	)
Shares acquired to be held in Group Treasury		(9.6	)		(46.8	)		37.2			(897	)		(4,057	)		3,160
Shares acquired to be canceled		(49.9	)		(27.0	)		(22.9	)		(4,805	)		(2,396	)		(2,409	)
Other share purchases		(4.1	)		(5.4	)		1.3			(417	)		(473	)		56
Increase in equity from exercise of options and employee transactions		27.0			41.4			(14.4	)		1,592			2,400			(808	)
Equity-based compensation		11.9			10.3			1.6			815			1,143			(328	)
Decrease/(Increase) of treasury share repurchase obligation under a share buy-back trading plan											658			(658	)		1,316
Dividends											(6,643	)		(6,810	)		167
Net income of the year attributable to shareholders of Novartis AG											17,783			10,210			7,573
Other comprehensive income attributable to shareholders of Novartis AG											(1,806	)		(2,936	)		1,130
Balance at end of year		2,373.9			2,398.6			(24.7	)		77,046			70,766			6,280

        During 2015, 38.9 million treasury shares were delivered as a result of options being exercised and physical share deliveries related to equity-based participation plans (2014: 51.7 million shares). 9.6 million shares were repurchased on the SIX Swiss Exchange first trading line (2014: 46.8 million), 4.1 million shares were acquired from employees which were previously granted to them under the respective programs (2014: 5.4 million). In addition, Novartis repurchased 49.9 million shares on the SIX Swiss Exchange second trading line under the $5 billion share buyback announced in 2013, which was completed

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in November 2015, and also to offset the dilutive impact from equity-based participation plans (2014: 27.0 million). With these transactions, the total number of shares outstanding was reduced by 24.7 million in 2015 (2014: reduction of 27.5 million shares) and the sixth share buyback program, which was approved by the shareholders at the AGM 2008 has been completed.

Treasury shares

        At December 31, 2015, our holding of treasury shares amounted to 303.1 million shares or 11% of the total number of issued shares. Approximately 137 million treasury shares are held in entities that limit their availability for use.

        At December 31, 2014, our holding of treasury shares amounted to 307.6 million shares or 11% of the total number of issued shares. Approximately 153 million treasury shares are held in entities that limit their availability for use.

        At December 31, 2013, our holding of treasury shares amounted to 280.1 million shares or 10% of the total number of issued shares. Approximately 149 million treasury shares are held in entities that limit their availability for use.

Bonds

        In February 2015, three Swiss franc bonds totaling CHF 1.375 billion were completed; a 10-year bond of CHF 0.5 billion with a coupon of 0.25%, a 14-year bond of CHF 0.550 billion with a coupon of 0.625% and a 20-year bond of CHF 0.325 billion with a coupon of 1.050%.

        In November 2015, two US Dollar bonds totaling $3.0 billion were issued: a 10-year bond of $1.75 billion with a coupon of 3.0% and a 30-year bond of $1.25 billion with a coupon of 4.0%.

        In 2015, a 2.9% US Dollar bond of $2.0 billion and a 3.625% CHF bond of 0.8 billion were repaid.

        In February 2014, a $4.0 billion bond offering was completed in the United States consisting of two tranches; one 10 year bond of $2.15 billion with a coupon of 3.4% and one 30 year bond of $1.85 billion with a coupon of 4.4%. Further, a 4.125% US Dollar bond of $2 billion was repaid at maturity.

        In October 2014, a EUR 1.2 billion bond offering was completed consisting of two tranches; one 7 year bond of EUR 0.6 billion with a coupon of 0.75% and one 12 year bond of EUR 0.6 billion with a coupon of 1.625%.

        In April 2013, a 1.9% US Dollar bond of $2.0 billion was repaid.

Liquidity/Short-term Funding

        We continuously track our liquidity position and asset/liability profile. This involves modeling expected cash flows based on both historical experiences and contractual expectations to project our liquidity requirements. We seek to preserve prudent liquidity and funding capabilities.

        We are not aware of significant demands to change our level of liquidity needed to support our normal business activities. We make use of various borrowing facilities provided by several financial institutions. We also successfully issued various bonds in 2009, 2010, 2012, 2014 and 2015 and raised funds through our commercial paper programs. In addition, reverse repurchasing agreements are contracted and Novartis has entered into credit support agreements with various banks for derivative transactions. We have no commitments from repurchase or securities lending transactions at the end of 2015. For details of the maturity profile of debt, currency and interest rate structure, see "Item 18. Financial Statements—Note 29".

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5.C Research & Development, Patents and Licenses

        Our R&D spending for continuing operations totaled $8.9 billion, $9.1 billion and $9.1 billion ($8.7 billion, $8.7 billion and $8.9 billion excluding impairments and amortization charges) for the years 2015, 2014 and 2013, respectively. Each of our divisions has its own R&D and patents policies. Our divisions have numerous products in various stages of development. For further information on these policies and these products in development, see "Item 4. Information on the Company—4.B Business Overview."

        As described in the "Risk Factors" section and elsewhere in this Form 20-F, our drug development efforts are subject to the risks and uncertainties inherent in any new drug development program. Due to the risks and uncertainties involved in progressing through pre-clinical development and clinical trials, and the time and cost involved in obtaining regulatory approvals, among other factors, we cannot reasonably estimate the timing, completion dates, and costs, or range of costs, of our drug development program, or of the development of any particular development compound, see "Item 3. Key Information—3.D Risk Factors." In addition, for a description of the research and development process for the development of new drugs and our other products, and the regulatory process for their approval, see "Item 4. Information on the Company—4.B Business Overview."

5.D Trend Information

        Please see "—5.A Operating Results—Factors Affecting Results of Operations" and "Item 4, Information on the Company—4.B Business Overview" for trend information.

5.E Off-Balance Sheet Arrangements

        We have no unconsolidated special purpose financing or partnership entities or other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that is material to investors, see also "Item 18. Financial Statements—Note 28" and matters described in "Item 5.F Aggregate Contractual Obligations".

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5.F Aggregate Contractual Obligations

        The following table summarizes the Group's contractual obligations and other commercial commitments at December 31, 2015, as well as the effect these obligations and commitments are expected to have on the Group's liquidity and cash flow in future periods:

	Payments due by period
	Total		Less than 1 year		2–3 years		4–5 years		After 5 years
	$ m		$ m		$ m		$ m		$ m
Non-current financial debt, including current portion		17,986		1,659		505		5,460		10,362
Operating leases		2,996		273		335		207		2,181
Unfunded pensions and other post-employment benefit plans		2,165		113		234		251		1,567
Research & Development
Unconditional commitments		650		88		147		265		150
Potential milestone commitments		2,405		601		781		626		397
Purchase commitments
Property, plant & equipment		359		304		55
Total contractual cash obligations		26,561		3,038		2,057		6,809		14,657

        We expect to fund the R&D and purchase commitments with internally generated resources.

        For other contingencies, see "Item 4. Information on the Company—4.D Property, Plants and Equipment—Environmental Matters", "Item 8. Financial Information—8.A Consolidated Statements and Other Financial Information" and "Item 18. Financial Statements—Note 20 and 28".

Item 6.    Directors, Senior Management and Employees

6.A Directors and Senior Management

Board of Directors

Joerg Reinhardt, Ph.D.
        Chairman of the Board of Directors
        German, age 59

Function at Novartis AG Joerg Reinhardt, Ph.D., has been Chairman of the Board of Directors of Novartis since 2013. He is also Chairman of the Research & Development Committee and Chairman of the Board of Trustees of the Novartis Foundation.

Other activities Mr. Reinhardt previously was chairman of the board of management and the executive committee of Bayer HealthCare, Germany. Prior to that, he was Chief Operating Officer of Novartis from 2008 to 2010, and Head of the Vaccines and Diagnostics Division of Novartis from 2006 to 2008. He was also Chairman of the Board of the Genomics Institute of the Novartis Research Foundation in the United States from 2000 to 2010, a member of the supervisory board of MorphoSys AG in Germany from 2001 to 2004, and a member of the board of directors of Lonza Group AG in Switzerland from 2012 to 2013.

Professional background Mr. Reinhardt graduated with a Ph.D. in pharmaceutical sciences from Saarland University in Germany. He joined Sandoz Pharma Ltd. in 1982 and held various positions at Sandoz and later Novartis, including Head of Development.

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        Key knowledge/experience Leadership, global and industry experience—former chairman of global healthcare company; former Chief Operating Officer of Novartis and former Chairman of Novartis research institution; former board member of leading biotechnology company and of global supplier for pharmaceutical, healthcare and life sciences industries.

Enrico Vanni, Ph.D.
        Vice Chairman of the Board of Directors
        Swiss, age 64

Function at Novartis AG Enrico Vanni, Ph.D., has been a member of the Board of Directors since 2011. He qualifies as an independent Non-Executive Director. He is Vice Chairman of the Board of Directors and Chairman of the Compensation Committee. He is also a member of the Audit and Compliance Committee and the Research & Development Committee.

Other activities Since his retirement as director of McKinsey & Company in 2007, Mr. Vanni has been an independent consultant. He is a board member of several companies in industries from healthcare to private banking—including Advanced Oncotherapy PLC in England, and non-listed companies such as Lombard Odier SA, Banque Privée BCP (Suisse) SA, Eclosion2, and Denzler & Partners SA, all based in Switzerland.

Professional background Mr. Vanni holds an engineering degree in chemistry from the Federal Polytechnic School of Lausanne, Switzerland; a Ph.D. in chemistry from the University of Lausanne; and a Master of Business Administration from INSEAD in Fontainebleau, France. He began his career as a research engineer at the International Business Machines Corp. (IBM) in California, United States, and joined McKinsey in Zurich in 1980. He managed the Geneva office for McKinsey from 1988 to 2004, and consulted for companies in the pharmaceutical, consumer and finance sectors. He led McKinsey's European pharmaceutical practice and served as a member of the firm's partner review committee prior to his retirement in 2007. As an independent consultant, Mr. Vanni has continued to support leaders of pharmaceutical and biotechnology companies on core strategic challenges facing the healthcare industry.

        Key knowledge/experience Global and industry experience—senior consultant of global pharmaceutical/biotechnology and consumer goods companies, and financial institutions. Science experience—research engineer at technology company and manager of projects in global pharmaceutical R&D. Leadership experience—office management of global consulting company and leadership of its European pharmaceutical practice.

Nancy C. Andrews, M.D., Ph.D.
        Member of the Board of Directors
        American, age 57

Function at Novartis AG Nancy C. Andrews, M.D., Ph.D., has been a member of the Board of Directors since February 27, 2015. She qualifies as an independent Non-Executive Director and is a member of the Research & Development Committee.

Other activities Dr. Andrews is dean of the Duke University School of Medicine and vice chancellor for academic affairs at Duke University in the United States. She is also a professor of pediatrics, pharmacology and cancer biology at Duke. Prior to joining Duke, she was director of the Harvard/MIT M.D.-Ph.D. Program, and dean of basic sciences and graduate studies as well as professor of pediatrics at Harvard Medical School in the US. From 1993 to 2006, Dr. Andrews was a biomedical research investigator at the Howard Hughes Medical Institute, also in the US. Her research expertise is in iron homeostasis and mouse models of human diseases.

Professional background Dr. Andrews received her Ph.D. in biology from the Massachusetts Institute of Technology in the US and her M.D. from Harvard Medical School. She completed her residency and

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fellowship trainings in pediatrics and hematology/oncology at Boston Children's Hospital and the Dana-Farber Cancer Institute, both in the US, and served as an attending physician at Boston Children's Hospital. Dr. Andrews also served as president of the American Society for Clinical Investigation. Additionally, she was elected as a fellow of the American Association for the Advancement of Science and to membership in the US National Academy of Sciences, the National Academy of Medicine, and the American Academy of Arts and Sciences. She serves on the council of the National Academy of Medicine and on the board of directors of the American Academy of Arts and Sciences.

        Key knowledge/experience Leadership and healthcare experience—dean of leading US university medical school; member of various medical, scientific and ethical institutions and commissions. Education and scientific experience—research scientist and professor at leading US universities.

Dimitri Azar, M.D.
        Member of the Board of Directors
        American, age 56

Function at Novartis AG Dimitri Azar, M.D., has been a member of the Board of Directors since 2012. He qualifies as an independent Non-Executive Director and is a member of the Audit and Compliance Committee and the Research & Development Committee.

Other activities Dr. Azar is dean of the College of Medicine and professor of ophthalmology, bioengineering and pharmacology at the University of Illinois at Chicago in the United States, where he formerly was head of the Department of Ophthalmology and Visual Sciences. He is a member of the American Ophthalmological Society and is on the boards of trustees of the Chicago Medical Society, the Chicago Ophthalmological Society, the Association for Research in Vision and Ophthalmology, and the Tear Film and Ocular Surface Society.

Professional background Dr. Azar began his career at the American University of Beirut Medical Center in Lebanon, and completed his fellowship and residency training at the Massachusetts Eye and Ear Infirmary at Harvard Medical School in the US. His research on matrix metalloproteinases in corneal wound healing and angiogenesis has been funded by the US National Institutes of Health since 1993. Dr. Azar practiced at the Wilmer Eye Institute at the Johns Hopkins Hospital School of Medicine in the US, and then returned to the Massachusetts Eye and Ear Infirmary as director of cornea and external disease. He became professor of ophthalmology with tenure at Harvard Medical School in 2003. Dr. Azar holds an Executive Master of Business Administration from the University of Chicago Booth School of Business in the US.

        Key knowledge/experience Leadership, healthcare and education experience—dean and professor at leading US university medical school. Biomedical science experience—federally-funded clinician-scientist and research fellowship recipient.

Verena A. Briner, M.D.
        Member of the Board of Directors
        Swiss, age 64

Function at Novartis AG Verena A. Briner, M.D., has been a member of the Board of Directors since 2013. She qualifies as an independent Non-Executive Director and is a member of the Risk Committee.

Other activities Dr. Briner is professor of internal medicine at the University of Basel, and visiting professor at the University of Lucerne, both in Switzerland. She is chief medical officer and head of the Department of Medicine at the Lucerne Cantonal Hospital in Switzerland. Additionally, she is a member of several medical and ethical institutions and commissions, including the board of the Foundation for the Development of Internal Medicine in Europe, the senate of the Swiss Academy of Medical Sciences, and

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the journal of the inter-cantonal convention on highly-specialized medicine (IVHSM), Switzerland. She is also a member and former president of the Swiss Society of Internal Medicine.

Professional background Dr. Briner graduated with an M.D. from the University of Basel in 1978, and has a specialized degree in internal medicine and nephrology from the Swiss Medical Association. She has received several prestigious scholarships and scientific grants, including the President's Grant of the Swiss Society of General Internal Medicine in 2011. Additionally, she is a fellow of the Royal College of Physicians, United Kingdom, and an honorary fellow of the American College of Physicians, the European Federation of Internal Medicine, the Polish Society of Internal Medicine, and the Swiss Society of General Internal Medicine.

        Key knowledge/experience Leadership and healthcare experience—chief medical officer and department head at leading Swiss hospital; former president of Swiss medical society; member of various medical and ethical institutions and commissions. Education experience—professor and visiting professor at leading Swiss universities.

Srikant Datar, Ph.D.
        Member of the Board of Directors
        American, age 62

Function at Novartis AG Srikant Datar, Ph.D., has been a member of the Board of Directors since 2003. He qualifies as an independent Non-Executive Director. He is Chairman of the Audit and Compliance Committee, and a member of the Risk Committee and the Compensation Committee. The Board of Directors has appointed him as Audit Committee Financial Expert.

Other activities Mr. Datar is Arthur Lowes Dickinson Professor at the Graduate School of Business Administration at Harvard University in the United States. He is also a member of the boards of directors of ICF International Inc., Stryker Corp. and T-Mobile US, all in the US.

Professional background Mr. Datar graduated in 1973 with distinction in mathematics and economics from the University of Bombay in India. He is a chartered accountant, and holds two master's degrees and a doctorate from Stanford University in the US. Mr. Datar has worked as an accountant and planner in industry, and as a professor at Carnegie Mellon University, Stanford University and Harvard University, all in the US. His research interests are in the areas of cost management, measurement of productivity, new product development, innovation, time-based competition, incentives and performance evaluation. He is the author of many scientific publications and has received several academic awards and honors. Mr. Datar has also advised and worked with numerous companies in research, development and training.

        Key knowledge/experience Leadership and education experience—former senior associate dean and current professor at leading US university. Global and industry experience board member of global professional services firm, leading global medical technology company, and major US telecommunications company.

Ann Fudge
        Member of the Board of Directors
        American, age 64

Function at Novartis AG Ann Fudge has been a member of the Board of Directors since 2008. She qualifies as an independent Non-Executive Director and is a member of the Risk Committee; the Compensation Committee; and the Governance, Nomination and Corporate Responsibilities Committee.

Other activities Ms. Fudge is vice chairman and senior independent director of Unilever NV, London and Rotterdam. She is a trustee of the New York-based Rockefeller Foundation and the Washington, D.C.-based Brookings Institution, and is chair of the US Programs Advisory Panel of the

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Bill & Melinda Gates Foundation. Ms. Fudge is also a trustee of WGBH public media and serves on the board of the Council on Foreign Relations.

Professional background Ms. Fudge received her bachelor's degree from Simmons College in the United States and her Master of Business Administration from Harvard University Graduate School of Business, also in the US. She is former chairman and CEO of Young & Rubicam Brands, New York. Before that, she served as president of the Beverages, Desserts and Post Division of Kraft Foods Inc. in the US.

        Key knowledge/experience Leadership and marketing experience—former chairman and CEO of global marketing communications company; former president of leading consumer products business unit. Global and industry experience—former board member of global technology company; board member of global consumer goods company.

Pierre Landolt, Ph.D.
        Member of the Board of Directors
        Swiss, age 68

Function at Novartis AG Pierre Landolt, Ph.D., has been a member of the Board of Directors since 1996. He qualifies as an independent Non-Executive Director and is Chairman of the Governance, Nomination and Corporate Responsibilities Committee.

Other activities Mr. Landolt is chairman of the Sandoz Family Foundation, overseeing its development in several investment fields. He is also chairman of the Swiss private bank Landolt & Cie SA. In Switzerland, he is chairman of Emasan AG and Vaucher Manufacture Fleurier SA, and vice chairman of Parmigiani Fleurier SA. Additionally, he is vice chairman of the Montreux Jazz Festival Foundation and a board member of Amazentis SA, Switzerland. In Brazil, Mr. Landolt is president of AxialPar Ltda. and Moco Agropecuaria Ltda., the Instituto Fazenda Tamanduá and the Instituto Estrela de Fomento ao Microcrédito.

Professional background Mr. Landolt graduated with a bachelor's degree in law from the University of Paris—Assas. From 1974 to 1976, he worked for Sandoz Brazil. In 1977, he acquired an agricultural estate in the semi-arid Northeast Region of Brazil, and within several years converted it into a model farm in organic and biodynamic production. Since 1997, Mr. Landolt has been associate and chairman of AxialPar Ltda., Brazil, an investment company focused on sustainable development. In 2000, he co-founded Eco-Carbone SAS, a company active in the design and development of carbon-sequestration processes. In 2007, he co-founded Amazentis SA, a startup company active in the convergence space of medication and nutrition. In 2011, Mr. Landolt received the title of Docteur des Sciences Économiques Honoris Causa from the University of Lausanne in Switzerland.

        Key knowledge/experience Banking and industry experience in international and emerging markets—chairman of private bank; chairman and vice chairman of luxury goods companies; board member of agribusiness company. Leadership and global experience chairman of large family investment holding.

Andreas von Planta, Ph.D.
        Member of the Board of Directors
        Swiss, age 60

Function at Novartis AG Andreas von Planta, Ph.D., has been a member of the Board of Directors since 2006. He qualifies as an independent Non-Executive Director. He is Chairman of the Risk Committee and a member of the Audit and Compliance Committee and the Governance, Nomination and Corporate Responsibilities Committee.

Other activities Mr. von Planta is a board member of Helvetia Holding AG in Switzerland, and also serves on the boards of various Swiss subsidiaries of foreign companies and other non-listed Swiss

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companies, including A.P. Moller Finance SA, HSBC Private Bank (Switzerland) SA, Socotab Frana SA, Raymond Weil SA and Générale-Beaulieu Holding SA. Additionally, he is chairman of the regulatory board of the SIX Swiss Exchange AG.

Professional background Mr. von Planta holds lic. iur. and Ph.D. degrees from the University of Basel in Switzerland, and an LL.M. from Columbia University School of Law in the United States. He passed his bar examinations in Basel in 1982. Since 1983, he has lived in Geneva and worked for the law firm Lenz & Staehelin, where he became a partner in 1988. His areas of specialization include corporate law, corporate governance, corporate finance, company reorganizations, and mergers and acquisitions.

        Key knowledge/experience Leadership and global experience—board member of insurance company. Industry experience—partner at leading Swiss law firm.

Charles L. Sawyers, M.D.
        Member of the Board of Directors
        American, age 56

Function at Novartis AG Charles L. Sawyers, M.D., has been a member of the Board of Directors since 2013. He qualifies as an independent Non-Executive Director and is a member of the Research & Development Committee and the Governance, Nomination and Corporate Responsibilities Committee.

Other activities In the United States, Dr. Sawyers is chair of the Human Oncology and Pathogenesis Program at Memorial Sloan Kettering Cancer Center, professor of medicine and of cell and developmental biology at the Weill Cornell Graduate School of Medical Sciences, and an investigator at the Howard Hughes Medical Institute. He serves on US President Barack Obama's National Cancer Advisory Board, and is former president of the American Association for Cancer Research and of the American Society for Clinical Investigation. He is also a member of the US National Academy of Sciences and Institute of Medicine.

Professional background Dr. Sawyers received his M.D. from the Johns Hopkins School of Medicine in the US, and worked at the Jonsson Comprehensive Cancer Center at the University of California, Los Angeles in the US for nearly 18 years before joining Memorial Sloan Kettering in 2006. An internationally-acclaimed cancer researcher, he co-developed the Novartis cancer drug Gleevec/Glivec and has received numerous honors and awards, including the Lasker-DeBakey Clinical Medical Research Award in 2009. Dr. Sawyers is a member of the scientific advisory board of Agios Pharmaceuticals Inc. in the US.

        Key knowledge/experience Leadership, healthcare and science experience—program chair at leading cancer treatment and research institution; member of US cancer advisory board; former president of scientific organization and of medical honor society. Education experience—professor at leading US university.

William T. Winters
        Member of the Board of Directors
        British/American, age 54

Function at Novartis AG William T. Winters has been a member of the Board of Directors since 2013. He qualifies as an independent Non-Executive Director and is a member of the Compensation Committee.

Other activities Mr. Winters is CEO and a board member of Standard Chartered, based in London. He previously ran Renshaw Bay, an alternative asset management firm, and was co-CEO of JPMorgan's investment bank from 2003 to 2010. Additionally, he was a commissioner on the UK Independent Commission on Banking in 2010 and 2011.

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Professional background Mr. Winters received his bachelor's degree from Colgate University in the United States, and his Master of Business Administration from the Wharton School of the University of Pennsylvania, also in the US. He joined JPMorgan in 1983 and held management roles across several market areas and in corporate finance. Mr. Winters is a board member of Colgate University, and also serves on the boards of the International Rescue Committee, the Young Vic theater and the Print Room theater in the United Kingdom. He was awarded the title of Commander of the Order of the British Empire in 2013.

Key knowledge/experience Leadership and global experience CEO and executive director of leading international banking group; former chairman and CEO of alternative asset management firm; former co-CEO of investment banking at global financial services firm. Education experience—board member of leading US university.

Honorary Chairmen

Alex Krauer, Ph.D.

Daniel Vasella, M.D.

Corporate Secretary

Charlotte Pamer-Wieser, Ph.D.

Executive Committee

Joseph Jimenez
        Chief Executive Officer of Novartis
        American, age 56

        Joseph Jimenez has been Chief Executive Officer (CEO) of Novartis since 2010. Under his leadership, and driven by a commitment to R&D investment, Novartis has developed one of the largest pipelines of self-originated drugs in the industry. Mr. Jimenez has also transformed the company's portfolio to focus on leading businesses with innovation power and global scale in pharmaceuticals, eye care and generics.

        Prior to serving as CEO of Novartis, Mr. Jimenez held the position of Division Head, Novartis Pharmaceuticals. He joined Novartis in 2007 as Division Head, Novartis Consumer Health.

        Previously, Mr. Jimenez served as president and CEO of the North American and European businesses for the H.J. Heinz Company. Additionally, he served on the board of directors of Colgate-Palmolive Co. from 2009 to 2015, and of AstraZeneca PLC from 2002 to 2007.

        Mr. Jimenez is a member of the board of directors of General Motors Co. He graduated in 1982 with a bachelor's degree from Stanford University and in 1984 with a Master of Business Administration from the University of California, Berkeley, both in the United States.

Steven Baert
        Head of Human Resources of Novartis
        Belgian, age 41

        Steven Baert has been Head of Human Resources (HR) of Novartis since February 2014. He is a member of the Executive Committee of Novartis.

        Mr. Baert joined Novartis in 2006 as Head of Human Resources Global Functions in Switzerland. He has held several senior HR roles, including Head of Human Resources for Emerging Growth Markets,

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and Global Head, Human Resources, Oncology. Mr. Baert also served as Head of Human Resources, US and Canada, for Novartis Pharmaceuticals Corporation.

        Prior to joining Novartis, Mr. Baert held HR positions at Bristol-Myers Squibb Co. and Unilever.

        Mr. Baert represents Novartis on the board of GSK Consumer Healthcare. He holds a Master of Business Administration from the Vlerick Business School in Belgium and a Master in Law from the Katholieke Universiteit Leuven, also in Belgium. Additionally, he has a Bachelor in Law from the Katholieke Universiteit Brussels.

Felix R. Ehrat, Ph.D.
        Group General Counsel of Novartis
        Swiss, age 58

        Felix R. Ehrat, Ph.D., has been Group General Counsel of Novartis since 2011. He is a member of the Executive Committee of Novartis.

        Mr. Ehrat is a leading practitioner of corporate, banking, and mergers and acquisitions law, as well as an expert in corporate governance and arbitration. He started his career as an associate with Baer & Karrer Ltd. in Zurich in 1987, became partner in 1992, and advanced to senior partner (2003 to 2011) and executive chairman of the board (2007 to 2011) of the firm. Mr. Ehrat is chairman of Globalance Bank AG in Switzerland, and chairman of SwissHoldings (Federation of Industrial and Service Groups in Switzerland). He is a board member of Geberit AG and avenir suisse (a think tank for economic and social issues). Previously, he was, among other things, chairman and a board member of several listed and non-listed companies.

        Mr. Ehrat was admitted to the Zurich bar in 1985 and received his doctorate of law from the University of Zurich in Switzerland in 1990. In 1986, he completed an LL.M. at McGeorge School of Law in the United States. Some of his past memberships include the International Bar Association, where he was co-chair of the Corporate and M&A Law Committee from 2007 to 2008, and Association Internationale des Jeunes Avocats, where he was president from 1998 to 1999.

David Epstein
        Division Head, Novartis Pharmaceuticals
        American, age 54

        David Epstein has been Division Head of Novartis Pharmaceuticals since 2010. He is a member of the Executive Committee of Novartis.

        Since taking this role, Mr. Epstein has set a course for Novartis Pharmaceuticals to develop into the world's best pharmaceutical business. He previously served as Head of Novartis Oncology, building the Oncology business from start-up to number two in the world through six new drug approvals and more than 10 indication expansions.

        Before joining Novartis, Mr. Epstein was an associate in the strategy practice of the consulting firm Booz Allen Hamilton in the United States. He joined Sandoz, a Novartis predecessor company, in 1989 and held various leadership positions of increasing responsibility, including Chief Operating Officer of Novartis Pharmaceuticals Corporation in the US and Global Head of Novartis Specialty Medicines.

        Mr. Epstein received a bachelor's degree in pharmacy, with honors, from the Ernest Mario School of Pharmacy at Rutgers, The State University of New Jersey, in the US in 1984. He received a Master of Business Administration in finance and marketing from New York's Columbia University Graduate School of Business, also in the US, in 1987.

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Mark C. Fishman, M.D.
        President of the Novartis Institutes for BioMedical Research
        American, age 64

        Mark C. Fishman, M.D., has been President of the Novartis Institutes for BioMedical Research (NIBR) since 2002. He is a member of the Executive Committee of Novartis.

        Before joining Novartis in 2002, Dr. Fishman was chief of cardiology and director of the Cardiovascular Research Center at Massachusetts General Hospital, as well as professor of medicine at Harvard Medical School, both in the United States. He completed his internal medicine residency, chief residency and cardiology training at Massachusetts General Hospital.

        Dr. Fishman graduated with a bachelor's degree from Yale College in the US in 1972, and with an M.D. from Harvard Medical School in 1976. He has been honored with many awards and distinguished lectureships, and serves on the council of the Institute of Medicine of the National Academies in the US. Additionally, he is a fellow of the American Academy of Arts and Sciences, also in the US.

Richard Francis
        Division Head, Sandoz
        British, age 47

        Richard Francis has been Division Head of Sandoz since May 2014. He is a member of the Executive Committee of Novartis.

        Mr. Francis joined Novartis from Biogen Idec, where he held global and country leadership positions during his 13-year career with the company. Most recently, he was senior vice president of the company's US commercial organization. From 1998 to 2001, he was at Sanofi in the United Kingdom, where he held various marketing roles across the company's urology, analgesics and cardiovascular products. He has also held sales and marketing positions at Lorex Synthelabo and Wyeth.

        Mr. Francis holds a B.A. in economics from the Manchester Metropolitan University, England.

Jeff George
        Division Head, Alcon
        American, age 42

        Jeff George has been Division Head of Alcon since May 2014. He is a member of the Executive Committee of Novartis.

        For more than five years prior to joining Alcon, Mr. George led Sandoz, the generics division of Novartis and the world's second-largest generics company with more than 26,000 associates across 164 countries. Prior to Sandoz, he was Head of Emerging Markets for the Middle East, Africa, Southeast Asia and CIS for Novartis Pharmaceuticals.

        Mr. George joined Novartis in 2007 as Head of Commercial Operations for Western and Eastern Europe for Novartis Vaccines. Before joining Novartis, he was senior director of strategic planning and business development at Gap Inc. in San Francisco, United States. Between 2001 and 2004, he worked at McKinsey & Company, also in San Francisco, as an engagement manager.

        Mr. George received a Master of Business Administration from Harvard University in the US in 2001. He graduated in 1999 with a master's degree from the Johns Hopkins University's School of Advanced International Studies, also in the US, where he studied international economics and emerging markets political economy. In 1996, he received his bachelor's degree, magna cum laude, in international relations from Carleton College in the US.

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Harry Kirsch
        Chief Financial Officer of Novartis
        German, age 50

        Harry Kirsch has been Chief Financial Officer (CFO) of Novartis since 2013. He is a member of the Executive Committee of Novartis.

        Mr. Kirsch joined Novartis in 2003 and, prior to his current position, served as CFO of the company's Pharmaceuticals Division. Under his leadership, the division's core operating income margin increased, in constant currencies, every quarter of 2011 and 2012 despite patent expirations. At Novartis, he also served as CFO of Pharma Europe, and as Head of Business Planning & Analysis and Financial Operations for the Pharmaceuticals Division. Mr. Kirsch joined Novartis from Procter & Gamble (P&G) in the United States, where he was CFO of P&G's global pharmaceutical business. Prior to that, he held finance positions in different categories of P&G's consumer goods business, technical operations, and Global Business Services organization.

        Mr. Kirsch represents Novartis on the board of GSK Consumer Healthcare. He studied industrial engineering and economics at the University of Karlsruhe in Germany ("Diplom-Wirtschaftsingenieur").

André Wyss
        Global Head, Novartis Business Services and Country President for Switzerland
        Swiss, age 48

        André Wyss has been Global Head of Novartis Business Services (NBS) since May 2014. In July 2014, he was also appointed Country President for Switzerland. He is a member of the Executive Committee of Novartis.

        Mr. Wyss joined Novartis in 1984 as a chemistry apprentice. Before being appointed Head of NBS, he served as US Country Head and President of Novartis Pharmaceuticals Corporation. Prior to that, he was Head of the Pharmaceuticals Division Region Asia-Pacific, Middle East and African Countries (AMAC). Before leading AMAC, he served as Group Emerging Markets Head, and as Country President and Head of Pharmaceuticals, Greece.

        Mr. Wyss received a graduate degree in economics from the School of Economics and Business Administration (HWV) in Switzerland in 1995. He is a member of the board of economiesuisse.

Secretary

Bruno Heynen

6.B Compensation

DEAR SHAREHOLDER

        As Chairman of the Compensation Committee of the Board of Directors, I am pleased to share with you the 2015 Compensation Report of Novartis AG.

        At Novartis, our mission is to discover new ways to improve and extend people's lives. We use science-based innovation to address some of society's most challenging healthcare issues, discovering and developing breakthrough treatments and finding new ways to deliver them to as many people as possible. Our company also wants to be an employer of choice and to provide superior returns to our shareholders. During the last two years, the Compensation Committee undertook significant work to:

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Better align the executive compensation system with our long-term business strategy and shareholder interests

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–

Strengthen the corporate governance framework

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Implement all elements of the Minder Ordinance to Board and executive compensation

        The Compensation Committee would like to acknowledge the strong shareholder support at the 2015 Annual General Meeting (AGM) for all of the remuneration-related resolutions, and express appreciation for the opportunity to engage many of our shareholders on compensation topics in 2015. The Compensation Committee would also like to thank Dr. Ulrich Lehner for his services on the Compensation Committee and welcome William Winters as a new member.

2015 company performance

        In 2015, Novartis progressed in all of its key priorities. The company completed its portfolio transformation ahead of schedule, achieved major innovation milestones with Entresto, Cosentyx and biosimilars, captured cross-divisional synergies with the creation of the Novartis Business Services unit and continued to build a high-performing organization. Currencies had a very negative impact on our reported results in US dollars as the US dollar strengthened significantly vs. all major currencies in 2015. Operationally, in constant currencies, the company was marginally below its sales target but slightly above its net income and free cash flow targets. Pharmaceuticals and Sandoz delivered strong performances, while Alcon negatively impacted consolidated results. The company improved core margin despite the currency impact. Although, in US dollars, Novartis' TSR was –3.5% in 2015, TSR was +53.4% for the period 2013-2015, corresponding to the usual three-year cycle of our long-term plans.

2015 CEO compensation

        For 2015, our CEO was awarded total compensation of CHF 11,596,560. This amount included an Annual Incentive of CHF 3,090,758 (representing 100% of target) based on a combination of his and our company's performance, as summarized above. Half of the Annual Incentive was delivered in cash, and the remaining half was delivered in restricted share units, which will have a three-year vesting period. His total compensation also included Long-Term Incentive grants with a target value of CHF 6,181,580, which will be subject to performance conditions for the 2015-2017 cycle.

Compensation systems

        While the Compensation Committee continued to evaluate the effectiveness of our compensation program, 2015 was a year of stability and refinement of our existing compensation systems following major changes to the Swiss and international regulatory environment. During 2015, the Compensation Committee made only small changes to further align compensation to long-term business strategy and shareholder interests for all associates of Novartis. With effect from 2016, the new compensation system for Executive Committee members will be rolled out to all key executives. Our company has also embedded our Values and Behaviors in the talent framework and ensured that our rigorous performance management process is upheld at all levels of the organization. The new program has the full support of our Board of Directors. We believe that it provides a competitive advantage to Novartis in the marketplace for executive talent.

2016 AGM

        The Compensation Committee is committed to continued engagement between shareholders and our company to fully understand diverse viewpoints and discuss the important connections between our company's compensation program, business strategy, and long-term financial and operating performance. As was the case last year and in line with our Articles of Incorporation, shareholders will be asked to approve the following:

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Total maximum amount of Board compensation from the 2016 AGM to the 2017 AGM

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Total maximum amount of Executive Committee compensation for the 2017 financial year

        Shareholders will also be asked to endorse this Compensation Report in an advisory vote.

        On behalf of Novartis and the Compensation Committee, I would like to thank you for your continued support and feedback, which I consider extremely valuable in driving improvements in our compensation systems and practices. I invite you to send your comments to me at the following email address: investor.relations@novartis.com.

        Respectfully,

Enrico Vanni, Ph.D.

        Chairman of the Compensation Committee

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COMPENSATION REPORT AT A GLANCE

Executive Committee compensation

2015 Executive Committee Compensation System (see "—2015 Executive Committee Compensation System" below)

The following components are included:

	Fixed compensation and benefits		Variable compensation
	Annual base compensation	Pension and other benefits	Annual Incentive	Long-Term Performance Plan (LTPP)	Long-Term Relative Performance Plan (LTRPP)
Purpose	Reflects associates' responsibilities, job characteristics, experience and skill sets	Establish a level of security for associates and their dependents tailored to local market practices and regulations	Rewards performance against key short-term targets and Values & Behaviors	Rewards long-term shareholder value creation and long-term innovation	Rewards relative total shareholder return
Performance period	n/a	n/a	1 year (2015)	3 years (2015-2017)	3 years (2015-2017)
Performance measures	n/a	n/a	Based on a payout matrix made up of: —Individual balanced scorecard, including financial targets and individual objectives —Assessed Values and Behaviors	Based on: —75% Novartis Cash Value Added —25% divisional long-term innovation milestones	Based on Novartis relative total shareholder Return vs. versus our peer group of 12 healthcare companies(1)
Delivery (at the end of the performance period for variable compensation)	Cash	Country specific	50% cash 50% deferred equity(2) (3-year holding of restricted shares/ restricted share units)	Equity (includes dividend equivalents)	Equity (includes dividend equivalents)

⁽¹⁾

The companies in our peer group consist of Abbott, AbbVie, Amgen, AstraZeneca, Bristol-Myers Squibb, Eli Lilly & Co., GlaxoSmithKline, Johnson & Johnson, Merck & Co., Pfizer, Roche and Sanofi.

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Executive Committee members may elect to receive more of their Annual Incentive in shares instead of cash.

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	Fixed compensation and benefits		Variable compensation
	Annual base compensation	Pension and other benefits	Annual Incentive	Long-Term Performance Plan (LTPP)	Long-Term Relative Performance Plan (LTRPP)	Total variable compensation
CEO variable opportunity as % of base salary	n/a	n/a	Target: 150% (range 0-200% of target)	Target: 200% (range 0-200% of target)	Target: 100% (range 0-200% of target)	Target: 450% (range 0-200% of target)
Executive Committee variable opportunity as % of base salary (excluding CEO)	n/a	n/a	Target: 90%-120% (range 0-200% of target)	Target: 140%-190% (range 0-200% of target)	Target: 30%-90% (range 0-200% of target)	Target: 260%-400% (range 0-200% of target)

2015 Executive Committee Compensation (see "—2015 Executive Committee Compensation" below)

        Amounts paid or granted during the 2015 financial year:

	Fixed compensation and benefits					Variable compensation
	Annual base compensation		Pension and other benefits			Annual Incentive		Long-Term Performance Plan (LTPP)			Long-Term Relative Performance Plan (LTRPP)			Total variable compensation
(CHF)
Purpose
CEO compensation		2,060,500		263,721			3,090,758		4,121,054	(1)		2,060,527	(1)		11,596,560
Executive Committee compensation (excluding CEO)		7,429,769		5,071,392			11,230,142		11,973,697	(1)		4,652,661	(1)		40,357,661
Total		9,490,269		5,335,113	(2)		14,320,900		16,094,751			6,713,188			51,954,221	(2)

⁽¹⁾

The amounts shown in these columns represent the underlying share value of the grant date target value of the number of Performance Share Units granted to each Executive Committee member for the performance cycle 2015-2017.

⁽²⁾

It includes an amount of CHF 58,757 for mandatory employer contributions paid by Novartis to governmental social security systems. This amount is out of total employer contributions of CHF 3,457,097, and provides a right to the maximum future insured government pension benefit for the Executive Committee member.

2016 Executive Committee Compensation System

Compensation opportunity

        As for all associates, Executive Committee members may have received a merit increase, based on their 2015 performance, and/or an adjustment to benchmark.

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Performance measures

Annual Incentive

        No changes have been made to the performance measures under the Annual Incentive.

Long-Term Incentives

        No changes have been made to the performance measures under either the Long-Term Performance Plan or the Long-Term Relative Performance Plan.

Board compensation

2015 Board Compensation System (see "—2015 Board Compensation System" below)

Delivery: 50% cash, 50% shares

	Annual fee
(CHF)
Chairman of the Board		3,800,000	(1)
Board membership		300,000
Vice Chairman		50,000
Chairman of Audit and Compliance Committee		120,000
Chairman of the following committees:
—Compensation Committee
—Governance, Nomination and Corporate Responsibilities Committee
—Research & Development Committee(2)
—Risk Committee		60,000
Membership of Audit and Compliance Committee		60,000
Membership of the following committees:
—Compensation Committee
—Governance, Nomination and Corporate Responsibilities Committee
—Research & Development Committee
—Risk Committee		30,000

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The Chairman also received company pension contributions until the 2015 AGM (when they ceased), and payment for loss of other entitlements with his previous employer for a total value of EUR 2,665,051 staggered over the period from 2014 to 2016.

⁽²⁾

The Chairman receives no additional committee fees for chairing the Research & Development Committee.

2015 Board Compensation (see "—2015 Board Compensation" below)

Amounts earned during the 2015 financial year

	Cash		Equity		Other benefits(1)		Total
(CHF)
Chairman Dr. Joerg Reinhardt		1,900,000		1,900,000		29,197		3,829,197
Other Board members		1,601,417		2,331,917		17,145		3,950,479
Total		3,501,417		4,231,917		46,342		7,779,676	(2)

⁽¹⁾

It includes an amount of CHF 21,502 for mandatory employer contributions paid by Novartis to Swiss governmental social security systems. This amount is out of total employer contributions of CHF 429,806, and provides a right to the maximum

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future insured government pension benefit for the Board member. No occupational pension contributions have been provided to the Chairman from the 2015 AGM onwards.

⁽²⁾

Please see "—2015 Board Compensation—Reconciliation Between the Reported Board Compensation and the Amount Approved by Shareholders at the AGM" for a reconciliation between the amount reported in this table and the amount approved by shareholders at the 2015 AGM to be used to compensate Board members for the period from the 2015 AGM to the 2016 AGM. The amount paid is within the maximum amount approved by shareholders.

2016 Board Compensation System

        The Board compensation system will remain unchanged in 2016.

Compensation governance

Governance and risk management (see "—Compensation Governance" below)

        Decision-making authorities with regard to compensation, within the parameters set by the shareholders' meeting

Decision on	Authority
Compensation of Chairman and other Board members	Board of Directors
Compensation of CEO	Board of Directors
Compensation of Executive Committee members	Compensation Committee

Executive Committee compensation risk management principles

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Rigorous performance management process

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Balanced mix of short-term and long-term variable compensation elements

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Matrix approach to performance evaluation under the Annual Incentive, including an individual balanced scorecard and assessed Novartis Values and Behaviors

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Performance-vesting Long-Term Incentives only, with three-year overlapping cycles

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All variable compensation is capped at 200% of target

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Contractual notice period of 12 months

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Post-contractual non-compete limited to a maximum of 12 months (annual base compensation and Annual Incentive of the prior year only)

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No severance payments or change-of-control clauses

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Clawback principles apply to all elements of variable compensation

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Share ownership requirements; no hedging or pledging of Novartis share ownership position by Board and Executive Committee members

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EXECUTIVE COMMITTEE COMPENSATION PHILOSOPHY AND PRINCIPLES

Novartis Compensation Philosophy

        The compensation philosophy aims to ensure that the Executive Committee is rewarded according to its success in implementing the company strategy and to its contribution to company performance. The Executive Committee compensation system is designed in line with the following key elements:

Alignment With Company Strategy

        The Novartis strategy is to use science-based innovation to deliver better patient outcomes. We aim to lead in growing areas of healthcare. To align the compensation system with this strategy, the Board of Directors determines specific, measurable and time-bound performance metrics, including financial metrics such as sales, profit and cash flow, as well as non-financial metrics, which indicate the success of its implementation. The Board of Directors then sets short-term and long-term targets for each of these performance metrics and compensates the Executive Committee according to the extent to which the targets are achieved. In line with the company's focus on science-based innovation, the Board of Directors sets a number of specific targets for each division to fulfill within specific timeframes. In line with the company's aim to lead in growing areas of healthcare, Novartis has focused its portfolio to have three market-leading divisions in innovative pharmaceuticals, eye care and generics. Finally, to ensure that Novartis is a high-performing organization over the long term, the Board of Directors also sets targets in areas such as quality, talent, integrity and reputation, which are reinforced by the Novartis Values and Behaviors.

Executive Committee Compensation Benchmarking

        To attract and retain key talent, it is important for us to offer competitive compensation opportunities. Executives meeting their objectives are generally awarded target compensation at a level comparable to the median level of similar roles within the benchmark companies (see "—Benchmark Companies" below). In the event of under- or over-performance, the actual compensation may be lower or higher than the benchmark median.

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        While benchmarking information regarding executive pay is considered by the Compensation Committee, any decisions on compensation are ultimately based on the specific business needs of Novartis and the performance of the individual.

        The Compensation Committee reviews the compensation of the CEO and Executive Committee members annually in comparison to the relevant compensation levels of similar positions at peer companies. For this purpose, the Compensation Committee uses benchmark data from publicly available sources, as well as reputable market data providers. All data is reviewed and evaluated by the Compensation Committee's independent advisor, who also provides independent research and advice regarding the compensation of the CEO and other Executive Committee members.

        For the CEO and Executive Committee members, the company benchmarks against global competitors in the healthcare industry with similar business models, size and needs for talent and skills. The Compensation Committee reviews the companies in our compensation peer group annually and considers adjustments over time in line with the evolution of the competitive environment in the healthcare industry.

        Within this peer group, Novartis is among the largest in key dimensions including market capitalization, sales and operating income.

2015 EXECUTIVE COMMITTEE COMPENSATION SYSTEM

        The 2015 Executive Committee compensation system consists of the following components:

Fixed Compensation And Benefits

Annual Base Compensation

        The level of base compensation reflects each associate's key responsibilities, job characteristics, experience and skill sets. It is paid in cash, typically monthly.

        Base compensation is reviewed annually, and any increase reflects merit based on performance, as well as market movements.

Pension and Other Benefits

        The primary purpose of pension and insurance plans is to establish a level of security for associates and their dependents with respect to age, health, disability and death. The level and scope of pension and insurance benefits provided are country-specific, influenced by local market practices and regulations.

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        Company policy is to change from defined-benefit pension plans to defined-contribution pension plans. All major plans have now been aligned with this policy as far as reasonably practicable. See also "Item 18. Financial Statements—Note 25."

        Novartis may provide other benefits in a specific country according to local market practices and regulations, such as a company car, and tax and financial planning services. Executive Committee members who have been transferred on an international assignment also receive benefits (such as tax equalization) in line with the company's international assignment policies.

Variable Compensation

Annual Incentive

        For the Annual Incentive of the CEO and Executive Committee members, a target incentive is defined as a percentage of base compensation at the beginning of each performance year. The target incentive is 150% of base compensation for the CEO, and ranges from 90% to 120% for other Executive Committee members. It is paid half in cash and half in shares deferred for three years. The formula for the target Annual Incentive is outlined below:

Performance measures

        The Annual Incentive is based on a payout matrix made up of two elements: a balanced scorecard and the Novartis Values and Behaviors, which are described in more detail below.

Balanced scorecard

        The first element used to determine the payout of the Annual Incentive is a balanced scorecard within which Group or divisional financial targets are weighted 60% and individual objectives are weighted 40%. As reported last year, as of 2015, innovation was removed from the Group financial targets of the Annual Incentive and instead included in the Long-Term Performance Plan, as the Compensation Committee's view is that innovation achievements are more effectively measured on a multiyear basis. For more details on the target-setting and performance management process, please refer to "—Executive Committee Performance Management Process."

Group or divisional financial targets

        Within the Group or divisional financial targets, each measure such as sales or net income is weighted individually. The CEO and function heads share the same Group financial targets (described further below). In place of the Group targets, division heads have divisional targets that include divisional sales, operating income, free cash flow as a percentage of sales, and market share of peers. The Board of Directors sets the Group and divisional financial targets at the start of each performance year in constant currencies, and evaluates achievement against these targets at the end of that year.

Individual objectives

        Individual objectives differ for each Executive Committee member depending on his responsibilities, and may include additional financial and non-financial targets. Examples of additional financial targets are implementation of growth, productivity and development initiatives. Non-financial targets may include

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leadership and people management, workforce diversity, quality, social initiatives such as access to medicines, and ethical business practices.

        By way of illustration, the balanced scorecard measures used for the CEO in 2015 are set out in the following table:

2015 BALANCED SCORECARD MEASURES USED FOR THE CEO

Performance measures	Weight			Breakdown of performance measures
Group financial targets		60	%	Group net sales Corporate net result Group net income Group free cash flow as % of sales
CEO individual objectives		40	%	Additional financial targets (e.g., EPS) Innovation and growth Portfolio review Cross-divisional synergies High-performing organization
Overall total		100	%

Novartis Values and Behaviors

        The second element used to determine the payout of the Annual Incentive ensures that the associate's performance is achieved in line with the highest standards of business conduct, as outlined in the Novartis Values and Behaviors. Novartis requires Executive Committee members to be action-oriented and full of energy to face challenging situations, to assign the highest priority to customer satisfaction, and to commit to honesty in every facet of behavior, demonstrating strong ethical and legal conduct. Novartis leaders are expected to live up to these behaviors on a daily basis, and to align and energize other associates to do the same. Novartis Values and Behaviors are an essential element in the annual assessment of Executive Committee members. For more details on the performance assessment process of the Novartis Values and Behaviors, please refer to "—Executive Committee Performance Management Process—Assessment of Values and Behaviors at Novartis."

Performance evaluation and payout determination

        Following a thorough review of the two elements that compose the Annual Incentive—performance against the balanced scorecard objectives and an assessment against the Novartis Values and Behaviors—a rating from 1 to 3 is assigned to each.

        The following payout matrix shows how the Annual Incentive performance factor is derived using a combination of performance against the balanced scorecard and demonstration of the Novartis Values and Behaviors. The Compensation Committee determines the final payout factor for Executive Committee members taking into account the ranges shown. Payouts are capped at 200% of target.

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        The payout matrix for the Annual Incentive equally recognizes performance against the objectives in the balanced scorecard, and the assessment against the Novartis Values and Behaviors.

Form and delivery of the award

        The Annual Incentive is paid 50% in cash in March of the year following the performance period, and 50% in Novartis shares (or restricted share units, known as RSUs) that are deferred and restricted for three years. Each restricted share is entitled to voting rights and payment of dividends during the vesting period. Each RSU is equivalent in value to one Novartis share and is converted into one share at the vesting date. RSUs under this plan do not carry any dividend, dividend equivalent or voting rights. Following the vesting period, settlement is made in unrestricted Novartis shares or American Depositary Receipts (ADRs).

        If a participant leaves Novartis due to voluntary resignation or misconduct, unvested shares (and RSUs) are forfeited. The Board of Directors and the Compensation Committee retain accountability for ensuring that rules are applied correctly, and for determining whether a different treatment should apply in exceptional circumstances. This is necessary to ensure that the treatment of any award in the event of cessation of employment is appropriate.

        Executives may choose to receive some or all of the cash portion of their Annual Incentive in Novartis shares or ADRs (US only) that will not be subject to conditions. In the US, awards may also be delivered in cash under the US-deferred compensation plan.

Long-Term incentives

        Novartis operates two Long-Term Incentives (the Long-Term Performance Plan and the Long-Term Relative Performance Plan) for the Executive Committee members, which function in an identical way except for the performance conditions applied.

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Grant of Long-Term Incentives

        At the beginning of every performance period, Executive Committee members are granted a target number of performance share units (PSUs) under each of the Long-Term Incentives according to the following formula:

Vesting of Long-Term Incentives

        At the end of the three-year performance period, the Compensation Committee adjusts the number of PSUs realized based on actual performance against target.

        The performance factor can range from 0% to 200% of target. Each realized PSU is converted into one Novartis share at the vesting date. PSUs do not carry voting rights, but do carry dividend equivalents that are reinvested in additional PSUs and paid at vesting to the extent that performance conditions have been met. In the US, awards may also be delivered in cash under the US-deferred compensation plan.

        If a participant leaves Novartis due to voluntary resignation or termination by the company for misconduct, none of the awards vest. When a member is terminated by the company for reasons other than for performance or conduct, the award vests on a pro-rata basis for time spent with the company during the performance period. In such a case, the award will vest on the regular vesting date (no acceleration), will be subject to performance should an evaluation be possible, and will also be subject to other conditions such as observing the conditions of a non-compete agreement. Executives leaving Novartis due to approved retirement, including approved early retirement, death or disability, will receive full vesting of their award on the normal vesting date (acceleration will only apply in the case of death). The award will be subject to performance, should an evaluation be possible, and will also be subject to other conditions such as observing the conditions of a non-compete agreement. Further details can be found in "Item 18. Financial Statements—Note 26."

        The Board of Directors and the Compensation Committee retain accountability for ensuring that rules are applied correctly, and for determining whether different treatment should apply in exceptional circumstances. This is necessary to ensure that the treatment of any award in the event of cessation of employment is appropriate.

Long-Term Performance Plan (LTPP)

        This is the first of the two Long-Term Incentive plans.

Overview

        The LTPP, as described below, was granted for the first time to the CEO and Executive Committee members in 2014. The target incentive is 200% of base compensation for the CEO, and ranges from 140%

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to 190% for other Executive Committee members. Additional executives in key positions who have a significant impact on the long-term success of Novartis were invited to participate in the LTPP, as of 2015.

        In the 2013 and earlier Compensation Reports, there was a different plan that was also called LTPP. In this Compensation Report (as in the 2014 Compensation Report), that plan has been renamed Old Long-Term Performance Plan (OLTPP), and is described under "—Performance Vesting of Old Long-Term Performance Plan (2013-2015)."

Performance measures

        Awards under the LTPP are based on three-year performance objectives and split as follows:

Financial measure (Novartis Cash Value Added): 75% of LTPP

        The Novartis Cash Value Added (NCVA) is a metric that incentivizes both sales growth and margin improvement as well as asset efficiency. A summary of the calculation is below:

        The NCVA targets are determined considering expected growth rates in sales, operating income and return from invested capital, under foreseen economic circumstances.

        At the end of the performance cycle, the NCVA performance factor is calculated in constant currencies. The NCVA performance factor is based on a 1:3 payout curve, where a 1% deviation in realization versus target leads to a 3% change in payout (for example, a realization of 105% leads to a payout factor of 115%). If performance over the three-year vesting period falls below 67% of target, no payout is made for this portion of LTPP. If performance over the three-year vesting period is above 133% of target, payout for this portion of LTPP is capped at 200% of target.

        The calculated performance realization is adjusted for unplanned major events during the cycle (e.g., significant merger and acquisition transactions).

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Innovation measure: 25% of LTPP

        Innovation is a key element of the Novartis strategy. Divisional innovation targets are set at the beginning of the performance cycle, comprised of up to 10 target milestones that represent the most important research and development project milestones for each division. These milestones are chosen because of the expected future impact to Novartis in terms of potential revenue, or due to their qualitative potential impact to science, medicine, and the treatment or care of patients.

        A payout matrix has been established for this metric that allows a 0-150% payout for the achievement of target milestones. If all target milestones are achieved, a 150-200% payout may be awarded for extraordinary additional achievement. The CEO and function heads receive the weighted average of divisional innovation payouts.

        The Research & Development Committee assists the Board of Directors and the Compensation Committee in setting the innovation targets and reviewing achievements at the end of the cycle.

Long-Term Relative Performance Plan (LTRPP)

        This is the second of the two Long-Term Incentive plans.

Overview

        The LTRPP was granted for the first time to the CEO and Executive Committee members in 2014. The target incentive is 100% of base compensation for the CEO, and ranges from 30% to 90% for other Executive Committee members.

Performance measure

        The LTRPP is based on the achievement of long-term relative Group total shareholder return (TSR) versus the peer group of 12 companies in the healthcare industry over rolling three-year performance periods. TSR is calculated in US dollars as share price growth plus dividends over the three-year performance period. The calculation will be based on Bloomberg standard published TSR data, which is publicly available.

        The peer group for the 2015-2017 performance cycle is the same as for benchmarking the compensation of Executive Committee members and is comprised of: Abbott, AbbVie, Amgen, AstraZeneca, Bristol-Myers Squibb, Eli Lilly & Co., GlaxoSmithKline, Johnson & Johnson, Merck & Co., Pfizer, Roche and Sanofi.

        At the end of the performance period, all companies are ranked in order of highest to lowest TSR, and the position in the peer group determines the payout range as follows:

PAYOUT MATRIX Position in peer group	Payout range
Positions 1-3	160-200%
Positions 4-6	100-140%
Positions 7-10	20-80%
Positions 11-13	0%

        The Compensation Committee determines the payout within the ranges shown, and takes into consideration factors such as absolute TSR, overall economic conditions, currency fluctuations and other unforeseeable situations.

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Target Disclosure

        In line with our principle to allow shareholders to assess the relationship between company performance and pay, the financial, innovation and individual targets under the Annual Incentive plan and the LTPP will be disclosed in the Compensation Report with the achievements against such targets at the end of each performance cycle. Targets under the Annual Incentive plan and the LTPP are considered confidential at the time of setting. Communicating such targets before the end of the performance cycle would allow substantial insight into the company's forward-looking strategies and could therefore place the company at a competitive disadvantage.

2016 Executive Committee compensation system

        The Compensation Committee has evaluated the Executive Committee compensation system and has decided that it will remain unchanged in 2016. The Compensation Committee believes that it is operating as intended, supports the company's strategy, and is aligned with market and best practice.

EXECUTIVE COMMITTEE PERFORMANCE MANAGEMENT PROCESS

        To foster a high-performance culture, the company applies a uniform performance management process worldwide based on quantitative and qualitative criteria, including Novartis Values and Behaviors. Novartis associates, including the CEO and Executive Committee members, are subject to a three-step formal process:

CEO Objective Setting

        At the beginning of the year, the CEO presents the Group and divisional financial and innovation targets of our variable compensation plans to both the Compensation Committee and the Board of Directors for approval. At the same time, the CEO discusses his individual objectives for the coming year with the Chairman of the Board of Directors.

        The Board of Directors reviews and approves these objectives, which are incorporated into the Annual Incentive and Long-Term Incentive plans.

Annual Incentive

        The Group financial and individual targets proposed by the CEO are challenged and approved by both the Compensation Committee and the Board of Directors. The targets set for the Annual Incentive support our ambition to be a leader in the healthcare industry.

Financial and innovation measure of LTPP

        The NCVA target is based on the company's long-range strategic plan approved by the Board of Directors to deliver long-term sustainable growth and productivity as well as efficient use of its assets. The Compensation Committee believes that the NCVA target is ambitiously set to create long-term value for shareholders.

        The innovation targets of the LTPP are largely aligned with the major development projects outlined in "Item. 4 Information on the Company—Item 4.B Business Overview—Pharmaceuticals—Selected Development Projects," "Item. 4 Information on the Company—Item 4.B Business Overview—Alcon—Selected Development Projects," and "Item. 4 Information on the Company—Item 4.B Business Overview—Sandoz—Biosimilars in Phase III Development and Registration." The targets are

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recommended by the divisions and reviewed by the Research & Development Committee. The innovation targets are focused on challenging milestones of critical importance to the long-term success of the business, and should be best- or first-in-class development projects that can significantly advance treatment outcomes for patients worldwide.

Relative TSR: 100% of LTRPP

        The payout matrix for the LTRPP can be found in "—2015 Executive Committee Compensation System—Variable Compensation—Long-Term Incentives—Long-Term Relative Performance Plan (LTRPP)." The Compensation Committee believes that the LTRPP payout matrix is aligned with the company's pay-for-performance principle, including a very significant reduction in the actual payout relative to target payout if the company's TSR is below the median of the peer group.

CEO Performance evaluation

        The Board of Directors periodically assesses Group business performance as well as progress of the CEO against his objectives and incentive plan targets. At the mid-year performance review, the performance of the CEO is reviewed by the Chairman of the Board of Directors.

        For the year-end review, the CEO prepares and presents to the Chairman of the Board of Directors, and later to the full Board of Directors, the actual results against the previously agreed-upon objectives, taking into account the audited financial results as well as an assessment against the Novartis Values and Behaviors. At the year-end review, the Board of Directors discusses the performance of the CEO without him being present. It evaluates the extent to which targeted objectives have been achieved and, to the extent possible, compares these results with peer industry companies, taking into account general economic and financial criteria and industry developments. The Board of Directors later shares its assessment with the CEO.

CEO Compensation determination

        At its January meeting, following a recommendation from the Compensation Committee, the Board of Directors decides on the CEO's variable compensation for the prior performance cycles and on the target compensation for the coming year. This meeting takes place without the CEO being present. The Board of Directors later shares its decisions with the CEO.

Performance management process for other Executive Committee members (excluding the CEO)

        Executive Committee members propose the divisional financial and innovation targets for approval by the CEO and, subsequently, by the Board of Directors and Compensation Committee. In addition, each Executive Committee member agrees on individual objectives with the CEO, who also reviews members' performance at mid-year and year-end.

        At year-end, following his evaluation, the CEO meets with the Chairman of the Board of Directors, who reviews the performance of Executive Committee members. Subsequently, the CEO presents and discusses at the Board of Directors meeting his recommended performance rating for each member.

        Later, in the presence of the CEO and taking into consideration the recommendations of the Board of Directors, the Compensation Committee decides at its January meeting on the variable compensation of Executive Committee members for the prior year and on their target compensation for the coming year. The Compensation Committee informs the Board of Directors of its final decisions, and the CEO later shares these decisions with Executive Committee members.

218

Assessment of Values and Behaviors at Novartis

        Values and Behaviors have been an integral part of the company's compensation system since its foundation. In 2015, to reinforce the culture of the company, Novartis rolled out new Values and Behaviors—which are innovation, quality, collaboration, performance, courage and integrity.

What we value	Observed behaviors
Innovation by experimenting and delivering solutions	—Experiments and encourages others to do so
	—Takes smart risks that benefit patients and customers
	—Delivers new solutions with speed and simplicity
Quality by taking pride in doing ordinary things extraordinarily well	—Is always looking for better ways to do things
	—Does not compromise on quality and safety, and strives for excellence
	—Continuously works to improve own strengths and weaknesses
Collaboration by championing high-performing teams with diversity and inclusion	—Champions working together in high-performing teams
	—Knows self and impact on others
	—Welcomes diversity and inclusion of styles, ideas and perspectives
Performance by prioritizing and making things happen with urgency	—Is passionate to achieve goals and goes the extra mile
	—Puts team results before own success and acknowledges contributions of others
	—Prioritizes, decides and makes things happen with urgency
Courage by speaking up, giving and receiving feedback	—Speaks up and challenges the norm
	—Acknowledges when things don't work and learns
	—Gives and accepts constructive feedback
Integrity by advocating and applying high ethical standards every day	— Operates with high ethical standards
	—Is humble and caring, and shows trust, respect and empathy
	—Lives by the Code of Conduct even when facing resistance or difficulties

        These values are embedded in all aspects of employees' lives at Novartis, from recruitment and development to promotions, performance assessments through 360-degree evaluations and organizational employee surveys, as well as Annual Incentive awards to measure individual and organizational performance against our values. As part of the Annual Incentive award process, training programs and toolkits were established to evaluate behavior related to the six new values. They are one of the elements used to assess associates' performance.

219

        During 2015, we further improved the framework for measuring individual performance against our values, ensuring that fair, objective assessments can be made in a uniform way across all levels of the organization. The assessment is part of a rigorous management process review in which observed Values and Behaviors are evaluated based on globally-defined principles. The assessment initially takes place during a discussion between associates and line managers, followed by a calibration and validation at multiple levels of the organization to allow for a fair, consistent, objective and transparent evaluation. During the calibration sessions, line managers share the proposed ratings of their direct reports with peers to ensure all apply a common framework, and they seek input and feedback on observed behaviors.

        The Values and Behaviors assessment for the CEO and other Executive Committee members is calibrated by the Board of Directors.

2015 EXECUTIVE COMMITTEE COMPENSATION

2015 CEO Compensation

        The 2015 compensation of the CEO is outlined in detail within this section:

        Base salary:    The CEO's base salary remained CHF 2,060,500 for 2015.

        Benefits:    The CEO received pension benefits of CHF 175,289 and other benefits of CHF 88,432 during 2015.

        Annual Incentive:    The Annual Incentive performance is measured in constant currencies to reflect the operational performance that can be influenced. Overall, the company met most of its financial targets for the year set by the Board of Directors in constant currencies. Group results were negatively impacted by Alcon's performance and by the slow-down of emerging markets, offset by strong results from Pharmaceuticals and Sandoz. The Group was marginally behind its sales target, while Group net income was slightly ahead of target mainly due to strong cost management. Corporate net result was significantly ahead of target mainly due to lower corporate costs and taxes. Performance in Group free cash flow as a percentage of sales was slightly above target mainly due to higher cash flows from operating activities.

        Currency movements had a significant negative impact on the reported results vs. target (in US dollars, sales: –5.2 billion, net income and free cash flow (FCF): –1.6 billion each) that were adjusted in the Annual Incentive calculation.

2015 CEO BALANCED SCORECARD

Group financial targets (60%)	Performance metrics for continuing operations (weight)	Target(1)	Achievement vs. target(2) (in constant currencies)
	Group net sales (30%)	$55,289 m	Slightly below
	Corporate net result(3) (20%)	$–2,284 m	Significantly exceeded
	Group net income (30%)	$8,996 m	Slightly exceeded
	Group FCF as % of sales (20%)	20.5%	Slightly exceeded
	Overall achievement for Group financial targets		Slightly above target
Individual objectives (40%)	Additional key financial targets for continuing operations Additional financial targets were not all met. Including adjustments, in constant currencies, core operating income, EPS and core EPS targets were met, while reported operating income was slightly missed. Emerging Market growth and Divisional share of peers (Pharmaceuticals, Alcon and Sandoz) were below target (for the latter mainly due to currency impact).		Slightly below
	Continued

220

	Innovation and growth	Exceeded
	2015 was another excellent year for innovation and growth. The company successfully achieved 20 major approvals and 14 major submissions. Novartis had the highest number of FDA approvals(4) in the industry (4 out of 45 novel drugs). Major innovation milestones were achieved in 2015 with Entresto (approved in the EU), Cosentyx (approved for AS and PsA in EU) and submission of biosimilars etanercept and pegfilgrastim. Zarxio was the first biosimilar approved under the BPCIA pathway. Sandoz also received US approval of Glatopa. The NIBR unit launched a new immuno-oncology research team that delivered significant progress in building a portfolio with several candidates already in clinical trials and more expected to enter the clinic by the end of 2016.
Individual objectives (40%)
Individual objectives (40%)	Portfolio review With the announcement on March 2, 2015 of the completion of the transactions with GSK, and the announcement on July 31, 2015 of the divestment of the Vaccines influenza business to CSL, Novartis successfully completed its portfolio review ahead of schedule (target for completion: H2 2015). A total of 17,000 associates transferred from Novartis to GSK and CSL. The completion of the portfolio review has improved Novartis' competitive position resulting in a more focused company with leading positions in innovative pharmaceuticals, generics and eye care.	Slightly exceeded
	Cross-divisional synergies Novartis Business Services, our shared services organization, continued to execute on its priorities and the transformation of the organization is developing as scheduled. The company generated approximately $3,216 million in total productivity gains (target: $2,746 million) by leveraging our scale. In 2015 we announced plans to close or divest 6 sites. All of these actions increased the productivity of the company.	Exceeded
	High-performing organization (e.g., quality, talent)	At target
	Across the Novartis network, for the full year, there were 192 inspections, including 31 conducted by the FDA. 189 of the 192 inspections in the full year were good or satisfactory. The outcomes of three inspections are still pending. In addition, the company continued to roll out the process of upgrading its compliance and integrity processes as well as Novartis Values and Behaviors. A new talent management strategy was established and some progress was made on the talent pipeline and talent management initiatives. The company was disappointed with certain compliance and reputational challenges.
	Overall achievement for individual objectives	At target

⁽¹⁾

The target was set using July 2014 forward currency exchange rates

⁽²⁾

Adjusted for significant currency movements (in US dollars, sales: –5.2 billion, net income and FCF: –1.6 billion each) and other adjustments including the changes in income from associated companies

⁽³⁾

Includes corporate cost, income from associated companies, net financial income and income taxes

⁽⁴⁾

Source: FDA's Center for Drug Evaluation and Research's (CDER's) 2015 annual report

221

        Following a thorough performance evaluation, including assessed Values and Behaviors (see "—Executive Committee Performance Management Process—Assessment of Values and Behaviors at Novartis" for further details of the performance management process and assessment of Values and Behaviors), the Compensation Committee determined that the CEO's Annual Incentive performance factor would be 100%. The value of his Annual Incentive award was determined as follows:

2015 CEO ANNUAL INCENTIVE

	Annual base salary CHF thousands		x	Target incentive %			x	Performance factor %			=	Final award CHF thousands
Annual Incentive		2,061	x		150	%	x		100	%	=		3,091	(1)

⁽¹⁾

50% of the Annual Incentive was paid in cash and 50% was paid as 19,390 RSUs, which have a three-year vesting period.

        The table below shows how the 2015 Long-Term Incentive grants of the CEO were determined. These grants were awarded under the LTPP and LTRPP, and will vest to the extent that performance conditions have been met for the 2015-2017 cycle. An overview of these plans is outlined in "—2015 Executive Committee Compensation System—Variable Compensation—Long-Term Incentives."

CEO LONG-TERM INCENTIVE GRANTS CYCLE 2015-2017

	Annual base salary CHF thousands		x	Target incentive %			=	Grant value CHF thousands		Target number of PSUs(1)
LTPP		2,061	x		200	%	=		4,122		48,626
LTRPP		2,061	x		100	%	=		2,061		24,313

⁽¹⁾

Achievement will be reported in the 2017 Compensation Report. The grant value has been converted into a target number of PSUs based on a price of CHF 84.75 per Novartis share.

222

2015 CEO Target Compensation

        In January 2015, at target, the CEO's compensation was made up of 18% annual base compensation, 2% pension and other benefits, 27% Annual Incentive and 53% Long-Term Incentive. The Long-Term Incentive was split according to a ratio of 2:1 LTPP to LTRPP.

Executive Committee Compensation Tables (Audited)

Compensation of Executive Committee members for 2015

        The following table discloses the compensation paid or granted to the CEO and other Executive Committee members for performance in 2015.

Alignment of reporting and performance

        The compensation table synchronizes the reporting of Annual Incentive compensation with the performance in the given year (i.e., all amounts awarded for performance in 2015 are disclosed in full). This includes the restricted shares and RSUs granted under the Annual Incentive, which will vest three years following the grant based on plan rules. For awards granted under the LTPP and LTRPP, the target values (based on 100% achievement) at the time of grant are shown.

        The performance and vesting value of the LTPP and LTRPP for the performance cycle 2015-2017 will be reported in the 2017 Compensation Report. The achievement against target and the vesting value of the OLTPP for the performance cycle 2013-2015 are shown in a separate table under "—Performance Vesting of Old Long-Term Performance Plan (2013-2015)."

Valuation principles

        For the purpose of the tables contained within this Compensation Report, and to allow a comparison with other companies, Novartis shares and ADRs are disclosed at their market value on the date of grant. Market value is the quoted closing share price at that date. Restricted shares and RSUs are disclosed at the underlying value of Novartis shares and ADRs. PSUs are also valued for the purpose of this Compensation Report at the underlying value of the Novartis shares and ADRs at the grant date, and are disclosed at target value, assuming that they will vest at 100% achievement.

223

EXECUTIVE COMMITTEE MEMBER COMPENSATION FOR FINANCIAL YEAR 2015⁽¹⁾

			Fixed compensation and pension benefits				Variable compensation
			Base compensation								LTPP 2015-2017 cycle		LTRPP 2015-2017 cycle
					Pension benefits		2015 Annual Incentive										Total compensation
															Other
			Cash (amount)				Cash (amount)		Equity (value at grant date)(3)		PSUs (target value at grant date)(4)		PSUs (target value at grant date)(4)
	Currency				Amount(2)										Amount(5)		Amount(6)
Joseph Jimenez (CEO)		CHF		2,060,500		175,289		1,545,375		1,545,383		4,121,054		2,060,527		88,432		11,596,560
Steven Baert		CHF		653,333		158,099		543,900		543,953		960,048		256,030		94,716		3,210,079
Felix R. Ehrat		CHF		892,500		153,054		648,875		648,917		1,521,517		447,565		12,669		4,325,097
David Epstein	$			1,400,000		362,819		1,428,000		1,428,054		2,520,001		1,260,050		569,737		8,968,661
Mark C. Fishman(7)	$			990,000		248,910		861,300		861,323		1,881,089		891,021		129,825		5,863,468
Richard Francis		CHF		716,667		193,635		599,400		599,424		1,080,054		360,018		954,170		4,503,368
Jeff George	$			956,539		200,946		158,400		158,404		1,536,056		576,009		1,260,286		4,846,640
Harry Kirsch		CHF		950,000		160,431		757,625		757,628		1,480,074		647,575		51,476		4,804,809
Brian McNamara (until March 1, 2015)(8)	$			131,154		69,008		115,100		0		58,361		11,751		40,670		426,044
Andrin Oswald (until March 1, 2015)(8)		CHF		138,333		27,634		136,500		0		64,580		13,899		283,236		664,182
André Wyss		CHF		735,000		127,237		0		1,176,053		1,102,513		294,083		83,688		3,518,574
Total(9)		CHF		9,490,269		1,843,151		6,695,906		7,624,994		16,094,751		6,713,188		3,491,962		51,954,221

See following table for 2014 compensation figures

⁽¹⁾

Does not include reimbursement for travel and other necessary business expenses incurred by Executive Committee members in the performance of their services, as these amounts are not considered compensation

⁽²⁾

Includes service costs of pension and post-retirement healthcare benefits accumulated in 2015, in accordance with IAS19. It also includes an amount of CHF 58,757 for mandatory employer contributions paid by Novartis to governmental social security systems. This amount is out of total employer contributions of CHF 3,457,097, and provides a right to the maximum future insured government pension benefit for the Executive Committee member.

⁽³⁾

The portion(s) of the Annual Incentive delivered in shares is rounded up to the nearest share based on the closing share price on the grant date (January 20, 2016). The closing share price on this date was CHF 79.70 per Novartis share and $80.49 per ADR.

⁽⁴⁾

The amounts shown in these columns represent the underlying share value of the target number of PSUs granted to each Executive Committee member for the performance cycle 2015-2017 based on the closing share price on the grant date (January 21, 2015). The closing share price on this date was CHF 84.75 per Novartis share and $98.75 per ADR.

⁽⁵⁾

Includes any other perquisites, benefits in kind and international assignment benefits as per global mobility policy (e.g., housing, international health insurance, children's school fees, tax equalization). Tax equalization benefits included for David Epstein, Richard Francis, Jeff George and Andrin Oswald are $305,867, CHF 739,086, $1,153,361 and CHF 249,728, respectively.

⁽⁶⁾

All amounts are before deduction of employee's social security contribution and income tax due by the Executive Committee member

224

Continued from page 223

⁽⁷⁾

Mark C. Fishman, President NIBR and Executive Committee member, will step down from the Executive Committee on February 29, 2016 and retire from Novartis. He will receive further contractual compensation that includes the base salary, pension and other benefits (pro-rata until February 29, 2016) and the vesting of his incentive awards in accordance with the terms of the Novartis plan rules. As of March 1, 2016, Mark C. Fishman will provide certain consulting services to Novartis for which he will be compensated for a period of up to two years until February 28, 2018. The fees for these services are capped at $250,000 p.a. and are in line with those paid to other scientists who provide consultancy services to the NIBR organization.

⁽⁸⁾

Brian McNamara (Division Head, Novartis OTC) and Andrin Oswald (Division Head, Novartis Vaccines) transitioned to the GlaxoSmithKline (GSK) group on March 2, 2015 following the completion of the Novartis OTC and Vaccines transactions with GSK. The information disclosed under columns "LTPP" and "LTRPP" in the table above reflects their pro-rata compensation at target. Following their transition to GSK, and in accordance with the applicable plan rules, the LTPP and LTRPP awards for cycle 2015-2017 (as well as for those granted for cycle 2014-2016) will be eligible to vest on the normal vesting date and on a pro-rata basis based on the number of months worked with Novartis during the performance period. The vesting of these awards is subject to performance conditions assessed at the end of the cycle.

⁽⁹⁾

Amounts in US dollars for David Epstein, Mark C. Fishman, Jeff George and Brian McNamara were converted at a rate of CHF 1.00 = $1.040, which is the same average exchange rate used in the Group's consolidated financial statements.

225

EXECUTIVE COMMITTEE MEMBERS COMPENSATION FOR FINANCIAL YEAR 2014⁽¹⁾

			Fixed compensation and pension benefits				Variable compensation
			Base compensation								LTPP 2014-2016 cycle		LTRPP 2014-2016 cycle
					Pension benefits		2014 Annual Incentive										Total compensation
															Other
			Cash (amount)				Cash (amount)		Equity (value at grant date)(3)		PSUs (target value at grant date)(4)		PSUs (target value at grant date)(4)
	Currency				Amount(2)										Amount(5)		Amount(6)
Joseph Jimenez (CEO)		CHF		2,060,500		165,584		2,009,000		2,009,084		4,121,003		2,060,501		222,818		12,648,490
Steven Baert (from February 26, 2014)		CHF		482,426		68,963		309,212		309,253		709,328		136,438		103,147		2,118,767
Juergen Brokatzky-Geiger (until February 25, 2014)(7)		CHF		110,650		22,454		0		0		0		0		3,245,256		3,378,360
Kevin Buehler (until April 30, 2014)(8)	$			382,691		82,991		230,400		230,384		729,614		345,620		4,139,920		6,141,620
Felix R. Ehrat		CHF		875,000		154,299		0		1,408,037		1,496,019		440,066		8,928		4,382,349
David Epstein	$			1,400,000		343,460		1,260,000		1,260,050		2,520,002		1,260,001		277,804		8,321,317
Mark C. Fishman	$			990,000		294,572		1,009,800		1,009,818		1,881,034		891,033		78,369		6,154,626
Richard Francis (from May 1, 2014)(9)		CHF		466,667		114,435		211,450		211,451		871,135		186,735		3,364,623		5,426,496
Jeff George	$			924,520		127,826		654,341		654,416		1,470,358		275,692		1,084,850		5,192,003
George Gunn(10)		CHF		865,000		116,542		622,800		622,828		1,384,066		346,035		0		3,957,271
Harry Kirsch		CHF		829,167		148,526		888,250		888,265		1,360,024		425,021		31,980		4,571,233
Brian McNamara	$			673,077		76,484		578,000		578,083		1,020,055		204,076		77,717		3,207,492
Andrin Oswald		CHF		827,500		125,406		539,500		539,519		1,162,005		249,054		233,675		3,676,659
André Wyss (from May 1, 2014)		CHF		466,667		59,703		0		736,223		935,003		249,349		58,045		2,504,990
Total(11)		CHF		10,978,356		1,821,737		7,992,041		10,136,681		19,004,820		6,813,877		12,440,922		69,188,434

As published in the 2014 Compensation Report

⁽¹⁾

Does not include reimbursement for travel and other necessary business expenses incurred in the performance of their services, as these amounts are not considered compensation. In general, for those who have left the Executive Committee in the course of 2014, the information under the columns "Base compensation", "Pension benefits", "Annual Incentive", "LTPP" and "LTRPP" in the table above reflects their pro-rata compensation over 2014 for the period they were a member of the Executive Committee. The information under the column "Other" includes inter alia their pro-rata compensation from the date they stepped down from the Executive Committee to December 31, 2014. For those who have joined the Executive Committee in the course of 2014, the information under the columns "Base compensation", "Pension benefits" and "Annual Incentive" includes their pro-rata compensation from the date they joined the Executive Committee to December 31, 2014. The information under the "LTPP" and "LTRPP" in the table above reflects their pro-rata compensation at target from the date they joined the Executive Committee to December 31, 2016.

⁽²⁾

Includes service costs of pension and post-retirement healthcare benefits accumulated in 2014, in accordance with IAS19. In addition, in compliance with the Minder Ordinance, it includes an amount of mandatory employer social security contributions of CHF 76,534. This amount provides a right to the maximum future insured government benefit for the members. This is out of a mandatory total of CHF 2,980,528 paid by Novartis to both Swiss and US governmental social security systems.

⁽³⁾

The portion(s) of the Annual Incentive delivered in shares is rounded up to the nearest share based on the closing share price on the grant date (January 21, 2015).

⁽⁴⁾

The amounts shown in these columns represent the underlying share value of the target number of PSUs granted to each Executive Committee member for the performance cycle 2014-2016 based on the closing share price on January 22, 2014. The closing share price on this date was CHF 73.75 per Novartis share and $80.79 per ADR.

226

Continued from page 225

⁽⁵⁾

Includes any other perquisites, benefits in kind, international assignment benefits as per global mobility policy (e.g. housing, international health insurance, children's school fees, tax equalization) and other compensation. Does not include relocation costs paid in 2014

⁽⁶⁾

All amounts are before deduction of employee's social security contribution and income tax due by the Executive Committee member

⁽⁷⁾

Juergen Brokatzky-Geiger stepped down from the Executive Committee on February 25, 2014, and as of February 26, 2014, he has been appointed as Global Head of Corporate Social Responsibility. He remained under the old Executive Committee incentive compensation system. As a result, his variable compensation has been reported in full under the column "Other".

⁽⁸⁾

Kevin Buehler stepped down from the Executive Committee on April 30, 2014. In accordance with the contractual 12 month notice period of his employment agreement, he will retire from the company on April 30, 2015. He will receive further contractual compensation that includes the base salary, pension and other benefits (pro-rata until April 30, 2015) and the vesting of his incentive awards in accordance with the terms of the Novartis plan rules. His compensation does not include an annual pension in payment ($507,017) following the acquisition of Alcon in 2011.

⁽⁹⁾

Richard Francis will receive compensation in the form of 41,500 RSUs for lost entitlements at his former employer with a total value at grant of CHF 3.2 million. The vesting of the RSUs will be staggered based on the vesting period at his former employer, and extend over the period from 2015-2017, provided that he remains employed with Novartis at the respective due dates. 21,500, 13,500 and 6,500 RSUs will respectively vest on February 1, 2015, 2016 and 2017.

⁽¹⁰⁾

Following the completion on January 1, 2015 of the transaction with Eli Lilly, George Gunn (Division Head, Novartis Animal Health), stepped down from the Executive Committee. He will provide assistance with regard to the post-closing divestment of Animal Health until he will reach his contractual retirement age in July 2015. George Gunn will receive further contractual compensation that includes the base salary, pension and other benefits (pro-rata until July 31, 2015) and the vesting of his incentive awards in accordance with the terms of the Novartis plan rules.

⁽¹¹⁾

Amounts in US dollars for Kevin Buehler, David Epstein, Mark C. Fishman, Jeff George and Brian McNamara were converted at a rate of CHF 1.00 = $1.094, which is the same average exchange rate used in the Group's consolidated financial statements. At the time of his appointment as Head of Alcon, Mr. George's Swiss employment agreement was replaced with a US employment agreement in US dollars.

227

EXECUTIVE COMMITTEE MEMBERS—EQUITY AWARDS FOR FINANCIAL YEAR 2015 (Number of equity instruments)⁽¹⁾

	Variable compensation
	2015 Annual Incentive		LTPP 2015-2017 cycle		LTRPP 2015-2017 cycle
	Equity (number)(2)		PSUs (target number)(3)		PSUs (target number)(3)
Joseph Jimenez		19,390		48,626		24,313
Steven Baert		6,825		11,328		3,021
Felix R. Ehrat		8,142		17,953		5,281
David Epstein		17,742		25,519		12,760
Mark C. Fishman		10,701		19,049		9,023
Richard Francis		7,521		12,744		4,248
Jeff George		1,968		15,555		5,833
Harry Kirsch		9,506		17,464		7,641
Brian McNamara (until March 1, 2015)(4)		0		591		119
Andrin Oswald (until March 1, 2015)(4)		0		762		164
André Wyss		14,756		13,009		3,470
Total		96,551		182,600		75,873

See table below for 2014 compensation figures

⁽¹⁾

The value of the awards included in this table are reported in the table "EXECUTIVE COMMITTEE MEMBER COMPENSATION FOR FINANCIAL YEAR 2015" under "—2015 Executive Committee Compensation—Executive Committee Compensation Tables (Audited)."

⁽²⁾

Vested shares, restricted shares and/or RSUs granted under the Annual Incentive for performance year 2015

⁽³⁾

Target number of PSUs granted under the LTPP and LTRPP as applicable for the 2015-2017 performance cycle

⁽⁴⁾

Target number of PSUs granted under the LTPP and LTRPP are reported on a pro-rata basis. See footnote 8 of the table "EXECUTIVE COMMITTEE MEMBER COMPENSATION FOR FINANCIAL YEAR 2015" under "—2015 Executive Committee Compensation—Executive Committee Compensation Tables (Audited)."

228

EXECUTIVE COMMITTEE MEMBERS—EQUITY AWARDS FOR PERFORMANCE YEAR 2014 (Number of equity instruments)⁽¹⁾

	Variable compensation
	2014 Annual Incentive		LTPP 2014-2016 cycle		LTRPP 2014-2016 cycle
							Other Equity/ Target PSUs (number)
	Equity (number)(2)		Target PSUs (number)(3)		Target PSUs (number)(3)
Joseph Jimenez		23,706		55,878		27,939		0
Steven Baert (from February 26, 2014)		3,649		9,618		1,850		0
Juergen Brokatzky-Geiger (until February 25, 2014)		0		0		0		30,953	(4)
Kevin Buehler (until April 30, 2014)		2,333		9,031		4,278		31,936
Felix R. Ehrat		16,614		20,285		5,967		0
David Epstein		12,760		31,192		15,596		0
Mark C. Fishman		10,226		23,283		11,029		0
Richard Francis (from May 1, 2014)		2,495		11,812		2,532		41,500	(5)
Jeff George		6,627		18,224		3,417		0
George Gunn		7,349		18,767		4,692		0
Harry Kirsch		10,481		18,441		5,763		0
Brian McNamara		5,854		12,626		2,526		0
Andrin Oswald		6,366		15,756		3,377		0
André Wyss (from May 1, 2014)		8,687		12,678		3,381		0
Total		117,147		257,591		92,347		104,389

As published in the 2014 Compensation Report

⁽¹⁾

See also corresponding footnote 1 of the table "EXECUTIVE COMMITTEE MEMBER COMPENSATION FOR FINANCIAL YEAR 2014" with regard to the Executive Committee members who left or joined the Committee in the course of 2014.

⁽²⁾

Vested shares, restricted shares and/or RSUs granted under the Annual Incentive for performance year 2014

⁽³⁾

Target number of PSUs granted under the LTPP and LTRPP as applicable for the 2014–2016 performance cycle

⁽⁴⁾

Juergen Brokatzky-Geiger remained under the old Executive Committee compensation system. The information under the column "Other" includes the following equity awards: 12,638 restricted shares granted under the Novartis Equity Plan Select, 6,342 investment shares and 3,171 matching shares under the Employee Share Ownership Plan, and 8,802 target PSUs under the OLTPP for the 2014-2016 performance cycle.

⁽⁵⁾

This amount reflects the total number of RSUs granted to Richard Francis in 2014 as compensation for lost entitlements at his former employer on joining Novartis.

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EXECUTIVE COMMITTEE MEMBER COMPENSATION BASE AND VARIABLE COMPENSATION MIX FOR FINANCIAL YEAR 2015⁽¹⁾

	Base salary			Variable compensation(2)
Joseph Jimenez		18.2	%		81.8	%
Steven Baert		22.1	%		77.9	%
Felix R. Ehrat		21.5	%		78.5	%
David Epstein		17.4	%		82.6	%
Mark C. Fishman		18.1	%		81.9	%
Richard Francis		21.4	%		78.6	%
Jeff George		28.3	%		71.7	%
Harry Kirsch		20.7	%		79.3	%
André Wyss		22.2	%		77.8	%
Total		20.1	%		79.9	%

⁽¹⁾

Excludes pension and other benefits, as well as Brian McNamara and Andrin Oswald, who stepped down from the Executive Committee on March 1, 2015 as a result of the GlaxoSmithKline transaction.

⁽²⁾

See the table "EXECUTIVE COMMITTEE MEMBER COMPENSATION FOR FINANCIAL YEAR 2015" under "—2015 Executive Committee Compensation—Executive Committee Compensation Tables (Audited)" with regard to the disclosure principles of variable compensation.

Loans to Executive Committee members

        No loans were granted to current or former Executive Committee members or to "persons closely linked" to them in 2015. No such loans were outstanding as of December 31, 2015.

Other payments to Executive Committee members

        During 2015, no other payments (or waivers of claims) were made to Executive Committee members or to "persons closely linked" to them.

Payments to former Executive Committee members

        During 2015, under the former Executive Committee members' contracts and in line with the company's plan rules and policies, payments were made to Kevin Buehler, the former Division Head of Alcon, and George Gunn, the former Division Head of Animal Health, who retired from the company on May 1, 2015 and on August 1, 2015, respectively. In 2015, an amount of $1,127,324 and CHF 1,214,583 was paid to Mr. Buehler and Mr. Gunn, respectively. These amounts exclude the value of the vested OLTPP awards for cycle 2013-2015 of Mr. Buehler and Mr. Gunn, who received, in accordance with the plan rules, $1,763,889 and CHF 1,527,285 (value of the shares delivered at vesting), respectively. In addition, in line with their contracts and the company's policies, a total amount of CHF 24,116 was paid by the company for tax and financial services provided to two other former Executive Committee members. With the exception of the above amounts, during 2015, no other payments (or waivers of claims) were made to former Executive Committee members or to "persons closely linked."

James E. Bradner, future President of NIBR and Executive Committee member

        As announced on September 24, 2015, James E. Bradner will succeed Mark Fishman as President of the Novartis Institutes for BioMedical Research (NIBR) and become an Executive Committee member with effect from March 1, 2016. Prior to joining Novartis, Dr. Bradner served as a board member and

230

advisor to many scientific companies he founded, and as a supervisory board member of another company. In reaching the terms of the offer for Dr. Bradner, the Board of Directors recognized the need to make up for compensation that Dr. Bradner would be forfeiting on joining Novartis. In extending our offer to Dr. Bradner, the following compensation for lost entitlements was agreed to attract him to Novartis:

–

In January 2016, as compensation for lost entitlements at one of his scientific companies on joining Novartis, Dr. Bradner has been paid an amount of $844,250 for the 275,000 shares that he forfeited. The fair market value of the forfeited shares was determined by an independent valuation expert.

–

In January 2016, Dr. Bradner received compensation in the form of 3,607 RSUs for lost entitlements in connection with his supervisory board mandate with a total value at grant of $309,300. The vesting of the RSUs will be staggered based on the original vesting period of the forfeited entitlements, provided that he remains employed with Novartis at the respective due dates.

        Please also see the additional related disclosure made in "Item 18. Financial Statements—Note 27." These disclosures are made on a voluntary basis and will be further communicated in next year's annual report on Form 20-F.

Award and delivery of equity to Novartis associates

        During 2015, 12.4 million unvested restricted shares (or ADRs), RSUs and target PSUs were granted and 14.4 million Novartis shares (or ADRs) were delivered to Novartis associates under various equity-based participation plans. Current unvested equity instruments (restricted shares, RSUs and target PSUs) as well as outstanding equity options held by associates represent 2.4% of shares issued of Novartis. Novartis delivers treasury shares to associates to fulfill these obligations and aims to offset the dilutive impact from its equity-based participation plans.

Share Ownership Requirements for Executive Committee members

        Executive Committee members are required to own at least a minimum multiple of their annual base compensation in Novartis shares or share options within three years of hire or promotion, as set out in the table below.

CEO	5 × base compensation
Executive Committee members	3 × base compensation

        In the event of a substantial rise or drop in the share price, the Board of Directors may, at its discretion, amend that time period accordingly.

        The determination of equity amounts against the share ownership requirements is defined to include vested and unvested Novartis shares or ADRs, as well as RSUs acquired under the compensation plans, but excluding unvested matching shares granted under the Leveraged Share Savings Plan (LSSP) and the Employee Share Ownership Plan (ESOP), and unvested PSUs from LTPP and LTRPP. The determination includes other shares as well as vested options of Novartis shares or ADRs that are owned directly or indirectly by "persons closely linked" to them. The Compensation Committee reviews compliance with the share ownership guideline on an annual basis.

        As of December 31, 2015, all members who have served at least three years on the Executive Committee have met or exceeded their personal Novartis share ownership requirements.

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        As of January 1, 2016, to better align with prevalent market practice and the change to our compensation system, Executive Committee members will be required to meet their share ownership requirement within five years of hire/promotion.

Shares, ADRs, equity rights and share options owned by Executive Committee members

        The following tables show the total number of shares, ADRs, other equity rights and share options owned by Executive Committee members and "persons closely linked" to them as of December 31, 2015.

        As of December 31, 2015, no Executive Committee members together with "persons closely linked" to them owned 1% or more of the outstanding shares (or ADRs) of Novartis, either directly or through share options.

        The market value of share options (previously granted) is calculated using an option pricing valuation model as at the grant date.

SHARES, ADRs AND OTHER EQUITY RIGHTS OWNED BY EXECUTIVE COMMITTEE MEMBERS⁽¹⁾

	Vested shares and ADRs		Unvested shares and other equity rights(2)			Total at December 31, 2015
Joseph Jimenez		284,405		322,200			606,605
Steven Baert		1,700		44,977			46,677
Felix R. Ehrat		92,435		107,870			200,305
David Epstein		70,371		230,535	(3)		300,906
Mark C. Fishman		52,242		276,622	(3)		328,864
Richard Francis		14,357		37,722			52,079
Jeff George		119,247		99,373			218,620
Harry Kirsch		46,579		100,359			146,938
André Wyss		44,660		79,917			124,577
Total(4)		725,996		1,299,575			2,025,571

⁽¹⁾

Includes holdings of "persons closely linked" to Executive Committee members (see definition under "—2015 Executive Committee Compensation—Executive Committee Compensation Tables (Audited)—Persons Closely Linked," below)

⁽²⁾

Includes restricted shares, RSUs and target number of PSUs. Matching shares under the ESOP, LSSP, and target number of PSUs are disclosed pro-rata to December 31, unless the award qualified for full vesting under the relevant plan rules. Awards under all other incentive plans are disclosed in full.

⁽³⁾

Includes both deferred and unvested cash-settled equity awards and holdings of Novartis shares in US-defined contribution plans.

⁽⁴⁾

As a result of the GlaxoSmithKline transaction, Brian McNamara and Andrin Oswald stepped down from the Executive Committee on March 1, 2015. Brian McNamara owned 52,251 vested shares and 15,200 unvested shares and other equity rights at March 1, 2015. Andrin Oswald owned 122,892 vested shares and 41,547 unvested shares and other equity rights at March 1, 2015.

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SHARE OPTIONS OWNED BY EXECUTIVE COMMITTEE MEMBERS⁽¹⁾

	Number of share options(2)
	2011		Other		Total at December 31, 2015
Jeff George		141,396		0		141,396
André Wyss		0		378,390		378,390
Total(3)		141,396		378,390		519,786

⁽¹⁾

The last share option grants under the Novartis Equity Plan Select were made in January 2013.

⁽²⁾

Share options disclosed for a specific year were granted in that year under the Novartis Equity Plan Select. The column "Other" refers to share options granted in 2008 or earlier, to share options granted to these executives while they were not Executive Committee members, and to share options bought on the market by the Executive Committee members or "persons closely linked" to them (see definition under "—2015 Executive Committee Compensation—Executive Committee Compensation Tables (Audited)—Persons Closely Linked," below).

⁽³⁾

No other current Executive Committee members owned share options at December 31, 2015. As a result of the GlaxoSmithKline transaction, Brian McNamara and Andrin Oswald stepped down from the Executive Committee on March 1, 2015. At March 1, 2015, Brian McNamara and Andrin Oswald did not own any share options.

Persons closely linked

        "Persons closely linked" are (I) their spouse, (II) their children below age 18, (III) any legal entities that they own or otherwise control, and (IV) any legal or natural person who is acting as their fiduciary.

PERFORMANCE VESTING OF OLD LONG-TERM PERFORMANCE PLAN (2013-2015)

Overview

        As of 2014, grants are no longer made under this plan to Executive Committee members, but performance for the last cycle of the OLTPP is reported in this Compensation Report. The performance for the first cycle of the LTPP and LTRPP (cycle 2014-2016) will be reported in the 2016 Compensation Report.

        The OLTPP provided grants based on a target percentage of base compensation at the beginning of each plan cycle. It represented 175% of base salary for the CEO.

Form of award at grant

        At the beginning of the performance period, participants were granted a target number of PSUs according to the following formula:

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Performance measure

        The rewards were based on rolling three-year Group performance objectives focused on the Novartis Economic Value Added (NVA) measured annually. NVA takes into account Group operating income adjusted for interest, taxes and cost of capital charge. The formula is included under "Item 5. Operating and Financial Review and Prospects—Item 5.A Operating Results—Non-IFRS Measures as Defined by Novartis—Novartis Economic Value Added."

        The NVA performance factor was based on a 1:5 payout curve, where a 1% deviation in realization versus target led to a 5% change in payout (for example, a performance ratio of 105% would have led to a performance factor of 125%). If performance over the three-year vesting period would have fallen below 80% of target, no shares would have vested. The performance factor was capped at 200% of target, corresponding to an achievement of 20% above target.

Delivery at vesting

        At the end of the three-year performance period, the target number of PSUs was multiplied by the performance factor approved by the Compensation Committee. PSUs were converted into Novartis shares and immediately vested. In the US, awards may also have been delivered in cash under the US-deferred compensation plan.

Outcome of the Performance Cycle 2013-2015

        Over the three-year performance period, 2013 to 2015, Novartis performed 3.5% ahead of the $7.4 billion NVA target, corresponding to a payout of 118% following the application of the 1:5 payout curve. This achievement was mainly driven by operating income performance and productivity initiatives. In arriving at the NVA performance score, the Compensation Committee excluded, as major items, the favorable impact from the delayed entry of generic competition for Diovan monotherapy in the US, income generated from the sale of the Idenix Pharmaceuticals Inc. and LTS Lohmann Therapie-Systeme AG stakes, the negative impact from executing the Group portfolio transformation (including an exceptional pre-tax impairment charge of $1.1 billion related to the divestment of the Vaccines influenza business). Over the entire three-year cycle, currency movements had a significant negative impact (more than $2.1 billion) in NVA well above the impact on the previous cycle of the OLTPP. Considering the total shareholder return of the three years (in US dollars, +53.4%), the Compensation Committee decided to exclude, on a discretionary basis, a portion of this currency impact.

234

        The table below shows the vesting of the OLTPP 2013-2015 cycle for the CEO and other Executive Committee members.

PAYOUT SCHEDULE FOR OLTPP 2013-2015 PERFORMANCE CYCLE⁽¹⁾

	Currency	PSUs (target value at grant date)		PSUs (target number)		Performance factor payout for OLTPP 2013-2015 cycle			Shares delivered at vesting (number)		Shares delivered at vesting (value at vesting price)
Joseph Jimenez	CHF		3,605,933		58,443		118	%		68,963		5,496,351
Other 8 members of the Executive Committee(2)	CHF		5,363,227		86,864		118	%		102,500		8,214,409
Total	CHF		8,969,160		145,307		118	%		171,463		13,710,760

See below for 2014 compensation figures

⁽¹⁾

For those who have left or joined the ECN in the course of the 2013-2015 performance period, the information disclosed under this table reflects the pro-rata LTPP 2013-2015 payout attributable to the period they were a member of the Executive Committee.

⁽²⁾

This table excludes the awards which were originally granted to Brian McNamara (10,780 target PSUs) and Andrin Oswald (13,688 target PSUs) for OLTPP 2013-2015 performance cycle. As a result of the GlaxoSmithKline transaction, and in accordance with the OLTPP plan rules, these awards were forfeited.

        For the Executive Committee members, including the CEO, the impact of the share price appreciation over the vesting period on the total value realized at vesting was CHF 3.1 million. For the CEO, the impact of the share price appreciation was CHF 1.4 million. This represents 25% of the overall vesting value.

        For comparative purposes, the table below shows the vesting of the OLTPP 2012-2014 cycle for the CEO and other Executive Committee members, as published in the 2014 Compensation Report.

PAYOUT SCHEDULE FOR OLTPP 2012-2014 PERFORMANCE CYCLE⁽¹⁾

	Currency	PSUs (target value at grant date)		PSUs (target number)		Performance factor payout for OLTPP 2012-2014 cycle			Shares delivered at vesting (number)		Shares delivered at vesting (value at vesting price)
Joseph Jimenez	CHF		3,605,926		66,530		168	%		111,771		9,472,592
Other 13 members of the Executive Committee	CHF		7,783,335		142,747		168	%		239,822		20,539,978
Total	CHF		11,389,261		209,277		168	%		351,593		30,012,570

As published in the 2014 Compensation Report

⁽¹⁾

For those who left or joined the Executive Committee in the course of the 2012-2014 performance period, the information disclosed under this table reflects the pro-rata LTPP 2012-2014 payout attributable to the period they were a member of the Executive Committee.

        For the Executive Committee members, including the CEO, the impact of the share price appreciation over the vesting period of the OLTPP 2012-2014 cycle on the total value realized at vesting was CHF 10.9 million. For the CEO, the impact of the share price appreciation was CHF 3.4 million. This represents 36% of the overall vesting value.

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2015 BOARD COMPENSATION SYSTEM

Board Compensation Philosophy and Benchmarking

        The Board of Directors sets compensation for its members at a level that allows for the attraction and retention of high-caliber individuals with global experience, including a mix of Swiss and international members. Board members do not receive variable compensation, underscoring their focus on corporate strategy, supervision and governance.

        The Board of Directors sets the level of compensation for its Chairman and the other members to be in line with relevant benchmark companies, which include other large Swiss-headquartered multinational companies, ABB, Credit Suisse, Holcim, Nestlé, Roche, Syngenta and UBS. This peer group has been chosen for Board compensation due to the comparability of Swiss legal requirements, including broad personal and individual liabilities under Swiss law (and new criminal liability under the Swiss rules regarding compensation of Board and Executive Committee members related to the Ordinance Against Excessive Compensation in Stock Exchange Listed Companies) and under US law (due to the company's secondary listing on the New York Stock Exchange).

        The Board of Directors reviews the compensation of its members, including the Chairman, each year based on a proposal by the Compensation Committee and advice from its independent advisor, including relevant benchmarking information.

Compensation of the Chairman of the Board of Directors

        As Chairman, Dr. Joerg Reinhardt receives total annual compensation valued at CHF 3.8 million. The total compensation is comprised equally of cash and shares, as follows:

–

Cash compensation: CHF 1.9 million per year

–

Share compensation: annual value equal to CHF 1.9 million of unrestricted Novartis shares

        From the 2015 Annual General Meeting (AGM), Dr. Reinhardt voluntarily waived the company contribution for pension and insurance benefits. Until this date, the company made employer contributions regarding the Chairman's participation in the Novartis Swiss standard pension and life insurance benefit plans. These contributions amounted to CHF 24,840.

        Dr. Reinhardt also receives compensation for lost entitlements at his former employer, with a total value of EUR 2.6 million, as reported in the 2014 and 2013 Compensation Reports. Payments are staggered based on the vesting period at his former employer, and extend over the period from 2014-2016, provided that he remains in office as Chairman at the respective due dates. On January 31, 2015, he received EUR 871,251 in cash⁽¹⁾.

        For 2015, the Chairman voluntarily waived the increase in compensation to which he is entitled, which is an amount not lower than the average annual compensation increase awarded to associates based in Switzerland (1.5% for 2015). For the year 2016, the Chairman will also voluntarily waive this increase.

Compensation of the other Board members

        The annual fee rates for Board membership and additional functions are included in the table below. These were approved by the Board of Directors with effect from the 2014 AGM and align our aggregate Board compensation to the current levels of other large Swiss companies.

⁽¹⁾

On January 31, 2016 he will receive the third and final installment of EUR 1,045,800.

236

2015 BOARD MEMBER ANNUAL FEE RATES

	Annual fee (CHF)
Chairman of the Board		3,800,000	(1)
Board membership		300,000
Vice Chairman		50,000
Chair of Audit and Compliance Committee		120,000
Chair of the following committees:
—Compensation Committee
—Governance, Nomination and Corporate Responsibilities Committee
—Research & Development Committee(2)
—Risk Committee		60,000
Membership of Audit and Compliance Committee		60,000
Membership of the following committees:
—Compensation Committee
—Governance, Nomination and Corporate Responsibilities Committee
—Research & Development Committee
—Risk Committee		30,000

⁽¹⁾

The Chairman also received company pension contributions until the 2015 AGM (when they ceased), and payment for loss of other entitlements at his previous employer for total EUR 2,665,051 staggered over 2014 to 2016.

⁽²⁾

The Chairman receives no additional committee fees for chairing the Research & Development Committee.

        In addition, the following policies apply regarding their compensation:

–

50% of compensation is delivered in cash, paid on a quarterly basis in arrears.

–

50% of compensation is delivered in shares in two installments: one six months after the AGM and one 12 months after the AGM.

–

Board members bear the full cost of their employee social security contributions, if any, and do not receive share options or pension benefits.

        The Board compensation system will remain unchanged in 2016.

237

2015 BOARD COMPENSATION

Board Member Compensation Table (Audited)

        The following table discloses the 2015 Board member compensation. Board compensation is reported as the amount earned in the financial year.

BOARD MEMBER COMPENSATION EARNED FOR FINANCIAL YEAR 2015⁽¹⁾

	Board membership		Vice Chairman		Audit and Compliance Committee		Compensation Committee			Governance, Nomination and Corporate Responsibilities Committee			Research & Development Committee		Risk Committee		Cash (CHF) (A)		Shares (CHF) (B)		Shares (number)(2)		Other (CHF) (C)(3)		Total (CHF) (A)+(B)+(C)(4)
Joerg Reinhardt(5)		Chair												Chair				1,900,000		1,900,000		19,397		29,197		3,829,197
Ulrich Lehner (until February 26, 2015)		·		·		·		·			·							39,167		39,167		1,242		582		78,916
Enrico Vanni		·		·		·		Chair						·				250,000		250,000		2,552		4,357		504,357
Nancy Andrews (from February 27, 2015)		·												·				137,500		137,500		812		—		275,000
Dimitri Azar		·				·								·				172,250		217,750		2,712		—		390,000
Verena A. Briner		·														·		165,000		165,000		1,684		4,357		334,357
Srikant Datar		·				Chair		·								·		240,000		240,000		2,450		—		480,000
Ann Fudge		·						·			·					·		195,000		195,000		1,990		—		390,000
Pierre Landolt(6)		·									Chair							—		360,000		3,674		3,492		363,492
Charles L. Sawyers		·									·	(7)		·				177,500		177,500		1,757		—		355,000
Andreas von Planta		·				·					·					Chair		225,000		225,000		2,296		4,357		454,357
William T. Winters		·						·	(7)									—		325,000		3,210		—		325,000
Total																		3,501,417		4,231,917		43,776		46,342		7,779,676

See table below for 2014 compensation figures

⁽¹⁾

Does not include reimbursement for travel and other necessary business expenses incurred by Board members in the performance of their services, as these are not considered compensation

⁽²⁾

Represents the gross number of shares delivered to each Board member in 2015. The number of shares reported in this column represents: (i) the second and final equity installment delivered in February 2015 for the services from the 2014 AGM to the 2015 AGM, and (ii) the first of two equity installment delivered in August 2015 for the services from the 2015 AGM to the 2016 AGM. The second and final equity installment for the services from the 2015 AGM to the 2016 AGM will take place in February 2016.

⁽³⁾

It includes an amount of CHF 21,502 for mandatory employer contributions paid by Novartis to Swiss governmental social security systems. This amount is out of total employer contributions of CHF 429,806, and provides a right to the maximum future insured government pension benefit for the Board member.

⁽⁴⁾

All amounts are before deduction of employee's social security contribution and income tax due by the Board member

⁽⁵⁾

Does not include EUR 871,251 paid to Joerg Reinhardt on January 31, 2015 for lost entitlements at his former employer. This amount is the second of three installments comprising to a total amount of EUR 2,665,051, which compensates him for lost entitlements with his previous employer due to him on joining Novartis. The third and last installment of EUR 1,045,800 will be delivered on January 31, 2016, provided that he remains in office as our Chairman at the due dates. The lost entitlements of EUR 2,665,051 of Joerg Reinhardt were included in full in the table entitled "BOARD MEMBER COMPENSATION IN 2013" under "Item. 6 Directors, Senior Management and Employees—Item 6.B Compensation—2013 Comparative Information—2013 Board Compensation" of our 2014 Annual Report on Form 20-F as filed with the SEC on January 27, 2015, based on our disclosure policy to report compensation for lost entitlements in full in the year the member of the Board or Executive Committee joined Novartis.

⁽⁶⁾

According to Pierre Landolt, the Sandoz Family Foundation is the economic beneficiary of the compensation.

⁽⁷⁾

From February 27, 2015

238

BOARD MEMBER COMPENSATION EARNED FOR FINANCIAL YEAR 2014⁽¹⁾

	Board membership		Vice Chairman		Audit and Compliance Committee		Compensation Committee		Governance, Nomination and Corporate Responsibilities Committee		Research & Development Committee(2)		Risk Committee			Chairman's Committee(2)		Delegated Board membership			Cash (CHF) (A)		Shares (CHF) (B)		Shares (number)(3)		Other (CHF) (C)(4)			Total (CHF) (A)+(B)+(C)(5)
Joerg Reinhardt(6)		Chair										Chair					Chair					2,058,334		1,741,666		12,180		157,844	(7)		3,957,844
Ulrich Lehner		·		·		·		·		·				·	(8)		·					262,500		262,500		1,527		37,851	(9)		562,851
Enrico Vanni		·		·		·		Chair				·					·					267,500		267,500		1,625		11,173	(9)		546,173
Dimitri Azar		·				·						·										86,250		313,750		2,154		—			400,000
Verena A. Briner		·												·	(10)							166,667		166,667		1,073		7,468	(9)		340,802
William Brody (until February 25, 2014)		·						·											·	(11)		43,750		43,750		—		83,333	(12)		170,833
Srikant Datar		·				Chair		·						·			·					260,000		260,000		1,560		—			520,000
Ann Fudge		·						·		·				·								204,167		204,167		1,268		—			408,334
Pierre Landolt(13)		·								Chair												—		368,333		2,340		7,031	(9)		375,364
Charles L. Sawyers		·										·										166,667		166,667		1,073		—			333,334
Andreas von Planta		·				·				·				Chair								234,167		234,167		1,462		9,175	(9)		477,509
Wendelin Wiedeking (until February 25, 2014)		·								·				·								—		75,000		—		4,482	(9)		79,482
William T. Winters		·																				29,167		279,167		1,950		—			308,334
Rolf M. Zinkernagel (until February 25, 2014)		·								·									·	(14)		54,167		54,167		—		175,870	(9),(15)		284,204
Total																						3,833,336		4,437,501		28,212		494,227			8,765,064

As published in the 2014 Compensation Report

⁽¹⁾

Does not include reimbursement for travel and other necessary business expenses incurred in the performance of their services, as these are not considered compensation.

⁽²⁾

As of February 26, 2014, the Research & Development Committee has been introduced and the Chairman's Committee disbanded.

⁽³⁾

Represents the gross number of shares delivered to each Board member in 2014 in respect of the first of two equity installments for the services from the 2014 AGM to the 2015 AGM. The second equity installment will take place in February 2015. This number does not include the number of shares for the compensation for services for the period from January 1, 2014 to the 2014 AGM.

⁽⁴⁾

In compliance with the Minder Ordinance, it includes an amount of mandatory employer social security contributions of CHF 27,771. This amount provides a right to the maximum future insured government benefit for the members. This is out of a mandatory total of CHF 359,890 paid by Novartis to both Swiss governmental social security systems.

⁽⁵⁾

All amounts are before deduction of employee's social security contribution and income tax due by the Board member.

239

Continued from page 238

⁽⁶⁾

Does not include EUR 748,000 paid to Joerg Reinhardt on January 31, 2014 for lost entitlements at his former employer. This amount is the first of three installments comprising to a total amount of EUR 2,665,051, which compensates him for lost entitlements with his previous employer due to him on joining Novartis. The second and third installment are staggered based on the vesting period at his former employer, and extend over the period from 2015-2016, provided that he remains in office as our Chairman at the respective due dates. On January 31, 2015 and 2016, he will respectively receive EUR 871,251 and EUR 1,045,800. The lost entitlements of EUR 2,665,051 of Joerg Reinhardt are included in full in the table entitled "BOARD MEMBER COMPENSATION IN 2013" under "Item. 6 Directors, Senior Management and Employees—Item 6.B Compensation—2013 Comparative Information—2013 Board Compensation" of our 2014 Annual Report on Form 20-F as filed with the SEC on January 27, 2015, based on our disclosure policy to report compensation for lost entitlements in full in the year the member of the Board or ECN joined Novartis.

⁽⁷⁾

Includes social security costs due by the individual and paid by the company until January 31, 2014, and service costs of pension and post-retirement healthcare benefits accumulated in 2014 in accordance with IAS19

⁽⁸⁾

Until February 25, 2014

⁽⁹⁾

Includes social security costs due by the individual and paid by the company until February 25, 2014. As of February 26, 2014, all Board members bear the full cost of their employee social security.

⁽¹⁰⁾

As of February 26, 2014

⁽¹¹⁾

The Board of Directors has delegated William Brody to the Board of Directors of the Genomics Institute of the Novartis Research Foundation (GNF) for the period from the 2014 AGM to the 2016 AGM.

⁽¹²⁾

Includes his pro-rata compensation for the delegated Board membership of GNF from February 26, 2014 to December 31, 2014

⁽¹³⁾

According to Pierre Landolt, the Sandoz Family Foundation is the economic beneficiary of the compensation.

⁽¹⁴⁾

The Board of Directors has delegated Rolf M. Zinkernagel to the Scientific Advisory Board of the Novartis Institute for Tropical Diseases (NITD) and to the Board of Directors of the Genomics Institute of the Novartis Research Foundation (GNF) for the period from the 2014 AGM to the 2016 AGM.

⁽¹⁵⁾

Includes his pro-rata compensation for the delegated Board memberships of NITD and GNF from February 26, 2014 to December 31, 2014

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RECONCILIATION BETWEEN THE REPORTED BOARD COMPENSATION AND THE AMOUNT APPROVED BY SHAREHOLDERS AT THE AGM

(CHF)	Compensation earned during the financial year (A)(1) 2015		Compensation earned for the period from January 1 to AGM (2 months) of the financial year (B) January 1, 2015 to 2015 AGM			Compensation to be earned for the period from January 1 to the AGM (2 months) in the year following the financial year (C) January 1, 2016 to 2016 AGM(2)		Total compensation earned from AGM to AGM (A)–(B)+(C) 2015 AGM to 2016 AGM		Amount approved/ endorsed by shareholders at the respective AGM 2015 AGM		Amount within the amount approved/ endorsed by shareholders at the AGM 2015 AGM
Joerg Reinhardt		3,829,197		(658,174	)		633,334		3,804,357		3,805,000		Yes
Other Board members		3,950,479		(667,250	)		653,334		3,936,563		3,940,000		Yes
Total		7,779,676		(1,325,424	)		1,286,668		7,740,920		7,745,000		Yes

	2014		January 1, 2014 to 2014 AGM(3)			January 1, 2015 to 2015 AGM		2014 AGM to 2015 AGM		2014 AGM		2014 AGM
Joerg Reinhardt		3,957,844		(670,497	)		658,174		3,945,521		3,962,000		Yes
Other Board members		4,807,220		(1,446,909	)(4)		667,250		4,027,561		4,060,000		Yes
Total		8,765,064		(2,117,406	)		1,325,424		7,973,082		8,022,000		Yes

⁽¹⁾

See above for 2015 and 2014 Board member compensation.

⁽²⁾

To be confirmed and reported in the 2016 Compensation Report.

⁽³⁾

Includes an amount of CHF 27,771 for mandatory employer social security contributions paid by Novartis to Swiss governmental social security systems. This amount is out of total employer contributions of CHF 359,890, and provides a right to the maximum future insured government pension benefit for the Board member.

⁽⁴⁾

Delegated Board membership fees earned after the 2014 AGM by William Brody and Rolf M. Zinkernagel are included in this amount.

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Loans to Board members

        No loans were granted to current or former members of the Board of Directors or to "persons closely linked" to them during 2015. No such loans were outstanding as of December 31, 2015.

Other payments to Board members

        During 2015, no payments (or waivers of claims) other than those set out in the table entitled "Board Member Compensation Earned for Financial Year 2015" (including its footnotes) under "—2015 Board Compensation—Board Member Compensation Table (Audited)" were made to current members of the Board of Directors or to "persons closely linked" to them.

Share ownership requirements for Board members

        The Chairman is required to own a minimum of 30,000 shares, and other members of the Board of Directors are required to own at least 4,000 Novartis shares within three years after joining the Board of Directors, to ensure alignment of their interests with shareholders. Board members are prohibited from hedging or pledging their ownership positions in Novartis shares that are part of their guideline share ownership requirement, and are required to hold these shares for 12 months after retiring from the Board of Directors. As of December 31, 2015, all members of the Board of Directors who have served at least three years on the Board of Directors have complied with the share ownership guidelines.

Shares, ADRs and share options owned by Board members

        The total number of vested Novartis shares and ADRs owned by members of the Board of Directors and "persons closely linked" to them as of December 31, 2015 is shown in the table below.

        As of December 31, 2015, no members of the Board of Directors together with "persons closely linked" to them owned 1% or more of the outstanding shares (or ADRs) of Novartis. As of the same date, no members of the Board of Directors held any share options.

SHARES AND ADRs OWNED BY BOARD MEMBERS⁽¹⁾

	Number of shares(2)
	At December 31, 2015
Joerg Reinhardt		480,404
Enrico Vanni		15,566
Nancy Andrews		609
Dimitri Azar		9,292
Verena A. Briner		6,429
Srikant Datar		32,629
Ann Fudge		15,605
Pierre Landolt(3)		54,866
Charles L. Sawyers		4,252
Andreas von Planta		124,868
William T. Winters		5,998
Total(4)		750,518

⁽¹⁾

Includes holdings of "persons closely linked" to Board members (see definition under "—2015 Executive Committee Compensation—Executive Committee Compensation Tables (Audited)—Persons Closely Linked")

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⁽²⁾

Each share provides entitlement to one vote.

⁽³⁾

According to Pierre Landolt, the Sandoz Family Foundation is the economic beneficiary of the shares.

⁽⁴⁾

Ulrich Lehner stepped down from the Board of Directors on February 26, 2015. At February 26, 2015, Ulrich Lehner owned 37,263 shares.

Payments to former Board members

        During 2015, no payments (or waivers of claims) were made to former Board members or to "persons closely linked" to them, except for the following amounts:

–

Prof. Dr. William R. Brody and Prof. Dr. Rolf M. Zinkernagel, who stepped down from the Board of Directors at the 2014 AGM, received delegated Board membership fees for their work on the Boards of the Novartis Institute for Tropical Diseases (Prof. Dr. Zinkernagel) and the Genomics Institute of the Novartis Research Foundation (Prof. Dr. Brody and Prof. Dr. Zinkernagel). During 2015, an amount of CHF 100,000 and CHF 200,000 was paid to Prof. Dr. Brody and Prof. Dr. Zinkernagel, respectively, for their work on these Boards. Their mandate on the Board of the Genomics Institute of the Novartis Research Foundation ended as of November 19, 2015. The company is appreciative of their many years of service on this Board.

–

The payments reported in "Item 18. Financial Statements—Note 27."

Item 18.    Financial Statements—Note 27

        The total expense for the year for the compensation awarded to Board and Executive Committee members using IFRS measurement rules is presented in the Financial Report in "Item 18. Financial Statements—Note 27."

COMPENSATION GOVERNANCE

Legal Framework

        The Swiss Code of Obligations and the Corporate Governance Guidelines of the SIX Swiss Exchange require listed companies to disclose certain information about the compensation of Board and Executive Committee members, their equity participation in the Group, and loans made to them. This Annual Report fulfills that requirement. In addition, the Annual Report is in line with the principles of the Swiss Code of Best Practice for Corporate Governance of the Swiss Business Federation (economiesuisse).

Compensation decision-making authorities

        Authority for decisions related to compensation is governed by the Articles of Incorporation, the Board Regulations and the Compensation Committee Charter, which are all published on the company website: www.novartis.com/corporate-governance.

        The Compensation Committee serves as the supervisory and governing body for compensation policies and plans within Novartis, and has overall responsibility for determining, reviewing and proposing compensation policies and plans for approval by the Board of Directors in line with the Compensation

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Committee Charter. A summary of discussions and conclusions of each committee meeting is delivered to the full Board of Directors. A summary of the compensation decision-making authorities is set out below:

COMPENSATION AUTHORIZATION LEVELS WITHIN THE PARAMETERS SET BY THE SHAREHOLDERS' MEETING

Decision on	Authority
Compensation of Chairman and other Board members	Board of Directors
Compensation of CEO	Board of Directors
Compensation of Executive Committee members	Compensation Committee

Committee member independence

        The Compensation Committee is composed exclusively of members of the Board of Directors who meet the independence criteria set forth in the Board Regulations. From the 2015 AGM, the Compensation Committee had the following four members: Ann Fudge, Enrico Vanni, Srikant Datar and William Winters. Enrico Vanni has served as Chair since 2012. Ulrich Lehner did not stand for re-election to the Board of Directors at the 2015 AGM.

Role of the Compensation Committee's independent advisor

        The Compensation Committee retained Frederic W. Cook & Co. Inc. as its independent external compensation advisor for 2015. The advisor was hired directly by the Compensation Committee in 2011, and the Compensation Committee has been fully satisfied with the performance and independence of the advisor since its engagement. Frederic W. Cook & Co. Inc. is independent of management and does not perform any other consulting work for Novartis. In determining whether or not to renew the engagement with the advisor, the Compensation Committee evaluates, at least annually, the quality of the consulting service, the independence of the advisor, and the benefits of rotating advisors.

Compensation Committee meetings held in 2015

        In 2015, the Compensation Committee held five formal meetings. The Compensation Committee conducted a performance self-evaluation in 2015 and a review of its charter, as it does every year.

Compensation governance and risk management

        The Compensation Committee, with support from its independent advisor, reviews market trends in compensation and changes in corporate governance rules. It also reviews, together with the Risk Committee, the Novartis compensation systems to ensure that it does not encourage inappropriate or excessive risk taking and instead encourages behaviors that support sustainable value creation.

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        A summary of the risk management principles is outlined below:

        Executive Committee employment contracts provide for a notice period of up to 12 months and contain no change-of-control clauses or severance provisions (e.g., agreements concerning special notice periods, longer-term contracts, "golden parachutes," waiver of lock-up periods for equities and bonds, shorter vesting periods, and additional contributions to occupational pension schemes).

Malus and clawback

        Any incentive compensation paid to Executive Committee members is subject to "malus" and "clawback" rules. This means that the Board of Directors for the CEO, or the Compensation Committee for other Executive Committee members, may decide, subject to applicable law, not to pay any unpaid or unvested incentive compensation (malus), or seek to recover incentive compensation that has been paid in the past (clawback), where the payout has been proven to conflict with internal management standards including company policies and accounting policies or a violation of law. This principle applies to both the Annual Incentive and to the Long-Term Incentives.

6.C Board Practices

DEAR SHAREHOLDER,

        In 2015, we took steps to further strengthen our corporate governance, reinforce the role of our Board in innovation, increase the diversity of our Board, and embed strong values in our company's culture.

Our mandate

        Our Board is accountable for striving to create sustainable value as described in article 2 of Novartis AG's Articles of Incorporation. We achieve this by setting a clear strategy for Novartis and through effective governance focused on target setting, risk management, and performance optimization to provide accountability and control.

        This requires an effective Board with the right composition, structure and processes, and with a clear understanding of its role. Our Board meets these requirements.

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        Our Board includes members with diverse educations, experiences, nationalities and interpersonal skills. This diversity was further strengthened when Nancy C. Andrews joined our Board in 2015. It will be further strengthened if Elizabeth Doherty and Ton Buechner are elected as new Board members at the forthcoming Annual General Meeting. For more information on these two Board member candidates, please consult our Notice of Annual General Meeting, dated January 27, 2016.

        We emphasize training, performance evaluation, and ongoing improvement of our Board and its members, as well as succession planning. To get an outside view on where we could improve further, in 2014 we initiated a performance and effectiveness evaluation by an independent expert. In 2015, we conducted this performance evaluation in-house. As a result of these evaluations, our Board launched a search for the above-mentioned two new Board members to strengthen the general management and finance expertise of our Board, and decided to further deepen the business understanding of our Board members by broadening their continuing education program.

        All Board members are independent, as defined by our rules and, with the exception of two of our Board members, those of key investors and proxy advisors. We have established processes to ensure our Board functions effectively. They promote efficient and balanced decision-making and seamless information transfer, enabling our Board to effectively fulfill its duties.

        Our Board is primarily responsible for setting the strategic direction of Novartis and for appointing our CEO and the other Executive Committee members. We assert independent judgment and work closely with our Executive Committee, making sure our strategy is properly implemented and our ethical standards are applied.

Important Board decisions

        One of the most important tasks of our Board is to set the strategic direction of Novartis, re-evaluate it each year, and make necessary changes in line with our mandate to create sustainable value. Active portfolio management is part of this role.

        To fulfill this task, our Board holds a dedicated two-day strategy meeting each August. In 2015, we completed our portfolio transformation, approved by our Board in 2014, to focus on our core businesses—Pharmaceuticals, Alcon and Sandoz—and to bring our Over-the-Counter business into a joint venture, with Novartis holding a significant minority stake. Our strategy for these businesses has not changed. It is to use science-based innovation to deliver better outcomes for patients. We aim to lead in growing areas of healthcare.

        The new Research & Development Committee of the Board, created to oversee our research and development strategy and to strengthen the Board's role in innovation, met four times in 2015 to evaluate various aspects of the effectiveness and competitiveness of our research and development organization.

        Novartis also implemented a Board decision to create a centralized services group, Novartis Business Services, to facilitate collaboration across our divisions, and drive efficiency and productivity gains.

        Finally, in 2015 we endorsed a proposal from our Executive Committee to introduce a revised set of six values to guide our employees' behavior at work. They include integrity and collaboration, and I believe they are important to the long-term success of Novartis.

Role of the Chairman

        As independent, non-executive Chairman, I provide direction to our Board and make sure we effectively collaborate with our CEO and Executive Committee.

        I ensure that our Board and its committees work effectively, setting the agenda, style and tone of Board discussions; promoting constructive debate and effective decision-making; and ensuring that our performance is regularly evaluated and that our members are properly trained.

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        In addition, I support and mentor our CEO, but do not interfere with the operational management of Novartis. I also promote effective communication with shareholders, so that we understand your views. In this task, I am supported by our Vice Chairman, Enrico Vanni.

Strengthened governance framework

        As of last year, we introduced annual elections of the Chairman of the Board, of all Board members, and of Compensation Committee members, and we instituted the option for our shareholders to provide their voting instructions to the Independent Proxy electronically. Moreover, we introduced yearly binding shareholder votes on the aggregate compensation of our Board and Executive Committee, as well as a yearly non-binding shareholder vote on the Compensation Report.

Importance of shareholder engagement

        Shareholder engagement is critical to our company's long-term success. Our Board of Directors is dedicated to enhancing interactions with our shareholders. We conduct interactions in an atmosphere of trust and respect that promotes a collaborative dialogue between Novartis and our shareholders—with views and positions expressed openly to enhance mutual understanding. As part of these efforts, our governance specialists meet regularly with their peers from shareholder groups. I have also personally met with many of our shareholders and intend to continue this dialogue.

Joerg Reinhardt

Chairman of the Board of Directors

SUMMARY OF OUR CORPORATE GOVERNANCE APPROACH

Leadership Structure

        Independent, non-executive Chairman and separate CEO

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Board Governance

Structure

        All Board members are non-executive and independent as defined by our rules. The Board has assigned responsibilities to five committees:

–

Audit and Compliance Committee

–

Compensation Committee

–

Governance, Nomination and Corporate Responsibilities Committee

–

Research & Development Committee

–

Risk Committee

Composition

        Board members have diverse educations, experience, nationalities and interpersonal skills. Their biographies (see "—Item 6.A Directors and Senior Management") describe their specific qualifications.

Processes

        The Board's processes significantly influence its effectiveness. The Board has implemented best practices for all such processes. Important elements include Board meeting agendas (to address all important topics), information submitted to the Board (to ensure the Board receives sufficient information from management to perform its supervisory duty and to make decisions that are reserved for it), and boardroom behavior (to promote an efficient and balanced decision-making process).

Board and Executive Committee Compensation

        Information on Board and Executive Committee compensation is outlined in our Compensation Report. See "—Item 6.B Compensation".

Full Implementation of Minder Ordinance

        In 2015, all elements of the rules implementing the Minder Initiative were fully introduced with the amendment of the Articles of Incorporation of Novartis AG. Key Articles of Incorporation content is presented in this Corporate Governance Report, including information on the maximum number of Board mandates of Board and Executive Committee members, and on the "say-on-pay" votes at the Annual General Meeting of Shareholders (AGM).

OUR SHARES AND OUR SHAREHOLDERS

Our Shares

Share Capital of Novartis AG

        As of December 31, 2015, the share capital of Novartis AG is CHF 1,338,496,500 fully paid-in and divided into 2,676,993,000 registered shares, each with a nominal value of CHF 0.50. Novartis AG has neither authorized nor conditional capital. There are no preferential voting shares; all shares have equal voting rights. No participation certificates, non-voting equity securities (Genussscheine), or profit-sharing certificates have been issued.

        Novartis shares are listed on the SIX Swiss Exchange (ISIN CH0012005267, symbol: NOVN), as well as on the New York Stock Exchange (NYSE) in the form of American depositary receipts (ADRs) representing Novartis American depositary shares (ADSs) (ISIN US66987V1098, symbol: NVS).

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        The holder of an ADR has the rights enumerated in the deposit agreement (such as the right to give voting instructions and to receive a dividend). The ADS depositary of Novartis AG—JPMorgan Chase Bank, New York—holding the Novartis shares underlying the ADRs is registered as a shareholder in the Novartis Share Register. An ADR is not a Novartis share and an ADR holder is not a Novartis AG shareholder. ADR holders exercise their voting rights by instructing the depositary to exercise their voting rights. Each ADR represents one Novartis share.

Changes in Share Capital

        During the last three years, the following changes were made to the share capital of Novartis AG:

        In 2013 and 2014, the share capital of Novartis AG did not change. In 2015, Novartis AG reduced its share capital by CHF 14.6 million (from CHF 1,353,096,500 to CHF 1,338,496,500) by canceling 29.2 million Novartis shares repurchased on the second trading line during 2013 and 2014.

Capital Changes
	Number of shares
Year	As of Jan 1		Changes in shares			As of Dec 31		Changes in CHF
2013		2,706,193,000					2,706,193,000
2014		2,706,193,000					2,706,193,000
2015		2,706,193,000		(29,200,000	)		2,676,993,000		(14,600,000	)

Convertible or Exchangeable Securities

        Novartis AG has not issued convertible or exchangeable bonds, warrants, options or other securities granting rights to Novartis shares, other than options (and similar instruments such as stock appreciation rights) granted under or in connection with equity-based participation plans of associates. Novartis AG does not grant any new stock options under these plans.

Share Repurchase Programs

        At the AGM in February 2008, shareholders approved the sixth share repurchase program authorizing the Board to repurchase Novartis shares up to a maximum of CHF 10 billion via a second trading line on the SIX Swiss Exchange. In 2008, a total of 6 million Novartis shares were repurchased at an average price of CHF 49.42 per Novartis share and canceled in 2009. In April 2008, the share repurchases were suspended in favor of debt repayment. In December 2010, the Board announced the reactivation of the share repurchases. In 2011, 39,430,000 Novartis shares were repurchased at an average price of CHF 52.81 per Novartis share and canceled in 2012. In 2012, no Novartis shares were repurchased. In 2013, 2,160,000 Novartis shares were repurchased at an average price of CHF 70.58 per Novartis share. In 2014, 27,040,000 Novartis shares were repurchased at an average price of CHF 81.18 per Novartis share. In 2015, 29,200,000 Novartis shares bought in 2013 and 2014 were canceled, and 49,878,180 Novartis shares were repurchased at an average price of CHF 93.24 per Novartis share. With those repurchases, the sixth share repurchase program has been completed.

Share Developments

Share developments in 2015

–

Swiss-listed Novartis shares decrease 6% to CHF 86.80

–

ADRs decrease 7% to $86.04

        Novartis shares finished at CHF 86.80, a decrease of 6% from the 2014 year-end closing price of CHF 92.35. Novartis ADRs decreased in 2015 by 7% to $86.04 from $92.66. The Swiss Market Index

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(SMI) in comparison decreased by 1.8% in 2015, whereas the world pharmaceutical index (MSCI) grew by 2.6% during the year. Total shareholder return in 2015 was –3.4% in CHF and –3.5% in US dollars. Over a longer-term period, Novartis AG has consistently delivered a solid performance, providing a 9.9% compounded annual total shareholder return between January 1, 1996 and December 31, 2015, exceeding the 8.9% compounded returns of its large pharmaceutical peers (see "—Item 6.B Compensation—Benchmark Companies") or the returns of 9.2% of the MSCI.

        The market capitalization of Novartis AG based on the number of Novartis shares outstanding (excluding Novartis treasury shares) amounted to $208 billion as of December 31, 2015, compared to $224 billion as of December 31, 2014.

Continuously rising dividend since 1996

        The Board proposes a 4% increase in the dividend payment for 2015 to CHF 2.70 per Novartis share (2014: CHF 2.60) for approval at the AGM on February 23, 2016. This represents the 19^th consecutive increase in the dividend paid per share since the creation of Novartis AG in December 1996. If the 2015 dividend proposal is approved by shareholders, dividends to be paid out will total approximately $6.6 billion (2014: $6.6 billion). This would result in an expected payout ratio of 93% of net income from continuing operations (2014: 62%) and 37% of net income attributable to shareholders of Novartis AG (2014: 65%). Based on the 2015 year-end share price of CHF 86.80, the dividend yield will be 3.1% (2014: 2.8%). The dividend payment date has been set for February 29, 2016.

Direct Share Purchase Plan

        Novartis AG offers a Direct Share Purchase Plan to investors residing in Switzerland. It provides an easy and inexpensive way for investors to directly purchase registered Novartis shares and for them to be held at no cost in a deposit account with SIX SAG AG. Due to legal restrictions, investors residing outside Switzerland may not participate in the plan. At the end of 2015, 7,814 shareholders were enrolled in this plan.

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Key Novartis Share Data	2015		2014		2013
Issued shares		2,676,993,000		2,706,193,000		2,706,193,000
Treasury shares(1)		303,098,183		307,566,743		280,108,692
Outstanding shares at December 31		2,373,894,817		2,398,626,257		2,426,084,308
Weighted average number of shares outstanding		2,402,806,352		2,425,782,324		2,440,849,805

⁽¹⁾

Approximately 137 million treasury shares (2014: 153 million; 2013: 149 million) are held in entities that restrict their availability for use.

Per-share information(1)	2015		2014			2013
Basic earnings per share (US dollars) from continuing operations		2.92		4.39			3.76
Basic earnings per share (US dollars) from discontinued operations		4.48		(0.18	)		0.00
Total basic earnings per share (US dollars)		7.40		4.21			3.76
Diluted earnings per share (US dollars) from continuing operations		2.88		4.31			3.70
Diluted earnings per share (US dollars) from discontinued operations		4.41		(0.18	)		0.00
Total diluted earnings per share		7.29		4.13			3.70
Operating cash flow (US dollars) from continuing operations		5.03		5.73			5.17
Year-end equity for Novartis AG shareholders (US dollars)		32.46		29.50			30.64
Dividend (CHF)(2)		2.70		2.60			2.45

⁽¹⁾

Calculated on the weighted average number of shares outstanding, except year-end equity.

⁽²⁾

2015: Proposal to shareholders for approval at the Annual General Meeting on February 23, 2016.

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Key ratios—December 31	2015		2014		2013
Price/earnings ratio(1)		11.9		22.2		21.3
Price/earnings ratio from continuing operations(1)		30.1		21.3		21.3
Enterprise value/EBITDA from continuing operations		16		15		13
Dividend yield (%)(1)		3.1		2.8		3.4

⁽¹⁾

Based on the Novartis share price at December 31 of each year.

Key data on ADRs issued in the US	2015		2014		2013
Year-end ADR price ($)		86.04		92.66		80.38
High(1)		106.12		96.65		80.39
Low(1)		83.96		78.20		63.70
Number of ADRs outstanding(2)		299,578,398		307,623,364		317,193,803

⁽¹⁾

Based on the daily closing prices.

⁽²⁾

The depositary, JPMorgan Chase Bank, holds one Novartis AG share for every ADR issued.

Share price (CHF)	2015		2014		2013
Year-end share price		86.80		92.35		71.20
High(1)		102.30		93.80		73.65
Low(1)		82.20		70.65		58.70
Year-end market capitalization ($ billions)(2)		208.3		223.7		194.2
Year-end market capitalization (CHF billions)(2)		206.1		221.5		172.7

⁽¹⁾

Based on the daily closing prices.

⁽²⁾

Market capitalization is calculated based on the number of shares outstanding (excluding treasury shares).

Our Shareholders

Significant Shareholders

        According to the Novartis Share Register, as of December 31, 2015, the following registered shareholders (including nominees and the ADS depositary) held more than 2% of the total share capital of Novartis AG with the right to vote these shares:¹

–

Shareholders: Novartis Foundation for Employee Participation, with its registered office in Basel, holding 2.6%; and Emasan AG, with its registered office in Basel, holding 3.3%

–

Nominees: Chase Nominees Ltd., London,² holding 8.8%; Nortrust Nominees, London, holding 3.2%; and The Bank of New York Mellon, New York, holding 4.6% through its nominees, Mellon Bank, Everett, holding 1.7% and The Bank of New York Mellon, Brussels, holding 2.9%

–

ADS depositary: JPMorgan Chase Bank, New York, holding 11.2%

        According to disclosure notifications filed with Novartis AG and the SIX Swiss Exchange, each of the following shareholders held between 3% and 5% of the share capital of Novartis AG as of December 31, 2015:

–

Capital Group Companies Inc., Los Angeles

–

BlackRock Inc., New York

¹

Excluding 6.2% of the share capital held as treasury shares by Novartis AG and its entities that restrict their availability for use

²

Previously reported as JPMorgan Chase Bank, New York, but changed to its affiliate Chase Nominees Ltd., London, which is entered as nominee in the Novartis Share Register

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        Disclosure notifications pertaining to shareholdings in Novartis AG that were filed with Novartis AG and the SIX Swiss Exchange are published on the latter's electronic publication platform, and can be accessed via:

        www.six-exchange-regulation.com/de/home/publications/significant-shareholders.html.

Cross Shareholdings

        Novartis AG has no cross shareholdings in excess of 5% of capital or voting rights with any other company.

Distribution of Novartis Shares

        The information in the following tables relates only to registered shareholders and does not include holders of unregistered shares. Also, the information provided in the tables below cannot be assumed to represent the entire Novartis AG investor base because nominees and JPMorgan Chase Bank, as ADS depositary, are registered as shareholders for a large number of beneficial owners.

        As of December 31, 2015, Novartis AG had approximately 161,000 registered shareholders.

Number of Shares Held As of December 31, 2015	Number of registered shareholders		% of registered share capital
1–100		24,096		0.06
101–1,000		96,203		1.53
1,001–10,000		36,616		3.83
10,001–100,000		3,387		3.32
100,001–1,000,000		470		5.16
1,000,001–5,000,000		73		5.79
5,000,001 or more(1)		34		50.79
Total registered shareholders/shares		160,879		70.48
Unregistered shares				29.52
Total				100.00

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Including significant registered shareholders as listed above

Registered Shareholders by Type As of December 31, 2015	Shareholders in %		Shares in %
Individual shareholders		96.14		11.76
Legal entities		3.79		39.65
Nominees, fiduciaries and ADS depositary		0.07		48.59
Total		100.00		100.00

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Registered Shareholders by Country As of December 31, 2015	Shareholders in %		Shares in %
France		2.49		0.92
Germany		5.21		1.91
Luxembourg		0.03		1.08
Switzerland(1)		88.60		40.93
United Kingdom		0.50		23.77
United States		0.30		27.53
Other countries		2.87		3.86
Total		100.00		100.00

Registered shares held by nominees are shown in the country where the company/affiliate entered in the Novartis Share Register as shareholder has its registered seat

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Excluding 6.2% of the share capital held as treasury shares by Novartis AG and its entities that restrict their availability for use

Shareholder Rights

        Shareholders have the right to receive dividends, to vote and to execute such other rights as granted under Swiss law and the Articles of Incorporation.

Right to vote

        Each Novartis share registered with the right to vote entitles the holder to one vote at General Meetings. Novartis shares can only be voted if they are registered with voting rights with the Novartis Share Register by the third business day before the General Meeting (for shareholder registration and voting restrictions, see "—Shareholder Registration").

        ADR holders may vote by instructing JPMorgan Chase Bank, the ADS depositary, to exercise the voting rights attached to the registered shares underlying the ADRs. JPMorgan Chase Bank exercises the voting rights for registered shares underlying ADRs for which no voting instructions have been given by providing a discretionary proxy to an uninstructed independent designee. Such designee has to be a Novartis AG shareholder.

Powers of General Meetings

        The following powers are vested exclusively in the General Meeting:

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Adoption and amendment of the Articles of Incorporation

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Election and removal of the Chairman of the Board, Board and Compensation Committee members, the Independent Proxy and external auditors

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Approval of the management report (if required) and of the consolidated financial statements

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Approval of the financial statements of Novartis AG and decision on the appropriation of available earnings shown on the balance sheet, including with regard to dividends

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Approval of the maximum aggregate amounts of compensation of the Board (for the period from an AGM until the next AGM) and of the Executive Committee (for the financial year following the AGM)

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Grant of discharge to Board and Executive Committee members

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Decision of other matters that are reserved by law or by the Articles of Incorporation to the General Meeting of Shareholders

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Resolutions and elections at General Meetings

        The General Meeting passes resolutions and elections with the absolute majority of the votes represented at the meeting. However, under the Articles of Incorporation (www.novartis.com/corporate-governance), the approval of two-thirds of the votes represented at the meeting is required for:

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An alteration of the purpose of Novartis AG

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The creation of shares with increased voting powers

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An implementation of restrictions on the transfer of registered shares and the removal of such restrictions

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An authorized or conditional increase of the share capital

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An increase of the share capital out of equity, by contribution in kind, for the purpose of an acquisition of property or the grant of special rights

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A restriction or suspension of rights or options to subscribe

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A change of location of the registered office of Novartis AG

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The dissolution of Novartis AG

        In addition, the law provides for a qualified majority for other resolutions, such as a merger or spin-off.

Other shareholder rights

        Shareholders representing at least 10% of the share capital may request that an extraordinary General Meeting of Shareholders be convened. Shareholders representing Novartis shares with an aggregate nominal value of at least CHF 1 million may request that an item be included in a General Meeting agenda. Such requests must be made in writing at least 45 days before the meeting, specify the agenda item to be included, and contain the proposal on which the shareholder requests a vote.

        Shareholders can vote their Novartis shares by themselves or appoint another shareholder or the Independent Proxy to vote on their behalf. All shareholders (who are not yet registered on the Sherpany Platform; see "—Shareholder Registration" below) receive a General Meeting invitation letter with a proxy appointment form for the appointment of the Independent Proxy. On this form shareholders can instruct the Independent Proxy to vote on alternative or additional motions related to the agenda items either (i) according to the motions of the Board for such alternative or additional motions, or (ii) against such alternative or additional motions, or (iii) to abstain from voting.

        Novartis AG offers shareholders the opportunity to use an online platform (the Sherpany Platform) to receive notices of future General Meetings exclusively by email and to electronically give their instructions to the Independent Proxy, grant powers of attorney to other shareholders, and order their admission cards online. The General Meeting registration form enables shareholders who are not yet registered on the Sherpany Platform to order detailed documents related to opening a Sherpany account. They may also do so by contacting the Novartis Share Register. Shareholders can deactivate their online account at any time and again receive invitations in paper form.

        Other rights associated with a registered Novartis share may only be exercised by the shareholder, its legal representative, another shareholder with the right to vote, or the Independent Proxy, or a usufructuary (a person not the owner of the share who is entitled to exercise the shareholder rights) or nominee who is registered in the Novartis Share Register.

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Shareholder Registration

        Only shareholders, usufructuaries or nominees registered in the Novartis Share Register with voting rights may exercise their voting rights. To be registered with voting rights, a shareholder must declare that he or she acquired the shares in his or her own name and for his or her own account. According to the Articles of Incorporation, the Board may register nominees with the right to vote. For restrictions on the registration of nominees, please see below.

        The Articles of Incorporation provide that no shareholder shall be registered with the right to vote for more than 2% of the registered share capital. The Board may, upon request, grant an exemption from this restriction. Considerations include whether the shareholder supports the Novartis goal of creating sustainable value and has a long-term investment horizon. In 2015, no exemptions were requested. Exemptions are in force for the registered significant shareholders listed under "—Our Shareholders—Significant Shareholders," and for Norges Bank (Central Bank of Norway), Oslo, which as of December 31, 2015, held less than 2% of the share capital of Novartis AG.

        The same registration and voting restrictions indirectly apply to holders of ADRs.

        Given that shareholder representation at General Meetings traditionally has been rather low in Switzerland, Novartis AG considers registration restrictions necessary to prevent a minority shareholder from dominating a General Meeting.

        The Articles of Incorporation provide that no nominee shall be registered with the right to vote for more than 0.5% of the registered share capital. The Board may, upon request, grant an exemption from this restriction if the nominee discloses the names, addresses and number of shares of the persons for whose account it holds 0.5% or more of the registered share capital. Exemptions are in force for the nominees listed under "—Our Shareholders—Significant Shareholders," and for the nominee Citi Bank, London, which in 2015 requested an exemption, but as of December 31, 2015 was not registered in the Novartis Share Register.

        The same restrictions indirectly apply to holders of ADRs.

        Registration restrictions in the Articles of Incorporation may only be removed through a resolution of the General Meeting of Shareholders, with approval of at least two-thirds of the votes represented at the meeting.

        Shareholders, ADR holders or nominees who are linked to each other or who act in concert to circumvent registration restrictions are treated as one person or nominee for the purposes of the restrictions on registration.

No Restrictions on Trading Of Shares

        No restrictions are imposed on the transferability of Novartis shares. The registration of shareholders in the Novartis Share Register or in the ADR register kept by JPMorgan Chase Bank does not affect the tradability of Novartis shares or ADRs. Registered Novartis shareholders or ADR holders may, therefore, purchase or sell their Novartis shares or ADRs at any time, including before a General Meeting regardless of the record date. The record date serves only to determine the right to vote at a General Meeting.

Change-of-Control Provisions

No opting up, no opting out

        According to the Swiss Stock Exchange Act (as per January 1, 2016, according to the Swiss Federal Act on Financial Infrastructures), anyone who—directly, indirectly or acting in concert with third parties—acquires equity securities exceeding 33¹/3% of the voting rights of a company (whether or not such rights are exercisable) is required to make an offer to acquire all listed equity securities of that

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company. A company may raise this threshold to 49% of the voting rights ("opting up") or may, under certain circumstances, waive the threshold ("opting out"). Novartis AG has not adopted any such measures.

Change-of-control clauses

        In accordance with good corporate governance and the rules implementing the Minder Initiative, there are no change-of-control clauses and "golden parachute" agreements benefiting Board members, Executive Committee members, or other members of senior management. Furthermore, employment contracts with Executive Committee members do not contain notice periods or contract periods exceeding 12 months, or commissions for the acquisition or transfer of enterprises or severance payments.

General Compensation Provisions

Non-executive members of the Board of Directors

        Compensation of non-executive members of the Board includes fixed compensation elements only. In particular, non-executive members of the Board of Directors shall receive no company contributions to any pension plan, no performance-related elements, and no financial instruments (e.g., options).

Members of the Executive Committee

        The members of the Executive Committee receive fixed and variable performance-related compensation award. Fixed compensation comprises of the base salary and may include other elements and benefits such as contributions to pension plans. Variable compensation may be structured into short-term and long-term compensation elements. Short-term variable compensation elements shall be governed by performance metrics that take into account the performance of Novartis and/or parts thereof, and/or individual targets. Achievements are generally measured based on the one-year period to which the short-term compensation relates. The long-term compensation plans are based on performance metrics that take into account strategic objectives of Novartis (such as financial, innovation, shareholder return and/or other metrics). Achievements are generally measured based on a period of not less than three years.

Additional Amount

        If the maximum aggregate amount of compensation already approved by the General Meeting is not sufficient to cover the compensation of newly appointed or promoted Executive Committee members, Novartis may pay out compensation, in a total amount up to 40% of the total maximum aggregate amount last approved for the Executive Committee per compensation period, to newly appointed or promoted Executive Committee members.

        For detailed information on the compensation of the Board and Executive Committee, see "—Item 6.B Compensation".

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OUR BOARD OF DIRECTORS

Election and Term of Office

        Board members, the Chairman, and Compensation Committee members are elected annually and individually by shareholders at the General Meeting. Board members whose term of office has expired are immediately eligible for re-election.

        The average tenure of Board members is six years. A Board member must retire after reaching age 70. Under special circumstances, shareholders may grant an exemption from this rule and re-elect a Board member for additional terms of office. There is no mandatory term limit for Board members, so as not to lose the value of the insight and knowledge of the company's operations and practices that long-serving Board members have developed.

Name	Nationality	Year of birth		First election at AGM		Last election at AGM		End of current term
Joerg Reinhardt, Ph.D.	D		1956		2013		2015		2016
Enrico Vanni, Ph.D.	CH		1951		2011		2015		2016
Nancy C. Andrews, M.D., Ph.D	US		1958		2015		2015		2016
Dimitri Azar, M.D.	US		1959		2012		2015		2016
Verena A. Briner, M.D.	CH		1951		2013		2015		2016
Srikant Datar, Ph.D.	US		1953		2003		2015		2016
Ann Fudge	US		1951		2008		2015		2016
Pierre Landolt, Ph.D.	CH		1947		1996		2015		2016
Andreas von Planta, Ph.D.	CH		1955		2006		2015		2016
Charles L. Sawyers, M.D.	US		1959		2013		2015		2016
William T. Winters	UK/US		1961		2013		2015		2016

Board Profile

Board Composition

        The composition of the Board must align with our status as a listed company, business portfolio, geographic reach and culture. The Board must be diverse in all aspects. Knowledge and experience in the

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following fields must be represented on the Board: leadership and management; healthcare, life sciences and medicine; research and development; engineering and technology; marketing; banking, finance and accounting; human resources; legal and public affairs; and risk management.

Individual Board Member Profile

        Board members should have the following personal qualities:

–

Interact with other Board members to build an effective and complementary Board

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Establish trusting relationships

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Apply independence of thought

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Be challenging but supportive in the boardroom

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Influence without creating conflict by applying a constructive, non-confrontational style

–

Listen well and offer advice based on sound judgment

–

Be able and willing to commit adequate time to Board and committee responsibilities

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Be open to personal feedback and seek to be responsive

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Do not have existing board memberships or hold other positions that could lead to a permanent conflict of interest

–

Understand and respect the boundaries of their role, leaving the operational management of the company to the CEO and his Executive Committee

        Board members' biographies (see "—Item 6.A Directors and Senior Management") highlight the specific qualifications that led the Board to conclude they are qualified to serve on the Board, which is diverse in terms of background, credentials, interests and skills.

Board Diversity

        The diversity of a board of directors is critical to its effectiveness. Thus, when the Governance, Nomination and Corporate Responsibilities Committee of Novartis identifies new Board member candidates to be proposed to shareholders for election, the maintenance and improvement of the Board's diversity is an important criterion. The Board's aspiration is to have a diverse Board in all aspects. This includes nationality, gender, background and experience, age, tenure, viewpoints, interests, and technical and interpersonal skills.

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Role of the Board and its Committees

        The Board is responsible for the overall direction and supervision of management and holds the ultimate decision-making authority for Novartis AG, except for those decisions reserved for shareholders.

        The Board has delegated certain responsibilities to five committees, as set out below. Responsibilities described with the terms "overseeing" or "reviewing" are subject to final Board approval. The committees enable the Board to work in an efficient and effective manner, ensuring a thorough review and discussion of issues, while giving the Board more time for deliberation and decision-making. Moreover, committees

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ensure that only Board members who are independent oversee audit and compliance, governance and compensation—as only independent Board members are delegated in the respective committees.

Responsibilities	Members	Number of meetings held in 2015/approximate average duration (hrs) of each meeting attendance	Link
Board of Directors		10/6:00
The primary responsibilities of the Board of Directors include: —Setting the strategic direction of the Group —Appointing, overseeing and dismissing key executives, and planning their succession —Approving major transactions and investments —Determining the organizational structure and governance of the Group —Determining and overseeing financial planning, accounting, reporting and controlling —Approving annual financial statements and corresponding financial results releases	Joerg Reinhardt(1) Enrico Vanni Nancy C. Andrews(3) Dimitri Azar Verena A. Briner Srikant Datar Ann Fudge Pierre Landolt Andreas von Planta Charles L. Sawyers William T. Winters	10 10 8 10 10 10 10 10 10 10 10	Articles of Incorporation of Novartis AG Regulations of the Board of Directors, its Committees and the Executive Committee of Novartis AG (Board Regulations) www.novartis.com/ corporate-governance
Audit and Compliance Committee		7/2:30
The primary responsibilities of this committee include: —Supervising external auditors and selecting and nominating external auditors for election by the meeting of shareholders —Overseeing internal auditors —Overseeing accounting policies, financial controls, and compliance with accounting and internal control standards —Approving quarterly financial statements and financial results releases —Overseeing internal control and compliance processes and procedures —Overseeing compliance with laws, and external and internal regulations The Audit and Compliance Committee has the authority to retain external consultants and other advisors.	Srikant Datar(1),(2) Dimitri Azar Enrico Vanni Andreas von Planta	7 7 7 7	Charter of the Audit and Compliance Committee www.novartis.com/ corporate-governance
Compensation Committee		5/2:30
The primary responsibilities of this committee include: —Designing, reviewing and recommending to the Board compensation policies and programs —Advising the Board on the compensation of the Board members and the CEO —Deciding on the compensation of Executive Committee members —Preparing the Compensation Report and submitting to the Board for approval The Compensation Committee has the authority to retain external consultants and other advisors.	Enrico Vanni(1) Srikant Datar Ann Fudge William T. Winters(4)	5 5 5 4	Charter of the Compensation Committee www.novartis.com/ corporate-governance

⁽¹⁾

Chairman

⁽²⁾

Audit Committee Financial Expert as defined by the US Securities and Exchange Commission

⁽³⁾

as of AGM February 2015

⁽⁴⁾

as of April meeting

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Responsibilities	Membership comprises	Number of meetings held in 2015/approximate average duration (hrs) of each meeting attendance	Link
Governance, Nomination and Corporate Responsibilities Committee		3/2:00
The primary responsibilities of this committee include: —Designing, reviewing and recommending to the Board corporate governance principles —Identifying candidates for election as Board members —Assessing existing Board members and recommending to the Board whether they should stand for re-election —Preparing and reviewing the succession plan for the CEO —Developing and reviewing an orientation program for new Board members and an ongoing education plan for existing Board members —Reviewing on a regular basis the Articles of Incorporation with a view to reinforcing shareholder rights —Reviewing on a regular basis the composition and size of the Board and its committees —Reviewing annually the independence status of each Board member —Reviewing directorships and agreements of Board members for conflicts of interest, and dealing with conflicts of interest —Overseeing the company's strategy and governance on corporate responsibility The Governance, Nomination and Corporate Responsibilities Committee has the authority to retain external consultants and other advisors.	Pierre Landolt(1) Ann Fudge Charles L. Sawyers Andreas von Planta	3 2 3 3	Charter of the Governance, Nomination and Corporate Responsibilities Committee www.novartis.com/corporate-governance

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Responsibilities	Membership comprises	Number of meetings held in 2015/approximate average duration (hrs) of each meeting attendance	Link
Research & Development Committee		4/8:00
The primary responsibilities of this committee include: —Monitoring research and development, and bringing recommendations to the Board —Assisting the Board in the oversight and evaluation related to research and development —Informing the Board on a periodic basis on the research and development strategy, the effectiveness and competitiveness of the research and development function, emerging scientific trends and activities critical to the success of research and development, and the pipeline —Advising the Board on scientific, technological, and research and development matters —Providing counsel and know-how to management in the area of research and development —Reviewing such other matters in relation to the company's research and development as the committee may, in its own discretion, deem desirable in connection with its responsibilities The Research & Development Committee has the authority to retain external consultants and other advisors.	Joerg Reinhardt(1) Nancy C. Andrews(2) Dimitri Azar Charles L. Sawyers Enrico Vanni	4 3 4 4 3	Charter of the Research & Development Committee www.novartis.com/corporate-governance
Risk Committee		4/2:00
The primary responsibilities of this committee include: —Ensuring that Novartis has implemented an appropriate and effective risk management system and process —Ensuring that all necessary steps are taken to foster a culture of risk-adjusted decision-making without constraining reasonable risk-taking and innovation —Approving guidelines and reviewing policies and processes —Reviewing with management, internal auditors and external auditors the identification, prioritization and management of risks, the accountabilities and roles of the functions involved in risk management, the risk portfolio, and the related actions implemented by management The Risk Committee has the authority to retain external consultants and other advisors.	Andreas von Planta(1) Verena A. Briner Srikant Datar Ann Fudge	4 4 4 4	Charter of the Risk Committee www.novartis.com/corporate-governance

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Chairman

⁽²⁾

as of AGM February 2015

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Functioning of the Board

        The Board takes decisions as a whole, supported by its five committees. Each committee has a written charter outlining its duties and responsibilities, and is led by a Board-elected chairman.

        The Board and its committees meet regularly throughout the year. The chairmen set their meeting agendas. Any Board member may request a Board or committee meeting, and the inclusion of an agenda item. Before meetings, Board members receive materials to help them prepare the discussions and decision-making.

Chairman

        Joerg Reinhardt has been independent, non-executive Chairman since August 1, 2013. He has both industry and Novartis experience, and meets the company's independence criteria. As independent Chairman, he can lead the Board to represent the interests of all stakeholders, being accountable to them and creating sustainable value through effective governance. The independent chairmanship also ensures an appropriate balance of power between the Board and Executive Committee.

        In this role, Joerg Reinhardt:

–

Provides leadership to the Board

–

Supports and mentors the CEO

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Supported by the Governance, Nomination and Corporate Responsibilities Committee, ensures effective succession plans for the Board and the Executive Committee

–

Ensures that the Board and its committees work effectively

–

Sets the agenda, style and tone of Board discussions, promoting constructive dialogue and effective decision-making

–

Supported by the Governance, Nomination and Corporate Responsibilities Committee, ensures that all Board committees are properly established, composed and operated

–

Ensures that the Board's performance is annually evaluated

–

Ensures introduction programs for new Board members and continuing education as well as specialization for all Board members

–

Ensures effective communication with the company's shareholders

–

Promotes effective relationships and communication between Board and Executive Committee members

Vice Chairman

        Enrico Vanni has been independent, non-executive Vice Chairman since February 22, 2013.

        In this role, he:

–

Leads the Board in case and as long as the Chairman is incapacitated

–

Chairs the sessions of independent Board members and leads independent Board members if and as long as the Chairman is not independent

Board Meetings

        The Board has meetings with Executive Committee members as well as private meetings without them.

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        In 2015, there were 10 Board meetings. Because all Board members are independent, no separate meetings of the independent Board members were held in 2015.

Key activities of our Board and committees in 2015

        The Board meeting agendas in 2015 included the following standard topics: strategy; Group targets; personal objectives of the CEO; mergers and acquisitions, and business development and licensing review; financial and business reviews; major projects; investments and transactions; the Annual Report; and the General Meeting agenda. Topics addressed during private meetings included Board self-evaluation and performance assessment of senior management, as well as succession planning.

        In addition, in 2015 our Board and its committees focused on a number of special topics, including:

Board of Directors:

        Our biosimilars development pipeline, the pricing and competitive environment in pharmaceuticals, the rollout of our new Values and Behaviors, a review of our brand identity, the proposal to revise our Articles of Incorporation and Board regulations to implement the "Minder Legislation," the analysis of the AGM 2015 and investor feedback from our corporate governance roadshow, the issue of new bonds, and the renewal of existing credit facilities.

Governance, Nomination and Corporate Responsibilities Committee:

        Investor feedback from our corporate governance roadshow and how to address it; the search profile for and discussion of potential new Board members to strengthen the general management and financial expertise background of our Board; a review of our corporate responsibility activities, including the proposal to introduce an "Access Brand" (a first-of-its-kind portfolio of products aimed at increasing access to medicines in low- and low-middle-income countries); and reviewing the activities of the Novartis Foundation (a philanthropic organization pioneering innovative healthcare models that have a transformational impact on the health of the poorest populations).

Compensation Committee:

        The metrics that underpin the Annual Incentive and the performance-based Long-Term Incentive plans; the constituents of the Novartis healthcare peer group used for benchmarking and variable compensation purposes; the rollout of the compensation system of Executive Committee members to the broader Novartis executive group, as well as approving the Long-Term Incentive plans for the rest of the Novartis employee population; investor feedback from the corporate governance roadshow; and expense policies.

Audit and Compliance Committee:

        The accounting of the portfolio transformation, the Novartis IT security organization and challenges, the roles of the Audit and Compliance Committee and the Risk Committee to avoid potential gaps or overlaps, working toward integrated assurance, specific accounting and compliance topics, compensation disclosures, the revision of the Internal Audit Charter, and the definition of growth products.

Risk Committee:

        Key business risks at Alcon; pharmacovigilance and quality preparedness; benchmarking the enterprise risk management organization and processes; risks related to pricing, data privacy, IT security, and data integrity in manufacturing and development; and risks and opportunities related to the Step Change program (a program evolving our approach to business practices and customer relationships to strengthen our focus on performance with integrity).

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Research & Development Committee:

        The Novartis portfolio of R&D projects in the following areas: respiratory diseases; infectious diseases; autoimmune, transplantation and immunological diseases; cardiovascular and metabolic diseases; immuno-oncology; and musculoskeletal diseases. The committee also supported the setting and evaluation of innovation-related long-term performance metrics.

Honorary Chairmen

        Dr. Alex Krauer and Dr. Daniel Vasella have been appointed Honorary Chairmen in recognition of their significant achievements on behalf of Novartis. They are not provided with Board documents and do not attend Board meetings.

Independence of Board Members

        The independence of Board members is a key corporate governance issue. An independent Board member is one who is independent of management and has no business or relationship that could materially interfere with the exercise of objective, unfettered and independent judgment. Only with a majority of Board members being independent can the Board fulfill its obligation to represent the interests of shareholders, being accountable to them and creating sustainable value through an effective governance of Novartis. Accordingly, Novartis established independence criteria based on international best-practice standards and outlined on the Novartis website:

        www.novartis.com/investors/governance-documents.shtml.

–

The majority of Board members and any member of the Audit and Compliance Committee; the Compensation Committee; and the Governance, Nomination and Corporate Responsibilities Committee must meet the company's independence criteria. These include, inter alia, (i) a Board member not having received direct compensation of more than $120,000 per year from Novartis, except for dividends or Board compensation, within the last three years, (ii) a Board member not having been an employee of Novartis within the last three years, (iii) a family member not having been an executive officer of Novartis within the last three years, (iv) a Board member or family member not being employed by the external auditor of Novartis, (v) a Board member or family member not being a board member, employee or 10% shareholder of an enterprise that has made payments to, or received payments from, Novartis, in excess of the greater of $1 million or 2% of that enterprise's gross revenues. For members of the Audit and Compliance Committee and the Compensation Committee, even stricter rules apply.

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In addition, Board members are bound by the Novartis Conflict of Interest Policy, which prevents a Board member's potential personal interests from influencing the decision-making of the Board.

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The Governance, Nomination and Corporate Responsibilities Committee annually submits to the Board a proposal concerning the determination of the independence of each Board member. For this assessment, the committee considers all relevant facts and circumstances of which it is aware—not only the explicit formal independence criteria. This includes an assessment of whether a Board member is truly independent, in character and judgment, from any member of the senior management and from any of his/her current or former colleagues.

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In its meeting on December 17, 2015, the Board determined that all of its members are independent.

Relationship of Non-Executive Board Members with Novartis

        No Board member is or was a member of the management of Novartis AG or of any other Novartis Group company in the last three financial years up to December 31, 2015. There are no significant

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business relationships of any Board member with Novartis AG or with any other Novartis Group company.

Mandates Outside the Novartis Group

        No Board member may hold more than 10 additional mandates in other companies, of which no more than four shall be in other listed companies. Chairmanships of the boards of directors of other listed companies count as two mandates. Each of these mandates is subject to Board approval.

        The following mandates are not subject to these limitations:

a)

Mandates in companies that are controlled by Novartis AG



b)

Mandates that a Board member holds at the request of Novartis AG or companies controlled by it. No Board member shall hold more than five such mandates.



c)

Mandates in associations, charitable organizations, foundations, trusts and employee welfare foundations. No Board member may hold more than 10 such mandates.

        "Mandates" means those in the supreme governing body of a legal entity that is required to be registered in the commercial register or a comparable foreign register. Mandates in different legal entities that are under joint control are deemed one mandate.

        The Board may issue regulations that determine additional restrictions, taking into account the position of the respective member.

Loans and Credits

        No loans or credits shall be granted to members of the Board.

Board Performance and Effectiveness Evaluation

Process

        The Board conducts an annual review to evaluate its performance and that of individual committees and members. As part of this process, each Board member completes a questionnaire on the performance and effectiveness of the Board and his/her committees, which lays the groundwork for a qualitative review led by the Chairman. The Chairman has discussions with each Board member, and then with the entire Board. Further, the committee evaluations are discussed by the respective committee and the results are debriefed to the Board. Any suggestion for improvement is recorded and actions are agreed upon.

        Periodically, this process is conducted by an independent consultant. In 2014, an independent performance and effectiveness evaluation of the Board and its committees, including an individual Board member assessment, was conducted by the independent expert company Russell Reynolds Associates. In 2015, the performance evaluation was conducted internally.

Content and Results

        The performance review examined the performance and effectiveness, and strengths and weaknesses, of individual Board members and of the full Board and each Board committee.

        This review covered topics including Board composition; purpose, scope and responsibilities; processes and governance of the Board and its committees; meetings and pre-reading material; team effectiveness; and leadership and culture.

        The review also evaluated the ability and willingness of each Board member to commit adequate time and effort to his/her responsibilities as provided for in the charter of the Governance, Nomination and Corporate Responsibilities Committee.

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        The results were discussed at the January 2016 meeting of the Board. It was concluded that the Board and its committees operate effectively.

Information and Control Systems of the Board vis-a-vis Management

Information on Management

        The Board ensures that it receives sufficient information from the Executive Committee to perform its supervisory duty and to make decisions that are reserved for it. The Board obtains this information through several means:

–

The CEO informs the Board regularly about current developments

–

Executive Committee meeting minutes are made available to the Board

–

Meetings or teleconferences are held as required between Board members and the CEO

–

The Board regularly meets with all Executive Committee members

–

The Board receives detailed, quarterly updates from each Division Head

–

By invitation, other members of management attend Board meetings to report on areas of the business for which they are responsible

–

Board members are entitled to request information from Executive Committee members or any other Novartis associate, and they may visit any Novartis site

Board Committees

        Board committees regularly meet with management and, at times, outside consultants to review the business, better understand applicable laws and policies affecting the Group, and support the Board and management in meeting the requirements and expectations of stakeholders and shareholders.

        In particular, the Chief Financial Officer (CFO), the Group General Counsel, and representatives of the external auditors are invited to Audit and Compliance Committee meetings. Additionally, the heads of Internal Audit, Financial Reporting & Accounting, Compliance and Quality, as well as the Head of the Global Business Practices Office report on a regular basis to the Audit and Compliance Committee. This committee reviews financial reporting processes on behalf of the Board. For each quarterly and annual release of financial information, the Disclosure Review Committee is responsible for ensuring the accuracy and completeness of disclosures. The Disclosure Review Committee, which is a management committee, is chaired by the CFO and includes the CEO; the Group General Counsel; the heads of the divisions, Novartis Business Services (NBS) and the Novartis Institutes for BioMedical Research (NIBR); the heads of finance of the divisions, NBS and NIBR; and the heads of the following corporate functions: Treasury, Tax, Financial Reporting & Accounting, Internal Audit and Investor Relations. The Audit and Compliance Committee reviews decisions made by the Disclosure Review Committee before the quarterly and annual releases are published.

        The Risk Committee oversees the risk management system and processes, and also reviews the risk portfolio of the Group to ensure appropriate and professional risk management. For this purpose, the Group Risk Office and the risk owners of the divisions report on a regular basis to the Risk Committee. The Group General Counsel, the Head of Group Risk, the Head of Internal Audit, and other senior executives are invited to these meetings on a regular basis.

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Novartis Management Information System

        Novartis produces comprehensive, consolidated (unaudited) financial statements on a monthly basis for the total Group and its divisions. These are typically available within 10 days of the end of the month and include the following:

–

Consolidated income statement of the month, quarter-to-date and year-to-date in accordance with International Financial Reporting Standards (IFRS), as well as adjustments to arrive at core results as defined by Novartis. The IFRS and core figures are compared to the prior-year period and targets in both US dollars and on a constant currency basis.

–

Consolidated balance sheet as of the month end in accordance with IFRS in US dollars

–

Consolidated cash flow on a monthly, quarter-to-date and year-to-date basis in accordance with IFRS in US dollars

–

Supplementary data on a monthly, quarterly and year-to-date basis such as free cash flow, gross and net debt, headcount, personnel costs, working capital, and earnings per share on a US dollar basis where applicable

        Constant currencies, core results, free cash flow, net debt and related target figures are non-IFRS measures. An explanation of non-IFRS measures can be found in "Item 5. Operating and Financial Review and Prospects—5.A Operating Results—Non-IFRS Measures as Defined by Novartis."

        The above information is made available to Board members on a monthly basis. An analysis of key deviations from the prior year or target is also provided.

        The Board also receives twice a year an outlook of the full-year results in accordance with IFRS and core, along with related commentary prior to the release of the quarterly results.

        On an annual basis, in the fourth quarter of the year, the Board receives and approves the operating and financial targets for the following year.

        In the middle of the year, the Board also reviews and approves the strategic plan for the next five years, which includes a projected consolidated income statement in US dollars prepared in accordance with IFRS and core (as defined by Novartis).

        The Board does not have direct access to the company's financial and management reporting systems but can, at any time, request more detailed financial information on any aspect that is presented to it.

Internal Audit

        The Internal Audit function carries out operational and system audits in accordance with an audit plan approved by the Audit and Compliance Committee. This function helps organizational units accomplish objectives by providing an independent approach to the evaluation, improvement and effectiveness of their internal control framework. It prepares reports on the audits it has performed, and reports actual or suspected irregularities to the Audit and Compliance Committee and the CEO. The Audit and Compliance Committee regularly reviews the Internal Audit scope, audit plans and results.

Risk Management

        The Group Risk Office is overseen by the Board's independent Risk Committee. The Compensation Committee works closely with the Risk Committee to ensure that the compensation system does not lead to excessive risk-taking by management (for details, see "—Item 6.B Compensation").

        Organizational and process measures have been established to identify and mitigate risks at an early stage. Organizationally, the individual divisions and functions are responsible for risk and risk mitigation, with specialized corporate functions—such as Group Finance, Group Quality Assurance, Corporate

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Health, Safety and Environment, Business Continuity Management and Integrity & Compliance, and the Business Practices Office—providing support and controlling the effectiveness of risk management by the divisions and functions in these respective areas.

OUR MANAGEMENT

Executive Committee Composition

        The Executive Committee is headed by the CEO. Its members are appointed by the Board.

        There are no contracts between Novartis and third parties whereby Novartis would delegate any business management tasks to such third parties.

Executive Committee Role and Functioning

        The Board has delegated to the Executive Committee overall responsibility for and oversight of the operational management of Novartis. This includes:

–

Developing policies and strategic plans for Board approval, and implementing those approved

–

Submitting to the Board and its committees proposed changes in management positions of material significance, investments, financial measures, acquisitions or divestments, contracts of material significance, and targets—and implementing those approved

–

Preparing and submitting quarterly and annual reports to the Board and its committees

–

Informing the Board of all matters of fundamental significance to the businesses

–

Recruiting, appointing and promoting senior management

–

Ensuring the efficient operation of the Group and achievement of optimal results

–

Promoting an active internal and external communications policy

–

Dealing with any other matters delegated by the Board

        The Executive Committee is supported by two sub-committees: The Deal Committee (members are the CEO, CFO, Division Head Pharmaceuticals, Group General Counsel, and Head of Biomedical Research) reviews important acquisitions and divestments of companies and businesses, and business development deals, and makes recommendations to the Executive Committee. The Disclosure Committee (members are the CEO, CFO, and Group General Counsel) determines whether an event constitutes information that is material to the Group, determines the appropriate disclosure and update of such information, and reviews media releases concerning such information.

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CEO

        In addition to other Board-assigned duties, the CEO leads the Executive Committee, building and maintaining an effective executive team. With the support of the Executive Committee, the CEO:

–

Is responsible for the operational management of Novartis

–

Develops strategy proposals to be recommended to the Board and ensures that approved strategies are implemented

–

Plans human resourcing to ensure that Novartis has the capabilities and means to achieve its plans, and that robust management succession and management development plans are in place and presented to the Board

–

Develops an organizational structure, and establishes processes and systems to ensure the efficient organization of resources

–

Ensures that financial results, business strategies and, when appropriate, targets and milestones are communicated to the investment community—and generally develops and promotes effective communication with shareholders and other stakeholders

–

Ensures that business performance is consistent with business principles, as well as legal and ethical standards

–

Develops processes and structures to ensure that capital investment proposals are reviewed thoroughly, that associated risks are identified, and that appropriate steps are taken to manage these risks

–

Develops and maintains an effective framework of internal controls over risk in relation to all business activities of the company

–

Ensures that the flow of information to the Board is accurate, timely and clear

Mandates Outside the Novartis Group

        No Executive Committee member may hold more than six additional mandates in other companies, of which no more than two additional mandates shall be in other listed companies. Each of these mandates is subject to Board approval. Executive Committee members are not allowed to hold chairmanships of the boards of directors of other listed companies.

        The following mandates are not subject to these limitations:

a)

Mandates in companies that are controlled by Novartis AG



b)

Mandates that an Executive Committee member holds at the request of Novartis AG or companies controlled by it. No Executive Committee member shall hold more than five such mandates.



c)

Mandates in associations, charitable organizations, foundations, trusts and employee welfare foundations. No Executive Committee member may hold more than 10 such mandates.

        "Mandates" means those in the supreme governing body of a legal entity that is required to be registered in the commercial register or a comparable foreign register. Mandates in different legal entities that are under joint control are deemed one mandate.

        The Board may issue regulations that determine additional restrictions, taking into account the position of the respective member.

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Loans and Credits

        No loans or credits shall be granted to members of the Executive Committee.

OUR INDEPENDENT EXTERNAL AUDITORS

Duration of the Mandate and Terms of Office of the Auditors

        Based on a recommendation by the Audit and Compliance Committee, the Board nominates an independent auditor for election at the AGM. PricewaterhouseCoopers (PwC) assumed its existing auditing mandate for Novartis in 1996. Bruno Rossi, auditor in charge, began serving in his role in 2013, and Stephen Johnson, global relationship partner, began serving in his role in 2014. The Audit and Compliance Committee ensures that these partners are rotated at least every five years.

Information to the Board and the Audit and Compliance Committee

        PwC is responsible for providing an opinion on whether the Group-consolidated financial statements comply with IFRS and Swiss law, and whether the separate parent company financial statements of Novartis AG comply with Swiss law. Additionally, PwC is responsible for opining on the effectiveness of internal control over financial reporting, on the Compensation Report as well as on the corporate responsibility reporting of Novartis.

        The Audit and Compliance Committee, acting on behalf of the Board, is responsible for overseeing the activities of PwC. In 2015, this committee held seven meetings. PwC was invited to six of these meetings to attend during the discussion of agenda items that dealt with accounting, financial reporting or auditing matters, and any other matters relevant to its audit.

        On an annual basis, PwC provides the Audit and Compliance Committee with written disclosures required by the US Public Company Accounting Oversight Board (PCAOB), and the committee and PwC discuss PwC's independence from Novartis and its management.

        The Audit and Compliance Committee recommended to the Board to approve the audited Group-consolidated financial statements and the separate parent company financial statements of Novartis AG for the year ended December 31, 2015. The Board proposed the acceptance of these financial statements for approval by the AGM.

        The Audit and Compliance Committee regularly evaluates the performance of PwC and once a year determines whether PwC should be proposed to the AGM for election. Also once a year, the auditor in charge and the global relationship partner report to the Board on PwC's activities during the current year and on the audit plan for the coming year. They also answer any questions or concerns Board members have about the performance of PwC, or about the work it has conducted or is planning to conduct.

        To assess the performance of PwC, the Audit and Compliance Committee holds private meetings with the CFO and the Global Head of Internal Audit and, if necessary, obtains an independent external assessment. Criteria applied for the performance assessment of PwC include an evaluation of its technical and operational competence; its independence and objectivity; the sufficiency of the resources it has employed; its focus on areas of significant risk to Novartis; its willingness to probe and challenge; its ability to provide effective, practical recommendations; and the openness and effectiveness of its communications and coordination with the Audit and Compliance Committee, the Internal Audit function, and management.

Approval of Audit and Non-Audit Services

        The Audit and Compliance Committee approves a budget for audit services whether recurring or non-recurring in nature, as well as audit-related services not related to internal controls over financial reporting. PwC reports quarterly to the Audit and Compliance Committee regarding the extent of services

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provided in accordance with the applicable pre-approval and the fees for services performed to date. The Audit and Compliance Committee individually approves all audit-related services relating to internal controls over financial reporting, tax services and other services prior to the start of work.

Audit And Additional Fees

        PwC charged the following fees for professional services rendered for the 12-month periods ended December 31, 2015 and December 31, 2014:

	2015		2014
	$ m		$ m
Audit Services		25.9		29.7
Audit-Related Services		1.7		2.0
Tax Services		0.0		0.2
Other Services		0.1		0.1
Total		27.7		32.0

        Audit services include work performed to issue opinions on Group-consolidated financial statements and parent company financial statements of Novartis AG, to issue opinions relating to the effectiveness of the Group's internal control over financial reporting, and to issue reports on local statutory financial statements. Also included are audit services that generally can only be provided by the statutory auditor, such as the audit of the Compensation Report, audits of non-recurring transactions, audits of the adoption of new accounting policies, audits of information systems and the related control environment, reviews of quarterly financial results, as well as procedures required to issue consents and comfort letters.

        Audit-related services include other assurance services provided by the independent auditor but not restricted to those that can only be provided by the statutory auditor. They include services such as audits of pension and other employee benefit plans, contract audits of third-party arrangements, corporate responsibility assurance, compliance with corporate integrity agreements, and other audit-related services.

        Tax services represent tax compliance, assistance with historical tax matters and other tax-related services.

        Other services include training in the finance area, benchmarking studies, and license fees for use of accounting and other reporting guidance databases.

OUR CORPORATE GOVERNANCE FRAMEWORK

Laws and Regulations

        Novartis AG is subject to the laws of Switzerland, in particular Swiss company and securities laws, and to the securities laws of the US as applicable to foreign private issuers of securities.

        In addition, Novartis AG is subject to the rules of the SIX Swiss Exchange, including the Directive on Information Relating to Corporate Governance.

        Novartis AG is also subject to the rules of NYSE as applicable to foreign private issuers of securities. NYSE requires Novartis AG to describe any material ways in which its corporate governance differs from that of domestic US companies listed on the exchange. These differences are:

–

Novartis AG shareholders do not receive written reports directly from Board committees.

–

External auditors are appointed by shareholders at the AGM, as opposed to being appointed by the Audit and Compliance Committee.

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–

While shareholders cannot vote on all equity compensation plans, they are entitled to hold separate, yearly binding shareholder votes on Board and Executive Committee compensation.

–

The Board has set up a separate Risk Committee that is responsible for business risk oversight, as opposed to delegating this responsibility to the Audit and Compliance Committee.

–

The full Board is responsible for overseeing the performance evaluation of the Board and Executive Committee.

–

The full Board is responsible for setting objectives relevant to the CEO's compensation and for evaluating his performance.

Swiss Code of Best Practice for Corporate Governance

        Novartis applies the Swiss Code of Best Practice for Corporate Governance.

Novartis Corporate Governance Standards

        Novartis has incorporated the corporate governance standards described above into the Articles of Incorporation and the Regulations of the Board of Directors, its Committees and the Executive Committee of Novartis AG (www.novartis.com/corporate-governance).

        The Governance, Nomination and Corporate Responsibilities Committee regularly reviews these standards and principles, taking into account best practices, and recommends improvements to the corporate governance framework for consideration by the full Board.

        Additional corporate governance information can be found on the Novartis website: www.novartis.com/corporate-governance.

        Printed copies of the Novartis Articles of Incorporation, Regulations of the Board, and Charters of Board Committees can be obtained by writing to: Novartis AG, Attn: Corporate Secretary, Lichtstrasse 35, CH-4056 Basel, Switzerland.

FURTHER INFORMATION

Group Structure of Novartis

Novartis AG and Group Companies

        Under Swiss company law, Novartis AG is organized as a corporation that has issued shares of common stock to investors. The registered office of Novartis AG is Lichtstrasse 35, CH-4056 Basel, Switzerland.

        Business operations are conducted through Novartis Group companies. Novartis AG, a holding company, owns or controls directly or indirectly all entities worldwide belonging to the Novartis Group. Except as described below, the shares of these companies are not publicly traded. The principal Novartis subsidiaries and associated companies are listed in "Item 18. Financial Statements—Note 32."

Divisions

        The businesses of Novartis are divided on a worldwide basis into three operating divisions: Pharmaceuticals, Alcon (eye care), and Sandoz (generics). In addition, there are NBS (shared services organization, delivering services to the divisions), NIBR (the company's global pharmaceutical research organization), and Group Corporate activities. In 2015, Animal Health and Vaccines were divested, and OTC was brought into a joint venture with GlaxoSmithKline's (GSK) business in this area—with Novartis holding a 36.5% minority stake in this joint venture.

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Majority Holdings in Publicly-traded Group Companies

        The Novartis Group owns 75% of Novartis India Limited, with its registered office in Mumbai, India, and listed on the Bombay Stock Exchange (ISIN INE234A01025, symbol: HCBA). The total market value of the 25% free float of Novartis India Limited was $97.6 million at December 31, 2015, using the quoted market share price at year end. Applying this share price to all the shares of the company, the market capitalization of the whole company was $390.5 million and that of the shares owned by Novartis was $292.9 million.

Significant Minority Shareholding owned by the Novartis Group

        The Novartis Group owns 33.3% of the bearer shares of Roche Holding AG, with its registered office in Basel, Switzerland, and listed on the SIX Swiss Exchange (ISIN CH0012032113, symbol: RO). The market value of the Group's interest in Roche Holding AG, as of December 31, 2015, was $14.9 billion. The total market value of Roche Holding AG was $241.08 billion. Novartis does not exercise control over Roche Holding AG, which is independently governed, managed and operated.

        The Novartis Group owns a 36.5% share of a joint venture created by GSK and Novartis, which combined the Novartis OTC and the GSK Consumer Healthcare businesses. Novartis holds four of the 11 seats of the joint venture's board. Furthermore, Novartis has certain minority rights and exit rights, including a put option that is exercisable as of March 2, 2018.

Political Contributions

        Novartis makes political contributions to support the political dialogue on public policy issues of relevance to Novartis, such as healthcare innovation and access to medicines.

        Political contributions made by Novartis are not intended to give rise to any obligations of the party receiving it. Moreover, rules and procedures are in place to make sure that political contributions are never made with the expectation of a direct or immediate return for Novartis, and that they fully comply with applicable laws, regulations and industry codes.

        Novartis only makes political contributions in countries where such contributions by corporations are legal and where political contributions from corporations are considered to reflect "good corporate citizenship." Moreover, Novartis only makes modest political contributions so as to not create any dependency from the political parties receiving these contributions.

        In 2015, Novartis made political contributions totaling approximately $1.13 million, thereof approximately $680,000 in Switzerland, $235,000 in the US, $150,000 in Japan, $45,000 in Australia, $11,000 in Canada, and $8,000 in the UK. In addition, in the US, a political action committee established by Novartis used funds received from Novartis employees (but not from the company) to make political contributions totaling approximately $280,000.

        In Switzerland, Novartis supports political parties that have a political agenda and hold positions that support the strategic interests of Novartis, its shareholders and other stakeholders. Swiss political parties are completely privately financed and the contributions of companies are a crucial part thereof. This private financing of parties is a deeply-rooted trait of the Swiss political culture, and contributing to that system is an important element of being a good corporate citizen.

Shareholder Relations

        The CEO, with the CFO and Investor Relations team, supported by the Chairman, is responsible for ensuring effective communication with shareholders to keep them informed of the company's strategy, business operations and governance. Through communication, the Board also learns about and addresses shareholders' expectations and concerns.

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        Novartis communicates with its shareholders through the AGM, meetings with groups of shareholders and individual shareholders, and written and electronic communications.

        At the AGM, the Chairman, CEO and other Executive Committee members, and representatives of the external auditors are present and can answer shareholders' questions. Other meetings with shareholders may be attended by the Chairman, CEO, CFO, Executive Committee members, and other members of senior management.

        Topics discussed, in full respect of applicable laws, with shareholders may include strategy, business performance and corporate governance.

Information for Our Stakeholders

Introduction

        Novartis is committed to open and transparent communication with shareholders, financial analysts, customers, suppliers and other stakeholders. Novartis aims to disseminate material developments in its businesses in a broad and timely manner that complies with the rules of the SIX Swiss Exchange and NYSE.

Communications

        Novartis publishes an Annual Report that provides information on the Group's results and operations. In addition, Novartis prepares an annual report on Form 20-F that is filed with the US Securities and Exchange Commission (SEC). Novartis discloses quarterly financial results in accordance with IFRS, and issues press releases from time to time regarding business developments.

        Novartis furnishes press releases relating to financial results and material events to the SEC via Form 6-K. An archive containing recent Annual Reports, annual reports on Form 20-F, and quarterly results releases—as well as related materials such as slide presentations and conference call webcasts—is on the Novartis website at www.novartis.com/investors.

        Novartis also publishes a consolidated Corporate Responsibility Performance Report, which details progress and demonstrates the company's commitment to be a leader in corporate responsibility. This report reflects the best-in-class reporting standard, the Global Reporting Initiative's (GRI) G4 guidelines, and fulfills the company's reporting requirement as a signatory of the UN Global Compact.

        Information contained in reports and releases issued by Novartis is only correct and accurate at the time of release. Novartis does not update past releases to reflect subsequent events, and advises against relying on them for current information.

Investor Relations Program

        An Investor Relations team manages the Group's interaction with the international financial community. Several events are held each year to provide institutional investors and analysts with various opportunities to learn more about Novartis.

        Investor Relations is based at the Group's headquarters in Basel. Part of the team is located in the US to coordinate interaction with US investors. Information is available on the Novartis website: www.novartis.com/investors. Investors are also welcome to subscribe to a free email service on this site.

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Website Information

Topic	Information
Share Capital	Articles of Incorporation of Novartis AG www.novartis.com/corporate-governance Novartis key share data www.novartis.com/key-share-data
Shareholder Rights	Articles of Incorporation of Novartis AG www.novartis.com/corporate-governance Investor Relations information www.novartis.com/investors
Board Regulations	Board Regulations www.novartis.com/corporate-governance
Executive Committee	Executive Committee www.novartis.com/executive-committee
Novartis Code for Senior Financial Officers	Novartis Code of Ethical Conduct for CEO and Senior Financial Officers www.novartis.com/corporate-governance
Additional Information	Novartis Investor Relations www.novartis.com/investors

6.D Employees

        The table below sets forth the breakdown of the total year-end number of our full time equivalent employees by main category of activity and geographic area for the past three years.

For the year ended December 31, 2015 (full time equivalents)	Research & Development		Production & Supply		Marketing & Sales		General & Administration		Total
USA		7,684		6,735		6,027		2,236		22,682
Canada and Latin America		469		1,470		4,756		1,313		8,008
Europe		10,014		19,767		18,278		7,383		55,442
Asia/Africa/Australasia		3,413		6,819		18,611		3,725		32,568
Total		21,580		34,791		47,672		14,657		118,700

For the year ended December 31, 2014 (full time equivalents)	Research & Development		Production & Supply		Marketing & Sales		General & Administration		Total
USA		8,147		8,283		6,529		2,341		25,300
Canada and Latin America		515		2,435		5,309		1,327		9,586
Europe		11,052		23,997		20,884		7,134		63,067
Asia/Africa/Australasia		3,693		7,739		21,454		2,574		35,460
Total		23,407		42,454		54,176		13,376		133,413
Thereof Continuing Operations		21,181		36,106		48,638		11,884		117,809
Thereof Discontinued Operations		2,226		6,348		5,538		1,492		15,604

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For the year ended December 31, 2013 (full time equivalents)	Research & Development		Production & Supply		Marketing & Sales		General & Administration		Total
USA		8,255		8,600		7,253		2,963		27,071
Canada and Latin America		570		2,943		5,611		1,325		10,449
Europe		11,438		23,449		20,719		7,009		62,615
Asia/Africa/Australasia		3,674		7,331		21,986		2,570		35,561
Total		23,937		42,323		55,569		13,867		135,696
Thereof Continuing Operations		21,658		35,847		49,643		12,214		119,362
Thereof Discontinued Operations		2,279		6,476		5,926		1,653		16,334

        As of December 31, 2015, the number of our full time equivalent employees decreased by approximately 15,000 compared to December 31, 2014, mainly due to the completion in 2015 of a series of transactions intended to transform our portfolio of businesses. For more information on these transactions see "Item 18. Financial Statements—Note 2."

        A significant number of our associates are represented by unions or works councils. We have not experienced any material work stoppages in recent years, and we consider our employee relations to be good.

6.E Share Ownership

        The aggregate amount of our shares owned by our non-executive Directors and the members of our Executive Committee in 2015 (including persons closely linked to them) as of December 31, 2015 was 1,688,920 shares. This excludes certain unvested shares and other equity rights (such as Restricted Stock Units and Phantom Shares) because such unvested shares and equity rights do not represent shares held by these persons as of December 31, 2015.

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        The aggregate amount of Novartis share and ADR options, including other information regarding the options, held by our non-executive Directors and the members of our Executive Committee in 2015, as of December 31, 2015 is set forth below:

Title of Options	Amount of shares called for by the options		Exercise Price(1)		Purchase Price (if any)		Expiration Date		Total number of options held
Novas16 Options		1		71.30		0		February 5, 2016		0
Novas17 Options		1		72.85		0		February 3, 2017		0
Novas18 Options		1		64.05		0		January 10, 2018		0
Novas19 Options		1		53.65		0		January 18, 2019		0
Novas20 Options		1		55.85		0		January 19, 2020		0
Novas21 Options		1		54.70		0		January 19, 2021		141,396
Novas22 Options		1		54.20		0		January 19, 2022		0
Novas23 Options		1		61.70		0		January 17, 2023		378,390
Total Novartis Share Options										519,786
Novartis ADR Options Cycle X		1	$	54.70		0		February 5, 2016		0
Novartis ADR Options Cycle XI		1	$	58.38		0		February 3, 2017		0
Novartis ADR Options Cycle XII		1	$	57.96		0		January 10, 2018		0
Novartis ADR Options Cycle XIII		1	$	46.42		0		January 18, 2019		0
Novartis ADR Options Cycle XIV		1	$	53.70		0		January 19, 2020		0
Novartis ADR Options Cycle XV		1	$	57.07		0		January 19, 2021		0
Novartis ADR Options Cycle XVI		1	$	58.33		0		January 19, 2022		0
Novartis ADR Options Cycle XVI		1	$	66.07		0		January 17, 2023		0
Total Novartis ADR Options										0

⁽¹⁾

Exercise price indicated is per share, and denominated in Swiss francs for share options and US dollars for ADR options.

        Information above for any non-executive Directors and members of our Executive Committee who stepped down during 2015 is reported as of the date of their resignation.

        Since 2014, we no longer grant any new share or ADR options to our non-executive Directors, the members of our Executive Committee and our associates under our equity-based participation plans. For more information on the Novartis shares, share options and other equity-based instruments owned by individual members of our Executive Committee and by our current non-executive Directors, see "—Item 6.B Compensation—Shares, ADRs, equity rights and share options owned by Executive Committee Members." and "—Item 6.B Compensation—Shares, ADRs and share options owned by Board members." For more information on our equity-based participation plans, see "Item 18. Financial Statements—Note 26."

Item 7.    Major Shareholders and Related Party Transactions

7.A Major Shareholders

        Novartis shares are widely held. As of December 31, 2015, Novartis had approximately 161,000 shareholders listed in its share register, representing approximately 70.5% of issued shares. Based on the Novartis AG share register and excluding treasury shares, approximately 40.9% of the shares registered by name were held in Switzerland and approximately 27.5% were held in the US. Approximately 11.8% of the shares registered in the share register were held by individual investors, while approximately 88.2% were held by legal entities, nominees, fiduciaries and the ADS depositary.

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        Based on our share register, we believe that we are not directly or indirectly owned or controlled by another corporation or government, or by any other natural or legal persons. There are no arrangements that may result in a change of control.

2015

        According to the share register, on December 31, 2015, no person or entity was registered as the owner of more than 5% of our shares. As of that date, excluding 6.2% of our share capital held as treasury shares by Novartis AG and its entities that restrict their availability for use, the following registered shareholders (including nominees and the ADS depositary) held more than 2% of the total share capital of Novartis with the right to vote these shares:

•

Shareholders: Novartis Foundation for Employee Participation, with its registered office in Basel, Switzerland, holding 2.6%; and Emasan AG, with its registered office in Basel, Switzerland, holding 3.3%;

•

Nominees: Chase Nominees Ltd., London, England (holding 8.8%) (Previously reported as JPMorgan Chase Bank, New York, NY but changed to its affiliate Chase Nominees Ltd., London, England, which is entered as nominee in our share register.); Nortrust Nominees, London, England (holding 3.2%); and The Bank of New York Mellon, New York, NY (holding 4.6%) through its nominees, Mellon Bank, Everett, MA (holding 1.7%) and The Bank of New York Mellon, Brussels, Belgium (2.9%); and

•

ADS depositary: JPMorgan Chase Bank, New York, NY (holding 11.2%).

        According to disclosure notifications filed with Novartis AG and the SIX Swiss Exchange, each of the following shareholders held between 3% and 5% of the share capital of Novartis AG as of December 31, 2015:

•

Capital Group Companies, Inc., Los Angeles, CA; and

•

BlackRock, Inc., New York, NY

        As of December 31, 2015, no other shareholder was registered as owner of more than 2% of the registered share capital. Novartis has not entered into any agreement with any shareholder regarding the voting or holding of Novartis shares.

2014

        According to the share register, on December 31, 2014, no person or entity was registered as the owner of more than 5% of our shares. As of that date, excluding 5.7% of our share capital held by Novartis AG, together with Novartis affiliates (excluding foundations), as treasury shares, the following registered shareholders (including nominees and the ADS depositary) held more than 2% of the total share capital of Novartis with the right to vote these shares:

•

Shareholders: Novartis Foundation for Employee Participation, with its registered office in Basel, Switzerland, holding 3.2%; and Emasan AG, with its registered office in Basel, Switzerland, holding 3.3%;

•

Nominees: JPMorgan Chase Bank, New York, NY (holding 9.1%); Nortrust Nominees, London, England (holding 3.2%); and The Bank of New York Mellon, New York, NY (holding 4.6%) through its nominees, Mellon Bank, Everett, MA (holding 2.6%) and The Bank of New York Mellon, Brussels, Belgium (2.0%); and

•

ADS depositary: JPMorgan Chase Bank, New York, NY (holding 11.4%).

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        According to disclosure notifications filed with Novartis AG and the SIX Swiss Exchange, each of the following shareholders held between 3% and 5% of the share capital of Novartis AG as of December 31, 2014:

•

Capital Group Companies, Inc., Los Angeles, CA; and

•

BlackRock, Inc., New York, NY

        As of December 31, 2014, no other shareholder was registered as owner of more than 2% of the registered share capital. Novartis has not entered into any agreement with any shareholder regarding the voting or holding of Novartis shares.

2013

        According to the share register, on December 31, 2013, no person or entity was registered as the owner of more than 5% of our shares. As of that date, excluding 4.9% of our share capital held by Novartis AG, together with Novartis affiliates (excluding foundations), as treasury shares, the following registered shareholders (including nominees and the ADS depositary) held more than 2% of the total share capital of Novartis with the right to vote these shares:

•

Shareholders: Novartis Foundation for Employee Participation, with its registered office in Basel, Switzerland, holding 3.0%; and Emasan AG, with its registered office in Basel, Switzerland, holding 3.3%;

•

Nominees: JPMorgan Chase Bank, New York, NY (holding 11.1%); Nortrust Nominees, London, England (holding 3.2%); and The Bank of New York Mellon, New York, NY (holding 4.6%) through its nominees, Mellon Bank, Everett, MA (holding 2.8%) and The Bank of New York Mellon, Brussels, Belgium (1.8%); and

•

ADS depositary: JPMorgan Chase Bank, New York, NY (holding 11.7%).

        According to a disclosure notification filed with Novartis AG, Norges Bank (Central Bank of Norway), Oslo, Norway, held 2.03% of the share capital of Novartis AG as of December 31, 2013.

        According to disclosure notifications filed with Novartis AG and the SIX Swiss Exchange, each of the following shareholders held between 3% and 5% of the share capital of Novartis AG as of December 31, 2013:

•

Capital Group Companies, Inc., Los Angeles, CA; and

•

BlackRock, Inc., New York, NY

        As of December 31, 2013, no other shareholder was registered as owner of more than 2% of the registered share capital. Novartis has not entered into any agreement with any shareholder regarding the voting or holding of Novartis shares.

7.B Related Party Transactions

        See "Item 18. Financial Statements—Note 27".

7.C Interests of Experts and Counsel

        Not applicable.

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Item 8.    Financial Information

8.A Consolidated Statements and Other Financial Information

        See "Item 18. Financial Statements."

Dividend policy

        Subject to the dividend policy described below, our Board of Directors expects to recommend the payment of a dividend in respect of each financial year. If approved by our shareholders at the relevant annual Shareholders' Meeting, the dividends will be payable shortly following such approval. Any shareholder who purchases our shares before the ex-dividend date and holds the shares until that date shall be deemed to be entitled to receive the dividends approved at that meeting. Dividends are reflected in our financial statements in the year in which they are approved by our shareholders.

        Our dividend policy is to pay a growing annual dividend. This policy is subject to our financial conditions and outlook at the time, the results of our operations and other factors.

        The Board will propose a dividend of CHF 2.70 per share to the shareholders for approval at the Annual General Meeting to be held on February 23, 2016. Because we pay dividends in Swiss francs, exchange rate fluctuations will affect the US dollar amounts received by holders of ADRs. For a summary of dividends we paid in the past five years, see "Item 3. Key Information—3.A Selected Financial Data—Cash Dividends per Share." See also "Item 3. Key Information—3.D Risk Factors—The price of our ADRs and the US dollar value of any dividends may be negatively affected by fluctuations in the US dollar/Swiss franc exchange rate."

Disclosure pursuant to Section 219 of the Iran Threat Reduction & Syria Human Rights Act (ITRA)

        At Novartis, it is our mission to discover, develop and successfully market innovative products to prevent and cure diseases, to ease suffering and to enhance the quality of life of all people, regardless of where they live. This mission includes the compliant sale of medicines and other healthcare products worldwide. To help us fulfill this mission, we have representative offices located in Iran.

        As of October 18, 2010, a non-US affiliate within our Pharmaceuticals Division entered into a non-binding Memorandum of Understanding (MoU) with the Ministry of Health and Medical Education of the Islamic Republic of Iran. Pursuant to the MoU, the Iranian Ministry of Health acknowledges certain benefits that may apply to sales of certain Novartis Pharmaceuticals medicines by third-party distributors in Iran. These include fast-track registration, market exclusivity, end-user subsidies and exemptions from customs tariffs. Novartis receives no payments from the Iranian Ministry of Health under the MoU and the MoU creates no obligations on the part of either Novartis or the Iranian Ministry of Health.

        In 2015, non-US affiliates relating to our Pharmaceuticals and Sandoz Divisions made payments to government entities in Iran related to exit fees and other transactions ordinarily incident to travel by doctors and other medical professionals resident in Iran to attend conferences or other events outside Iran.

        From time to time, including in 2015, non-US affiliates relating to our Pharmaceuticals and Sandoz Divisions enter into agreements with hospitals, research institutes, medical associations and universities in Iran to provide grants, sponsor congresses, seminars and symposia, and with doctors and other healthcare professionals for consulting services, including participation in advisory boards and investigator services for observational (non-interventional) studies. Some of these hospitals and research institutes are owned or controlled by the government of Iran, and some of these doctors and healthcare professionals are employed by hospitals that may be public or government-owned.

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        Because our Pharmaceuticals and Sandoz Divisions have operations in Iran, including employees, they obtain services and have other dealings incidental to their activities in that country, including paying taxes and salaries, and obtaining office rentals, insurance, electricity, water and telecommunications services, office and similar supplies and customs-related services from Iranian companies that may be owned or controlled by the government of Iran.

        Some beneficiaries of payments made by non-US affiliates relating to our Pharmaceuticals and Sandoz Divisions in the course of the operations described above maintain accounts at banks that are included on the list of Specially Designated Nationals (SDNs). Nonetheless, since such payments relate to lawful and authorized transactions, use of a blocked Iranian financial institution is permitted in accordance with applicable laws and given that such institution is identified on the SDN List with the tag [IRAN].

8.B Significant Changes

        None.

Item 9.    The Offer and Listing

9.A Offer and Listing Details

        Our shares are listed in Switzerland on the SIX Swiss Exchange (SIX).

        American Depositary Shares (ADSs), each representing one share, have been available in the US through an American Depositary Receipts (ADR) program since December 1996. This program was established pursuant to a Deposit Agreement which we entered into with JPMorgan Chase Bank N.A. as Depositary (Deposit Agreement). Our ADRs have been listed on the NYSE since May 2000, and are traded under the symbol "NVS."

        The table below sets forth, for the periods indicated, the high and low closing sales prices for our shares traded in Switzerland and for ADRs traded in US. The data below regarding our shares reflects price and volume information for trades completed by members of the SIX during the day as well as for inter- dealer trades completed off the SIX and certain inter-dealer trades completed during trading on the previous business day.

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        The following share data was taken from SIX; the ADR data was taken from Bloomberg:

	Shares				ADRs
	High CHF per share		Low CHF per share		High $ per ADR		Low $ per ADR
Annual information for the past five years
2011		55.80		39.99		64.52		51.65
2012		59.00		48.80		63.96		51.48
2013		73.65		58.70		80.39		63.70
2014		93.80		70.65		96.65		78.20
2015		102.30		82.20		106.12		83.96
Quarterly information for the past two years
2015
First Quarter		99.70		84.30		103.00		91.67
Second Quarter		101.40		92.00		105.50		98.34
Third Quarter		102.30		87.35		106.12		89.52
Fourth Quarter		91.70		82.20		95.03		83.96
2014
First Quarter		75.30		70.65		85.02		78.20
Second Quarter		81.40		72.90		90.98		82.51
Third Quarter		90.15		76.95		94.80		85.25
Fourth Quarter		93.80		80.00		96.65		85.02
Monthly information for most recent six months
August 2015		101.60		89.60		104.36		94.81
September 2015		94.80		87.35		97.96		89.52
October 2015		91.70		87.45		95.03		90.14
November 2015		90.35		87.05		91.04		85.24
December 2015		88.05		82.20		88.05		83.96
January 2016 (through January 20)		86.45		79.70		86.21		80.23

        Fluctuations in the exchange rate between the Swiss franc and the US dollar will affect any comparisons of Swiss share prices and US ADR prices.

        The average daily volumes of shares traded on the SIX (ON/OFF exchange) for the years 2015, 2014 and 2013 were 5,870,894, 4,963,517, and 4,568,858, respectively. These numbers are based on total annual turnover statistics supplied by the SIX via the Swiss Market Feed, which supplies such data to subscribers and to other information providers. The average daily volumes of ADRs traded in the US for the years 2015, 2014 and 2013 were 1,787,735, 1,504,087, and 1,440,718, respectively.

        The Depositary has informed us that as of January 20, 2016, there were 301,119,296 ADRs outstanding, each representing one Novartis share (approximately 11% of total Novartis shares issued). On January 20, 2016, the closing sales price per share on the SIX was CHF 79.70 and $80.49 per ADR on the NYSE.

9.B Plan of Distribution

        Not applicable.

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9.C Markets

        See "9.A Offer and Listing Details."

9.D Selling Shareholders

        Not applicable.

9.E Dilution

        Not applicable.

9.F Expenses of the Issue

        Not applicable.

Item 10.    Additional Information

10.A Share capital

        Not applicable.

10.B Memorandum and Articles of Association

        The following is a summary of certain provisions of our Articles of Incorporation (Articles), our Regulations of the Board of Directors (Board Regulations) and of Swiss law, particularly, the Swiss Code of Obligations (Swiss CO). This is not a summary of all the significant provisions of the Articles, the Board Regulations or of Swiss law and does not purport to be complete. This description is qualified in its entirety by reference to the Articles and the Board Regulations, which are an exhibit to this Form 20-F, and to Swiss law.

        At our 2015 Annual General Meeting held on February 27, 2015, our shareholders approved amendments to our Articles to align with the Swiss Ordinance against Excessive Compensation in Stock Exchange Listed Companies on Board and Executive Compensation (the "Ordinance"). Key aspects of these amendments included determining (i) the maximum number of allowable external mandates for members of our Board of Directors (Board) and Executive Committee, (ii) the principles concerning the tasks and responsibilities of our Compensation Committee, (iii) the details concerning the procedure for the new yearly binding separate shareholder votes on the aggregate compensation of our Board and Executive Committee, and (iv) the principles of our compensation policy.

10.B.1 Company Purpose

        Novartis AG is registered in the commercial register of the Canton of Basel-Stadt, Switzerland, under number CHE-103.867.266. Our business purpose, as stated in Article 2 of the Articles, is to hold interests in enterprises in the area of health care or nutrition. We may also hold interests in enterprises in the areas of biology, chemistry, physics, information technology or related areas. We may acquire, mortgage, liquidate or sell real estate and intellectual property rights in Switzerland or abroad. In pursuing our business purpose, we strive to create sustainable value.

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10.B.2 Directors

        (a)   According to our Board Regulations, a member of our Board (Director) may not participate in deliberations or resolutions on matters which affect, or reasonably might affect, the Director's interests, or the interests of a person close to the Director. In addition, the Swiss CO sets forth that if, in connection with the conclusion of a contract, the Company is represented by the person with whom it is concluding the contract, such contract shall be in writing. Furthermore, the Swiss CO does require directors and members of senior management to safeguard the interests of the corporation and, in this connection, imposes a duty of care and a duty of loyalty on such persons. This rule is generally interpreted to mean that directors and members of senior management are disqualified from participating in decisions which affect them personally.

        (b)   A Board resolution requires the affirmative majority of the votes cast. As with any Board resolution, Directors may not vote on their own compensation unless at least a majority of the Directors are present. Such votes are subject to the approval of the aggregate amounts of compensation of the Directors and the members of the Executive Committee by a shareholders' resolution under the Ordinance.

        (c)   The Articles prohibit the granting of loans or credits to Directors.

        (d)   Directors who have turned seventy years of age at the date of the General Meeting of Shareholders may no longer be elected as members of the Board. The General Meeting of Shareholders may, under special circumstances, grant an exemption from this rule.

        (e)   Our Directors are not required to be shareholders under our Articles.

10.B.3 Shareholder Rights

        Because Novartis AG has only one class of registered shares, the following information applies to all shareholders.

        (a)   The Swiss CO requires that at least 5% of our annual profit be retained as general reserves, so long as these reserves amount to less than 20% of our registered share capital. The law and the Articles permit us to accrue additional reserves.

        Under the Swiss CO, we may only pay dividends out of the balance sheet profit, out of reserves created for this purpose or out of free reserves. In any event, under the Swiss CO, while the Board may propose that a dividend be paid, we may only pay dividends upon shareholders' approval at a General Meeting of Shareholders. Our auditors must confirm that the dividend proposal of our Board conforms with the Swiss CO and the Articles. Our Board intends to propose a dividend once each year. See "Item 3. Key Information—3.A. Selected Financial Data—Cash Dividends per Share" and "Item 8. Financial Information—8.A. Consolidated Financial Statements and Other Financial Information—Dividend Policy."

        Dividends are usually due and payable shortly after the shareholders have passed a resolution approving the payment. Dividends which have not been claimed within five years after the due date revert to us, and are allocated to our general reserves. For information about deduction of the withholding tax or other duties from dividend payments, see "Item 10. Additional Information—10.E Taxation."

        (b)   Each share is entitled to one vote at a General Meeting of Shareholders. Voting rights may only be exercised for shares registered with the right to vote on the Record Date. In order to do so, the shareholder must file a share registration form with us, setting forth the shareholder's name, address and citizenship (or, in the case of a legal entity, its registered office). If the shareholder has not timely filed the form, then the shareholder may not vote at, or participate in, General Meetings of Shareholders.

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        To vote its shares, the shareholder must also explicitly declare that it has acquired the shares in its own name and for its own account. If the shareholder refuses to make such a declaration, the shares may not be voted unless the Board recognizes such shareholder as a nominee.

        The Articles provide that no shareholder shall be registered with the right to vote shares comprising more than 2% of the registered share capital. The Board may, upon request, grant an exemption from this restriction. Considerations include whether the shareholder supports our goal of creating sustainable value and has a long-term investment horizon. Furthermore, the Articles provide that no nominee shall be registered with the right to vote shares comprising more than 0.5% of the registered share capital. The Board may, upon request, grant an exemption from this restriction if the nominee discloses the names, addresses and number of shares of the persons for whose account it holds more than 0.5% of the registered share capital. The same restrictions indirectly apply to holders of ADRs. We have in the past granted exemptions from the 2% rule for shareholders and the 0.5% rule for nominees. Under the Articles, the Board may delegate the power to grant such exemptions. The Board has delegated this power to the Chairman of the Board.

        For purposes of the 2% rule for shareholders and the 0.5% rule for nominees, groups of companies and groups of shareholders acting in concert are considered to be one shareholder. These rules also apply to shares acquired or subscribed by the exercise of subscription, option or conversion rights.

        After hearing the registered shareholder or nominee, the Board may cancel, with retroactive effect as of the date of registration, the registration of the shareholders if the registration was effected based on false information.

        Registration restrictions in the Articles may only be removed upon a resolution carrying a two-thirds majority of the votes represented at a General Meeting of Shareholders.

        Shareholders' resolutions generally require the approval of a majority of the votes present at a General Meeting of Shareholders. As a result, abstentions have the effect of votes against the resolution. Shareholder resolutions requiring a vote by such "absolute majority of the votes" include among others (1) amendments to the Articles; (2) elections of Directors, the Chairman, the Compensation Committee members, the independent proxy and the statutory auditors; (3) approval of the management report and the financial statements; (4) setting the annual dividend; (5) approval of the aggregate amounts of compensation of the Directors and the members of the Executive Committee; (6) decisions to discharge Directors and management from liability for matters disclosed to the General Meeting of Shareholders; and (7) the ordering of an independent investigation into specific matters proposed to the General Meeting of Shareholders.

        According to the Articles and Swiss law, the following types of shareholders' resolutions require the approval of a "supermajority" of at least two-thirds of the votes present at a General Meeting of Shareholders: (1) an alteration of our corporate purpose; (2) the creation of shares with increased voting powers; (3) an implementation of restrictions on the transfer of registered shares and the removal of such restrictions; (4) an authorized or conditional increase of the share capital; (5) an increase of the share capital by conversion of equity, by contribution in kind, or for the purpose of an acquisition of property or the grant of special rights; (6) a restriction or an elimination of shareholders' preemptive rights; (7) a change of our domicile; (8) our dissolution; or (9) any amendment to the Articles which would create or eliminate a supermajority requirement.

        Our shareholders annually elect all of the members of the Board, as well as the Chairman of the Board, the members of the Compensation Committee and the independent proxy. Cumulative voting of shares is not permitted under Swiss law.

        At General Meetings of Shareholders, shareholders can be represented by proxy. However, a proxy must either be the shareholder's legal representative, another shareholder with the right to vote, or the independent proxy. Votes are taken either by a show of hands or by electronic voting, unless the General

287

Meeting of Shareholders resolves to have a ballot or where a ballot is ordered by the chairman of the meeting.

        American Depositary Shares (ADSs) each representing one Novartis share and evidenced by American Depositary Receipts (ADRs) are issued by our depositary JPMorgan Chase Bank, New York, and not by us. The ADR is vested with rights defined and enumerated in the Deposit Agreement (such as the rights to vote, to receive a dividend and to receive a share of Novartis in exchange for a certain number of ADRs). The enumeration of rights, including any limitations on those rights in the Deposit Agreement, is final. There are no other rights given to the ADR holders. Only the ADS depositary, holding our shares underlying the ADRs, is registered as shareholder in our share register. An ADR is not a Novartis share and an ADR holder is not a Novartis shareholder.

        The Deposit Agreement between our depositary, the ADR holder and us has granted certain indirect rights to vote to the ADR holders. ADR holders may not attend Novartis General Meetings in person. ADR holders exercise their voting rights by instructing JPMorgan Chase Bank, our depositary, to exercise the voting rights attached to the registered shares underlying the ADRs. Each ADR represents one Novartis share. JPMorgan Chase Bank exercises the voting rights for registered shares underlying ADRs for which no voting instructions have been given by providing a discretionary proxy to an uninstructed independent designee pursuant to paragraph 13 of the form of ADR. Such designee has to be a shareholder of Novartis. The same voting restrictions apply to ADR holders as to those holding Novartis shares (i.e., the right to vote up to 2% of the Novartis registered share capital—unless otherwise granted an exemption by the Board—and disclosure requirement for nominees).

        (c)   Shareholders have the right to allocate the profit shown on our balance sheet by vote taken at the General Meeting of Shareholders, subject to the legal requirements described in "Item 10.B.3(a) Shareholder Rights".

        (d)   Under the Swiss CO, any surplus arising out of a liquidation of our Company (i.e., after the settlement of all claims of all creditors) would be distributed to the shareholders in proportion to the paid-in nominal value of their shares.

        (e)   The Swiss CO limits a corporation's ability to hold or repurchase its own shares. We and our subsidiaries may only repurchase shares if we have freely disposable equity, in the amount necessary for this purpose, available. The aggregate nominal value of all Novartis shares held by us and our subsidiaries may not exceed 10% of our registered share capital. However, it is accepted that a corporation may repurchase its own shares beyond the statutory limit of 10%, if the repurchased shares are clearly dedicated for cancellation and if the shareholders passed a respective resolution at a General Meeting of Shareholders. In addition, we are required to create a special reserve on our balance sheet in the amount of the purchase price of the acquired shares. Repurchased shares held by us or our subsidiaries do not carry any rights to vote at a General Meeting of Shareholders, but are entitled to the economic benefits generally connected with the shares. It should be noted that the definition of what constitutes subsidiaries, and therefore, treasury shares, for purposes of the above described reserves requirement and voting restrictions differs from the definition included in the consolidated financial statements. The definition in the consolidated financial statements requires consolidation for financial reporting purposes of special purpose entities, irrespective of their legal structure, in instances where we have the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

        Under the Swiss CO, we may not cancel treasury shares without the approval of a capital reduction by our shareholders.

        (f)    Not applicable.

        (g)   Since all of our issued and outstanding shares have been fully paid in, we can make no further capital calls on our shareholders.

        (h)   See Items "10.B.3(b) Shareholder Rights" and "10.B.7 Change in Control".

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10.B.4 Changes To Shareholder Rights

        Under the Swiss CO, we may not issue new shares without the prior approval of a capital increase by our shareholders. If a capital increase is approved, then our shareholders would generally have certain preemptive rights to obtain newly issued shares in an amount proportional to the nominal value of the shares they already hold. These preemptive rights could be modified in certain limited circumstances with the approval of a resolution adopted at a General Meeting of Shareholders by a supermajority of votes. In addition, we may not create shares with increased voting powers or place restrictions on the transfer of registered shares without the approval of a resolution adopted at a General Meeting of Shareholders by a supermajority of votes. In addition, see Item 10.B.3(b) with regard to the Board's ability to cancel the registration of shares under limited circumstances.

10.B.5 Shareholder Meetings

        Under the Swiss CO and the Articles, we must hold an annual ordinary General Meeting of Shareholders within six months after the end of our financial year. General Meetings of Shareholders may be convened by the Board or, if necessary, by the statutory auditors. The Board is further required to convene an extraordinary General Meeting of Shareholders if so resolved by a General Meeting of Shareholders, or if so requested by shareholders holding an aggregate of at least 10% of the registered shares, specifying the items for the agenda and their proposals. Shareholders holding shares with a nominal value of at least CHF 1,000,000 (i.e., 2,000,000 Novartis shares) have the right to request that a specific proposal be put on the agenda and voted upon at the next General Meeting of Shareholders. A General Meeting of Shareholders is convened by publishing a notice in the official Swiss Commercial Gazette (Schweizerisches Handelsamtsblatt) at least 20 days prior to such meeting. Shareholders may also be informed by mail. There is no provision in the Swiss CO or our Articles requiring a quorum for the holding of a General Meeting of Shareholders. In addition, see "Item 10.B.3(b) Shareholder Rights" regarding conditions for exercising a shareholder's right to vote at a General Meeting of Shareholders.

10.B.6 Limitations

        There are no limitations under the Swiss CO or our Articles on the right of non-Swiss residents or nationals to own or vote shares other than the restrictions applicable to all shareholders. But see "Item 10.B.3(b) Shareholder Rights" regarding conditions for exercising an ADR holder's right to vote at a shareholder meeting.

10.B.7 Change in Control

        The Articles and the Board Regulations contain no provision that would have an effect of delaying, deferring or preventing a change in control of Novartis and that would operate only with respect to a merger, acquisition or corporate restructuring involving us or any of our subsidiaries.

        According to the Swiss Merger Act, shareholders may pass a resolution to merge with another corporation at any time. Such a resolution would require the consent of at least two-thirds of all votes present at the necessary General Meeting of Shareholders.

        Under the Swiss Financial Market Infrastructure Act, shareholders and groups of shareholders acting in concert who acquire more than 33¹/3% of our shares would be under an obligation to make an offer to acquire all remaining Novartis shares.

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10.B.8 Disclosure of Shareholdings

        Under the Swiss Financial Market Infrastructure Act, holders of our voting shares acting alone or acting in concert with others are required to notify us and the SIX Swiss Exchange of the level of their holdings whenever such holdings reach or exceed, or in some cases, fall short of, certain thresholds—3%, 5%, 10%, 15%, 20%, 25%, 33¹/3%, 50% and 66²/3%—of our registered share capital. Following receipt of such notification we are required to inform the public by publishing the information via the electronic publication platform operated by the competent Disclosure Office.

        An additional disclosure obligation exists under the Swiss CO which requires us to disclose, once a year in the notes to the financial statements published in our annual report, the identity of all of our shareholders (or related groups of shareholders) who have been granted exemption entitling them to vote more than 2% of our registered share capital, as described in "Item 10.B.3(b) Shareholder Rights".

10.B.9 Differences in the Law

        See the references to Swiss law throughout this "Item 10.B Memorandum and Articles of Association".

10.B.10 Changes in Capital

        The requirements of the Articles regarding changes in capital are not more stringent than the requirements of Swiss law.

10.C Material contracts

Transactions with GSK

        On April 22, 2014 (and as amended and restated on May 29, 2014), we entered into an overarching framework agreement (the "Implementation Agreement") with GSK for the Consumer Healthcare Joint Venture, the Vaccines Sale and the Oncology Acquisition (each as defined below and, together with the Influenza Put Option (as defined below), the "Transactions"). The Consumer Healthcare Joint Venture, the Vaccines Sale and the Oncology Acquisition were completed on March 2, 2015.

Consumer Healthcare Joint Venture with GSK

        On April 22, 2014 (and as amended and restated on May 29, 2014, and March 1, 2015), we entered into a Contribution Agreement with GSK under which GSK contributed its consumer healthcare business (the "GSK Consumer Healthcare Business") and we contributed our OTC Division, with certain limited exceptions which include the over-the-counter business of our Sandoz Division, into a newly-created joint venture which operates under the GSK Consumer Healthcare name (the "Consumer Healthcare Joint Venture"). In consideration for those contributions, GSK owns 63.5% of the issued share capital of the Consumer Healthcare Joint Venture and we own 36.5% of the issued share capital of the Consumer Healthcare Joint Venture.

        The operation of the Consumer Healthcare Joint Venture is governed by a Shareholders' Agreement, under which GSK has the right to appoint seven directors to the board of the Consumer Healthcare Joint Venture and we have the right to appoint four directors to the board of the Consumer Healthcare Joint Venture. The Shareholders' Agreement also contains certain minority shareholder protections, including the right to exit the Consumer Healthcare Joint Venture via a put option exercisable in certain windows in the period from the third to the twentieth anniversary of the creation of the Consumer Healthcare Joint Venture. The Shareholders' Agreement became operative concurrently with the creation of the Consumer Healthcare Joint Venture on March 2, 2015.

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Sale of Vaccines Business (Excluding our Influenza Vaccines Business) to GSK

        On April 22, 2014 (and as amended and restated on May 29, 2014, as further amended on October 9, 2014, and as further amended and restated on March 1, 2015), we entered into a Sale and Purchase Agreement with GSK under which we sold our Vaccines Division (with certain limited exceptions, and except for our influenza vaccines business) to GSK (the "Vaccines Sale") for up to $7.1 billion, consisting of $5.25 billion upfront and up to $1.8 billion in milestones, of which we have received $450 million as of December 31, 2015, plus royalties. We completed the Vaccines Sale on March 2, 2015.

Oncology Acquisition from GSK

        On April 22, 2014 (and as amended and restated on May 29, 2014, November 21, 2014, and March 1, 2015), we entered into a Sale and Purchase Agreement with GSK under which we acquired GSK oncology products and certain related assets (the "Oncology Acquisition"). GSK has also granted us a right of first negotiation over the co-development and commercialization of GSK's current and future oncology R&D pipeline, excluding oncology vaccines, for a period of twelve and one half years from closing. We completed the Oncology Acquisition on March 2, 2015. Novartis paid an aggregate cash consideration of $16 billion for the Oncology Acquisition. Up to $1.5 billion of the cash consideration is contingent on certain development milestones and is potentially refundable.

Influenza Vaccines Business Put Option with GSK

        On April, 22 2014 (and as amended and restated on May 29, 2014), we entered into a Put Option Deed with GSK pursuant to which we had the right to unilaterally require GSK to acquire our Vaccines Division's influenza vaccines business for $250 million, or certain parts of the influenza vaccines business for a pro-rata amount (the "Influenza Put Option") if the divestment to CSL discussed below was not completed. The Influenza Put Option expired concurrently with the closing of the divestment of our influenza vaccines business to CSL on July 31, 2015.

Sale of Influenza Vaccines Business to CSL

        On October 26, 2014 (and as amended and restated on July 31, 2015), we entered into a Share and Business Sale Agreement with CSL under which we divested our Vaccines Division's influenza vaccines business to CSL for $275 million. This transaction was completed effective July 31, 2015.

Sale of Animal Health Division to Lilly

        On April 22, 2014 (and as amended on December 17, 2014), we entered into a Stock and Asset Purchase Agreement with Lilly. Under this agreement, Lilly agreed to purchase our Animal Health Division (with certain limited exceptions) for approximately $5.4 billion. This transaction was completed on January 1, 2015.

10.D Exchange controls

        There are no Swiss governmental laws, decrees or regulations that restrict, in a manner material to Novartis, the export or import of capital, including any foreign exchange controls, or that generally affect the remittance of dividends or other payments to non-residents or non-citizens of Switzerland who hold Novartis' shares.

10.E Taxation

        The taxation discussion set forth below is intended only as a descriptive summary and does not purport to be a complete analysis or listing of all potential tax effects relevant to the ownership or

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disposition of our shares or ADRs. The statements of US and Swiss tax laws set forth below are based on the laws and regulations in force as of the date of this 20-F, including the current Convention Between the US and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, entered into force on December 19, 1997 (the "Treaty"), and the US Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations, rulings, judicial decisions and administrative pronouncements, and may be subject to any changes in US and Swiss law, and in any double taxation convention or treaty between the US and Switzerland occurring after that date, which changes may have retroactive effect.

Swiss Taxation

Swiss Residents

        Withholding Tax on Dividends and Distributions.    Dividends which we pay and similar cash or in-kind distributions which we may make to a holder of shares or ADRs (including distributions of liquidation proceeds in excess of the nominal value, stock dividends and, under certain circumstances, proceeds from repurchases of shares by us in excess of the nominal value) are generally subject to a Swiss federal withholding tax (the "Withholding Tax") at a current rate of 35%. Under certain circumstances distributions out of capital contribution reserves made by shareholders after December 31, 1996 are exempt from Withholding Tax. We are required to withhold this Withholding Tax from the gross distribution and to pay the Withholding Tax to the Swiss Federal Tax Administration. The Withholding Tax is refundable in full to Swiss residents who are the beneficial owners of the taxable distribution at the time it is resolved and duly report the gross distribution received on their personal tax return or in their financial statements for tax purposes, as the case may be.

        Income Tax on Dividends.    A Swiss resident who receives dividends and similar distributions (including stock dividends and liquidation surplus) on shares or ADRs is required to include such amounts in the shareholder's personal income tax return. However, distributions out of qualified capital contribution reserves are not subject to income tax. A corporate shareholder may claim substantial relief from taxation of dividends and similar distributions received if the shares held represent a fair market value of at least CHF 1 million.

        Capital Gains Tax upon Disposal of Shares.    Under current Swiss tax law, the gain realized on shares held by a Swiss resident who holds shares or ADRs as part of his private property is generally not subject to any federal, cantonal or municipal income taxation on gains realized on the sale or other disposal of shares or ADRs. However, gains realized upon a repurchase of shares by us may be characterized as taxable dividend income if certain conditions are met. Book gains realized on shares or ADRs held by a Swiss corporate entity or by a Swiss resident individual as part of the shareholder's business property are, in general, included in the taxable income of such person. However, the Federal Law on the Direct Federal Tax of December 14, 1990 and several cantonal laws on direct cantonal taxes provide for exceptions for Swiss corporate entities holding more than 10% of our voting stock for more than one year.

Residents of Other Countries

        Recipients of dividends and similar distributions on our shares who are neither residents of Switzerland for tax purposes nor holding shares as part of a business conducted through a permanent establishment situated in Switzerland ("Non-resident Holders") are not subject to Swiss income taxes in respect of such distributions. Moreover, gains realized by such recipients upon the disposal of shares are not subject to Swiss income taxes.

        Non-resident Holders of shares are, however, subject to the Withholding Tax on dividends and similar distributions mentioned above and under certain circumstances to the Stamp Duty described below. Such Non-resident Holders may be entitled to a partial refund of the Withholding Tax if the country in which they reside has entered into a bilateral treaty for the avoidance of double taxation with Switzerland.

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Non-resident Holders should be aware that the procedures for claiming treaty refunds (and the time frame required for obtaining a refund) may differ from country to country. Non-resident Holders should consult their own tax advisors regarding receipt, ownership, purchase, sale or other dispositions of shares or ADRs and the procedures for claiming a refund of the Withholding Tax.

        As of January 1, 2016, Switzerland has entered into bilateral treaties for the avoidance of double taxation with respect to income taxes with the following countries, whereby a part of the above-mentioned Withholding Tax may be refunded (subject to the limitations set forth in such treaties):

Albania
Algeria
Argentina
Armenia
Australia
Austria
Azerbaijan
Bahrain
Bangladesh
Belarus
Belgium
Bulgaria
Canada
Chile
China
Colombia
Croatia
Cyprus
Czech Republic
Denmark
Ecuador
Egypt
Estonia Finland
France
Germany
Georgia
Ghana
Greece
Hong Kong
Hungary
Iceland
India
Indonesia
Iran
Israel
Italy
Ivory Coast
Republic of Ireland
Jamaica
Japan
Kazakhstan
Republic of Korea
(South Korea)
Kuwait
Kyrgyzstan Latvia
Lithuania
Luxembourg
Macedonia
Malaysia
Malta
Mexico
Moldova
Mongolia
Montenegro
Morocco
Netherlands
New Zealand
Norway
Pakistan
Peru
Philippines
Poland
Portugal
Quatar
Romania
Russia
Serbia Singapore
Slovak Republic
Slovenia
South Africa
Spain
Sri Lanka
Sweden
Taiwan
Tajikistan
Thailand
Trinidad and Tobago
Tunisia
Turkey
Turkmenistan
Ukraine
United Arab Emirates
United Kingdom
United States of America
Uruguay
Uzbekistan
Venezuela
Vietnam

        The tax treaty with Bahrain is not applicable to the healthcare industry. Tax treaty negotiations are under way, or have been conducted, with Bosnia and Herzegovina, Brazil, Costa Rica, Libya, Liechtenstein, North Korea, Oman, Saudi Arabia, Senegal, Syria, and Zimbabwe. Tax treaty negotiations between Switzerland and some of the countries listed in the immediately preceding sentence have been ongoing for an extended period of time, and we are not certain when or if such negotiations will be completed, and when or if the corresponding treaties will come into effect.

        A Non-resident Holder of shares or ADRs will not be liable for any Swiss taxes other than the Withholding Tax described above and, if the transfer occurs through or with a Swiss bank or other Swiss securities dealer, the Stamp Duty described below. If, however, the shares or ADRs of Non-resident Holders can be attributed to a permanent establishment or a fixed place of business maintained by such person within Switzerland during the relevant tax year, the shares or ADRs may be subject to Swiss income taxes in respect of income and gains realized on the shares or ADRs and such person may qualify for a full refund of the Withholding Tax based on Swiss tax law.

        Residents of the US.    A Non-resident Holder who is a resident of the US for purposes of the Treaty is eligible for a reduced rate of tax on dividends equal to 15% of the dividend, provided that such holder (i) qualifies for benefits under the Treaty, (ii) holds, directly and indirectly, less than 10% of our voting stock, and (iii) does not conduct business through a permanent establishment or fixed base in Switzerland

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to which the shares or ADRs are attributable. Such an eligible holder must apply for a refund of the amount of the Withholding Tax in excess of the 15% Treaty rate. A Non-resident Holder who is a resident of the US for purposes of the Treaty is eligible for a reduced rate of tax on dividends equal to 5% of the dividend, provided that such holder (i) is a company, (ii) qualifies for benefits under the Treaty, (iii) holds directly at least 10% of our voting stock, and (iv) does not conduct business through a permanent establishment or fixed place of business in Switzerland to which the shares or ADRs are attributable. Such an eligible holder must apply for a refund of the amount of the Withholding Tax in excess of the 5% Treaty rate. Claims for refunds must be filed on Swiss Tax Form 82 (82C for corporations; 82I for individuals; 82E for other entities), which may be obtained from any Swiss Consulate General in the US or from the Federal Tax Administration of Switzerland at the address below, together with an instruction form. Four copies of the form must be duly completed, signed before a notary public of the US, and sent to the Federal Tax Administration of Switzerland, Eigerstrasse 65, CH-3003 Berne, Switzerland. The form must be accompanied by suitable evidence of deduction of Swiss tax withheld at source, such as certificates of deduction, signed bank vouchers or credit slips. The form may be filed on or after July 1 or January 1 following the date the dividend was payable, but no later than December 31 of the third year following the calendar year in which the dividend became payable. For US resident holders of ADRs, JPMorgan Chase Bank, N.A., as Depositary, will comply with these Swiss procedures on behalf of the holders, and will remit the net amount to the holders.

        Stamp Duty upon Transfer of Securities.    The sale of shares, whether by Swiss residents or Non-resident Holders, may be subject to federal securities transfer Stamp Duty of 0.15%, calculated on the sale proceeds, if the sale occurs through or with a Swiss bank or other Swiss securities dealer, as defined in the Swiss Federal Stamp Duty Act. The Stamp Duty has to be paid by the securities dealer and may be charged to the parties in a taxable transaction who are not securities dealers. Stamp Duty may also be due if a sale of shares occurs with or through a non-Swiss bank or securities dealer, provided (i) such bank or dealer is a member of the SIX, and (ii) the sale takes place on the SIX. In addition to this Stamp Duty, the sale of shares by or through a member of the SIX may be subject to a minor stock exchange levy.

US Federal Income Taxation

        The following is a general discussion of the material US federal income tax consequences of the ownership and disposition of our shares or ADRs that may be relevant to you if you are a US Holder (as defined below). Because this discussion does not consider any specific circumstances of any particular holder of our shares or ADRs, persons who are subject to US taxation are strongly urged to consult their own tax advisers as to the overall US federal, state and local tax consequences, as well as to the overall Swiss and other foreign tax consequences, of the ownership and disposition of our shares or ADRs. In particular, additional or different rules may apply to US expatriates, banks and other financial institutions, regulated investment companies, traders in securities who elect to apply a mark-to-market method of accounting, dealers in securities or currencies, tax-exempt entities, insurance companies, broker-dealers, investors liable for alternative minimum tax, investors that hold shares or ADRs as part of a straddle, hedging or conversion transaction, holders whose functional currency is not the US dollar, partnerships or other pass through entities, persons who acquired our shares pursuant to the exercise of employee stock options or otherwise as compensation and persons who hold directly, indirectly or by attribution, 10% or more of the voting power of our outstanding shares. This discussion generally applies only to US Holders who hold the shares or ADRs as a capital asset (generally, for investment purposes), and whose functional currency is the US dollar. Investors are urged to consult their own tax advisors concerning whether they are eligible for benefits under the Treaty.

        For purposes of this discussion, a "US Holder" is a beneficial owner of our shares or ADRs who is (i) an individual who is a citizen or resident of the US for US federal income tax purposes, (ii) a corporation (or other entity taxable as a corporation for US federal income tax purposes) created or organized in or under the laws of the US or a state thereof or the District of Columbia, (iii) an estate the income of which is subject to US federal income taxation regardless of its source, or (iv) a trust (i) subject

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to the primary supervision of a US court and the control of one or more US persons or (ii) that has a valid election in place to be treated as a US person. If a partnership (or other entity treated as a partnership for US federal income tax purposes) holds shares or ADRs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. Partners in a partnership that holds shares or ADRs are urged to consult their own tax advisor regarding the specific tax consequences of the owning and disposing of such shares or ADRs by the partnership.

        For US federal income tax purposes, a US Holder of ADRs generally will be treated as the beneficial owner of our shares represented by the ADRs. However, see the discussion below under "—Dividends" regarding certain statements made by the US Treasury concerning depositary arrangements.

        This discussion assumes that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

        Dividends.    US Holders will be required to include in gross income, as an item of ordinary income, the full amount (including the amount of any Withholding Tax) of a dividend paid with respect to our shares or ADRs at the time that such dividend is received by the US Holder, in the case of shares, or by the Depository, in the case of ADRs. For this purpose, a "dividend" will include any distribution paid by us with respect to our shares or ADRs (other than certain pro rata distributions of our capital stock) paid out of our current or accumulated earnings and profits, as determined under US federal income tax principles. To the extent the amount of a distribution by us exceeds our current and accumulated earnings and profits, such excess will first be treated as a tax-free return of capital to the extent of a US Holder's tax basis in the shares or ADRs (with a corresponding reduction in such tax basis), and thereafter will be treated as capital gain, which will be long-term capital gain if the US Holder held our shares or ADRs for more than one year. Under the Code, dividend payments by us on the shares or ADRs are not eligible for the dividends received deduction generally allowed to corporate shareholders.

        Dividend income in respect of our shares or ADRs will constitute income from sources outside the US for US foreign tax credit purposes. Subject to the limitations and conditions provided in the Code, US Holders generally may claim as a credit against their US federal income tax liability, any Withholding Tax withheld from a dividend. The rules governing the foreign tax credit are complex. Each US Holder is urged to consult its own tax advisor concerning whether, and to what extent, a foreign tax credit will be available with respect to dividends received from us. Alternatively, a US Holder may claim the Withholding Tax as a deduction for the taxable year within which the Withholding Tax is paid or accrued, provided a deduction is claimed for all of the foreign income taxes the US Holder pays or accrues in the particular year. A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit. The deduction, however, is not subject to the limitations applicable to foreign tax credits.

        The US Treasury has expressed concern that parties to whom ADRs are released may be taking actions inconsistent with the claiming of foreign tax credits for US Holders of ADRs. Accordingly, the summary above of the creditability of the Withholding Tax could be affected by future actions that may be taken by the US Treasury.

        In general, a US Holder will be required to determine the amount of any dividend paid in Swiss francs, including the amount of any Withholding Tax imposed thereon, by translating the Swiss francs into US dollars at the spot rate on the date the dividend is actually or constructively received by a US Holder, in the case of shares, or by the Depositary, in the case of ADRs, regardless of whether the Swiss francs are in fact converted into US dollars. If a US Holder converts the Swiss francs so received into US dollars on the date of receipt, the US Holder generally should not recognize foreign currency gain or loss on such conversion. If a US Holder does not convert the Swiss francs so received into US dollars on the date of receipt, the US Holder will have a tax basis in the Swiss francs equal to the US dollar value on such date. Any foreign currency gain or loss that a US Holder recognizes on a subsequent conversion or other disposition of the Swiss francs generally will be treated as US source ordinary income or loss.

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        For a non-corporate US Holder, the US dollar amount of any dividends paid to it prior to January 1, 2013 that constitute qualified dividend income generally will be taxable at a maximum rate of 15%. For tax years beginning after 2012, the top rate is 20% for taxpayers with incomes exceeding $413,200 ($464,850 for joint filing taxpayers) provided that the US Holder meets certain holding period and other requirements. In addition, the dividends could be subject to a 3.8% net investment income tax. This tax is applied against the lesser of the US Holder's net investment income or modified adjusted gross income over $200,000 ($250,000 for joint filing taxpayers). We currently believe that dividends paid with respect to our shares and ADRs will constitute qualified dividend income for US federal income tax purposes. However, the US Treasury and the US Internal Revenue Service ("IRS") have announced their intention to promulgate rules pursuant to which US Holders of shares and ADRs, among others, will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. US Holders of shares or ADRs are urged to consult their own tax advisors regarding the availability to them of the reduced dividend rate in light of their own particular situation and the computations of their foreign tax credit limitation with respect to any qualified dividends paid to them, as applicable.

        Sale or Other Taxable Disposition.    Upon a sale or other taxable disposition of shares or ADRs, US Holders generally will recognize capital gain or loss in an amount equal to the difference between the US dollar value of the amount realized on the disposition and the US Holder's tax basis (determined in US dollars) in the shares or ADRs. This capital gain or loss generally will be US source gain or loss and will be treated as long-term capital gain or loss if the holding period in the shares or ADRs exceeds one year. In the case of certain US Holders (including individuals), any long term capital gain generally will be subject to US federal income tax at preferential rates, which rates are subject to a maximum of 20% for taxpayers with incomes exceeding $413,200 ($464,850 for joint filing taxpayers) for gains recognized after January 1, 2013. In addition, the gains could be subject to a 3.8% investment income tax. This tax is applied against the lesser of the US Holder's net investment income or modified adjusted gross income over $200,000 ($250,000 for joint filing taxpayers). The deductibility of capital losses is subject to significant limitations under the Code. Deposits or withdrawals of our shares by US Holders in exchanges for ADRs will not result in the realization of gain or loss for US federal income tax purposes.

        US Information Reporting and Backup Withholding.    Dividend payments with respect to shares or ADRs and proceeds from the sale, exchange or other disposition of shares or ADRs received in the United States or through US-related financial intermediaries, may be subject to information reporting to the IRS and possible US backup withholding. Certain exempt recipients (such as corporations) are not subject to these information reporting and backup withholding requirements. Backup withholding will not apply to a US Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. Any US Holders required to establish their exempt status generally must provide a properly-executed IRS Form W-9 (Request for Taxpayer Identification Number and Certification). Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a US Holder's US federal income tax liability, and a US Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.

10.F Dividends and paying agents

        Not applicable.

10.G Statement by experts

        Not applicable.

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10.H Documents on display

        Any statement in this Form 20-F about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to the Form 20-F the contract or document is deemed to modify the description contained in this Form 20-F. You must review the exhibits themselves for a complete description of the contract or document.

        You may review a copy of our filings with the SEC, as well as other information furnished to the SEC, including exhibits and schedules filed with it, at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information. In addition, the SEC maintains an Internet site at http://www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC. These SEC filings are also available to the public from commercial document retrieval services.

        We are required to file or furnish reports and other information with the SEC under the Securities Exchange Act of 1934 and regulations under that act. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the form and content of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act.

10.I Subsidiary Information

        Not applicable.

Item 11.    Quantitative and Qualitative Disclosures about Market Risk

        The major financial risks facing the Group are managed centrally by Group Treasury. We have a written Treasury Directive and have implemented a strict segregation of front office and back office controls. The Group does regular reconciliations of its positions with its counterparties. In addition the Treasury function is included in management's internal control assessment.

        For information about the effects of currency fluctuations and how we manage currency risk, see "Item 5. Operating and Financial Review and Prospects—Item 5.B Liquidity and Capital Resources".

        For further information, see "Item 18. Financial Statements—Note 29".

Item 12.    Description of Securities Other than Equity Securities

12.A Debt Securities

        Not applicable.

12.B Warrants and Rights

        Not applicable.

12.C Other Securities

        Not applicable.

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12.D American Depositary Shares

Fees Payable By ADR Holders

        According to our Deposit Agreement with the ADS depositary, JPMorgan Chase Bank (JPMorgan), holders of our ADRs may have to pay to JPMorgan, either directly or indirectly, fees or charges up to the amounts set forth below:

Category	Depositary actions	Associated Fee
Depositing or substituting underlying shares	Acceptance of shares surrendered, and issuance of ADRs in exchange, including surrenders and issuances in respect of:	$5.00 for each 100 ADSs (or portion thereof) evidenced by the new ADRs delivered
	—Share distributions
	—Stock split
	—Rights
	—Merger
	—Exchange of shares or any other transaction or event or other distribution affecting the ADSs or the deposited shares
Withdrawing underlying shares	Acceptance of ADRs surrendered for withdrawal of deposited shares	$5.00 for each 100 ADSs (or portion thereof) evidenced by the ADRs surrendered
Selling or exercising rights	Distribution or sale of shares, the fee being in an amount equal to the fee for the execution and delivery of ADRs which would have been charged as a result of the deposit of such shares	$5.00 for each 100 ADSs (or portion thereof)
Transferring, splitting or grouping receipts	Transfers, combining or grouping of depositary receipts	$1.50 per ADR
Expenses of the depositary	Expenses incurred on behalf of holders in connection with —compliance with foreign exchange control regulations or any law or regulation relating to foreign investment —the depositary's or its custodian's compliance with applicable law, rule or regulation. —stock transfer or other taxes and other governmental charges —cable, telex and facsimile transmission and delivery	Expenses payable at the sole discretion of the Depositary by billing Holders or by deducting charges from one or more cash dividends or other cash distributions.
	—expenses of the depositary in connection with the conversion of foreign currency into US dollars (which are paid out of such foreign currency)
	—any other charge payable by any of the depositary or its agents
Advance tax relief	Tax relief/reclamation process for qualified holders.	A depositary service charge of $0.0075 per ADS

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Fees Payable By The Depositary To The Issuer

        Pursuant to an agreement effective as of May 11, 2012, JPMorgan, as depositary, has agreed to reimburse Novartis $1.0 million per quarter, a total of $4.0 million per contract year, for expenses incurred directly related to our ADR program (the "Program") which were incurred during the contract year, including Program-related legal fees, expenses related to investor relations in the US, US investor presentations, ADR-related financial advertising and public relations, reasonable accountants' fees in relation to our Form 20-F, maintenance and broker reimbursement expenses. Because our expenses related to these categories exceed $4.0 million (see, for example, the amount of our accountants' fees set forth at "Item 16C. Principal Accountant Fees and Services—Auditing and Additional Fees"), the $4.0 million cannot be deemed to have reimbursed us for any particular one or more of these expenses.

        JPMorgan has further agreed not to seek reimbursement of up to $50,000 of out-of-pocket expenses incurred annually in providing such administrative services.

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PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

        None.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

        None.

Item 15.    Controls and Procedures

        (a)   Novartis AG's chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 20-F, have concluded that, as of such date, our disclosure controls and procedures were effective.

        (b)   Report of Novartis Management on Internal Control Over Financial Reporting: Novartis' Board of Directors and management of the Group are responsible for establishing and maintaining adequate internal control over financial reporting. The Group's internal control system was designed to provide reasonable assurance to the Group's management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements.

        All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Group management assessed the effectiveness of the Group's internal control over financial reporting as of December 31, 2015. In making this assessment, it used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment management concluded that, as of December 31, 2015, Group's internal control over financial reporting is effective based on those criteria.

        PricewaterhouseCoopers AG, Switzerland (PwC), an independent registered public accounting firm, has issued an unqualified opinion on the effectiveness of the Group's internal control over financial reporting which is included under "Item 18. Financial Statements" on page F-2.

        (c)   See the report of PwC, an independent registered public accounting firm, included under "Item 18. Financial Statements" on page F-2.

        (d)   There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A.    Audit Committee Financial Expert

        Our Audit and Compliance Committee has determined that Srikant Datar possesses specific accounting and financial management expertise and that he is an Audit Committee Financial Expert as defined by the US Securities and Exchange Commission (SEC). The Board of Directors has also determined that Srikant Datar is "independent" in accordance with the applicable requirements of Rule 10A-3 of the US Securities Exchange Act of 1934, and that other members of the Audit and

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Compliance Committee have sufficient experience and ability in finance and compliance matters to enable them to adequately discharge their responsibilities.

Item 16B.    Code of Ethics

        In addition to our Code of Conduct, which is applicable to all of our associates, we have adopted a Code of Ethical Conduct that imposes additional obligations on our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. This document is accessible on our Internet website at

        https://www.novartis.com/investors/company-overview/corporate-governance

Item 16C.    Principal Accountant Fees and Services

        Refer to "Item 6. Directors, Senior Management and Employees—Item 6.C Board Practices—Our Independent External Auditors."

Item 16D.    Exemptions from the Listing Standards for Audit Committees

        Not Applicable.

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Item 16E.    Purchases of Equity Securities by the Issuer and Affiliated Purchasers

2015	Total Number of Shares Purchased (a)(1)		Average Price Paid per Share in $ (b)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (c)(2)		Maximum Approximate Value of Shares that may yet be purchased under the Plans or Programs in CHF (d)		Maximum Approximate Value of Shares that may yet be purchased under the Plans or Programs in $ (e)
							(CHF millions)		($ millions)(3)
Jan. 1–31		3,937,701		96.43		2,160,000		5,076		5,468
Feb. 1–28		7,505,191		100.25		2,100,000		4,878		5,145
Mar. 1–31		2,969,714		98.99		2,340,000		4,650		4,792
Apr. 1–30		2,379,328		103.16		2,040,000		4,448		4,726
May 1–31		2,009,752		102.56		1,840,000		4,271		4,508
Jun. 1–30		2,353,429		101.67		2,270,000		4,056		4,348
Jul. 1–31		6,904,824		102.67		6,685,000		3,402		3,529
Aug. 1–31		6,479,905		101.30		6,305,000		2,784		2,894
Sep. 1–30		6,854,308		95.09		6,755,000		2,159		2,215
Oct. 1–31		6,902,592		92.38		6,830,000		1,548		1,568
Nov. 1–30		8,078,310		87.78		6,629,280		958		931
Dec. 1–31		7,212,944		85.89		3,923,900		623		630
Total		63,587,998		95.94		49,878,180

⁽¹⁾

Column (a) shows shares we purchased as part of our sixth share repurchase program plus the following types of share purchases outside of our publicly announced repurchase program: (1) shares which we purchased on the open market; and (2) shares which we purchased from Swiss employees who had obtained the shares through a Novartis Employee Ownership Plan. See "Item 18. Financial Statements—Note 26"

⁽²⁾

Column (c) shows shares purchased as part of our sixth share repurchase program which was approved by the shareholders February 26, 2008 for an amount of up to CHF 10.0 billion. See "Item 6. Directors, Senior Management and Employes—5.C Board Practices—Our Shares and Our Shareholders—Share Repurchase Programs."

⁽³⁾

Column (e) shows the Swiss franc amount from column (d) converted into US dollars as of the month-end, using the Swiss franc/US dollar exchange rate at the applicable month-end.

Item 16F.    Change in Registrant's Certifying Accountant

        Not applicable.

Item 16G.    Corporate Governance

        Refer to "Item 6. Directors, Senior Management and Employees—Item 6.C Board Practices—Our Corporate Governance Framework."

Item 16H.    Mine Safety Disclosure

        Not applicable.

302

PART III

Item 17.    Financial Statements

        See "Item 18. Financial Statements."

Item 18.    Financial Statements

        The following financial statements are filed as part of this annual report on Form 20-F.

	Page
Index to consolidated financial statements		F-1
Report of PricewaterhouseCoopers AG		F-2
Consolidated income statements		F-4
Consolidated statements of comprehensive income		F-5
Consolidated statements of changes in equity		F-6
Consolidated balance sheets		F-7
Consolidated cash flow statements		F-8
Notes to the consolidated financial statements		F-9

303

Item 19.    Exhibits

1.1	Articles of Incorporation of Novartis AG, as amended February 27, 2015 (English translation).
1.2	Regulations of the Board and Committee Charters of Novartis AG, as amended in relevant part January 1, 2014, March 1, 2015, and November 1, 2015.
2.1	Amended and Restated Deposit Agreement, dated as of May 11, 2000 among Novartis AG, JPMorgan Chase Bank (fka Morgan Guaranty Trust Company of New York), as depositary, and all holders from time to time of ADRs issued thereunder (incorporated by reference to Exhibit (a)(1) to Post-Effective Amendment No. 1 to Novartis AG's registration statement on Form F-6 (File No. 333-11758) as filed with the SEC on September 8, 2000).
2.2	Amendment No. 1 to the Amended and Restated Deposit Agreement (incorporated by reference to Exhibit (a)(2) to Post-Effective Amendment No. 1 to Novartis AG's registration statement on Form F-6 (File No. 333-11758) as filed with the SEC on September 8, 2000).
2.3	Amendment No. 2 to the Amended and Restated Deposit Agreement (incorporated by reference to Exhibit (a)(3) to Novartis AG's registration statement on Form F-6 (File No. 333-13446) as filed with the SEC on May 7, 2001).
2.4	Restricted Issuance Agreement dated as of January 11, 2002 among Novartis AG, J.P. Morgan Chase Bank, as depositary, and all holders from time to time of ADRs representing ADSs issued thereunder (incorporated by reference to Exhibit 4 to the Registration Statement on Form F-3, File No. 333-81862, as filed with the SEC on January 31, 2002).
2.5	Letter Agreement dated December 14, 2007 between Novartis AG and JPMorgan Chase Bank, as depositary (incorporated by reference to Exhibit 2.4 to the Form 20-F for the year ended December 31, 2007 as filed with the SEC on January 28, 2008).
2.6	Form of American Depositary Receipt (incorporated by reference to Exhibit (a)(7) to the Registration Statement on Form F-6, File No. 333-198623, as filed with the SEC on September 8, 2014).
2.7	The total amount of long-term debt securities authorized under any instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. We hereby agree to furnish to the SEC, upon its request, a copy of any instrument defining the rights of holders of long-term debt of the Company or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
4.1	Implementation Agreement made on April 22, 2014, and amended and restated on May 29, 2014, between GlaxoSmithKline plc and Novartis AG. (Incorporated by reference to Exhibit 4.1 of the Form 20-F for the year ended December 31, 2014, as filed with the SEC on January 27, 2015.)
4.2	Contribution Agreement relating to the Consumer Healthcare Joint Venture made on April 22, 2014, as amended and restated on May 29, 2014 and March 1, 2015, between Novartis AG, GlaxoSmithKline plc and GlaxoSmithKline Consumer Healthcare Holdings Limited (formerly known as Leo Constellation Limited). Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.
4.3	Share and Business Sale Agreement relating to the Vaccines Group made on April 22, 2014, as amended and restated on May 29, 2014, as further amended on October 9, 2014, and as further amended and restated on March 1, 2015, between Novartis AG and GlaxoSmithKline plc. Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.

304

4.4	Sale and Purchase Agreement in relation to the Oncology Business made on April 22, 2014, as amended and restated on May 29, 2014, November 21, 2014 and March 1, 2015, between GlaxoSmithKline plc and Novartis AG. Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.
4.5	Put Option Deed relating to all or part of the Influenza Business of the Novartis Group made on April 22, 2014, and amended and restated on May 29, 2014, between Novartis AG and GlaxoSmithKline plc. Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC. (Incorporated by reference to Exhibit 4.5 of the Form 20-F for the year ended December 31, 2014, as filed with the SEC on January 27, 2015.)
4.6	Stock and Asset Purchase Agreement made on April 22, 2014, as amended on December 17, 2014, between Novartis AG and Eli Lilly and Company. Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC. (Incorporated by reference to Exhibit 4.6 of the Form 20-F for the year ended December 31, 2014, as filed with the SEC on January 27, 2015.)
4.7	Share and Business Sale Agreement relating to the Flu Group made on October 26, 2014, as amended and restated on July 31, 2015, between Novartis AG and CSL Limited. Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.
4.8	Shareholders' Agreement relating to GlaxoSmithKline Consumer Healthcare Holdings Limited made on March 2, 2015, between GlaxoSmithKline Consumer Healthcare Holdings Limited, GlaxoSmithKline plc, Setfirst Limited, Novartis AG, Novartis Holding AG and Novartis Finance Corporation. Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.
6.1	For earnings per share calculation, see "Item 18. Financial Statements—Note 7."
8.1	For a list of all of our principal Group subsidiaries and associated companies, see "Item 18. Financial Statements—Note 32."
12.1	Certification of Joseph Jimenez, Chief Executive Officer of Novartis AG, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification of Harry Kirsch, Chief Financial Officer of Novartis AG, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification of Joseph Jimenez, Chief Executive Officer of Novartis AG, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2	Certification of Harry Kirsch, Chief Financial Officer of Novartis AG, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1	Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers AG, to the incorporation by reference of the audit report contained in this Form 20-F into Novartis AG's Registration Statements on Form S-8 filed on October 1, 2004 (File No. 333-119475), on Form S-8 filed on September 5, 2006 (File No. 333-137112), on Form S-8 filed on October 29, 2009 (File No. 333-162727), on Form S-8 filed on January 18, 2011 (File No. 333-171739), on Form S-8 filed on April 8, 2011 (File No. 333-173382), on Form S-8 filed on September 12, 2014 (File No. 333-198706), and on Form F-3 filed on September 18, 2015 (File No. 333-207004).

305

SIGNATURES

        The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

NOVARTIS AG
By:	/s/ HARRY KIRSCH Name: Harry Kirsch Title: Chief Financial Officer, Novartis Group
By:	/s/ FELIX R. EHRAT Name: Felix R. Ehrat Title: General Counsel, Novartis Group

Date: January 27, 2016

306

NOVARTIS GROUP
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Index to consolidated financial statements
Report of PricewaterhouseCoopers AG	F-2
Consolidated income statements	F-4
Consolidated statements of comprehensive income	F-5
Consolidated statements of changes in equity	F-6
Consolidated balance sheets	F-7
Consolidated cash flow statements	F-8
Notes to the consolidated financial statements	F-9

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Novartis AG, Basel

        In our opinion, the accompanying consolidated balance sheets and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, consolidated cash flow statements and notes (pages F-4 through F-118 in this Form 20-F) present fairly, in all material respects, the financial position of Novartis AG and its consolidated subsidiaries (Group or Company) at December 31, 2015 and December 31, 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015 in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

        The Novartis' Board of Directors and management of the Group are responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying "Report of Novartis Management on Internal Control Over Financial Reporting" appearing under Item 15(b). Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board of the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk

F-2

that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers AG
/s/ BRUNO ROSSI Bruno Rossi Audit expert Auditor in charge	/s/ STEPHEN JOHNSON Stephen Johnson Global relationship partner
Basel, January 26, 2016

F-3

NOVARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENTS

(For the years ended December 31, 2015, 2014 and 2013)

	Note		2015			2014			2013
			$ m			$ m			$ m
Net sales to third parties from continuing operations		3		49,414			52,180			51,869
Sales to discontinued segments				26			239			221
Net sales from continuing operations		3		49,440			52,419			52,090
Other revenues				947			1,215			626
Cost of goods sold				(17,404	)		(17,345	)		(16,579	)
Gross profit from continuing operations				32,983			36,289			36,137
Marketing & Sales				(11,772	)		(12,377	)		(12,638	)
Research & Development				(8,935	)		(9,086	)		(9,071	)
General & Administration				(2,475	)		(2,616	)		(2,603	)
Other income				2,049			1,391			1,205
Other expense				(2,873	)		(2,512	)		(2,047	)
Operating income from continuing operations		3		8,977			11,089			10,983
Income from associated companies		4		266			1,918			599
Interest expense		5		(655	)		(704	)		(683	)
Other financial income and expense		5		(454	)		(31	)		(92	)
Income before taxes from continuing operations				8,134			12,272			10,807
Taxes		6		(1,106	)		(1,545	)		(1,498	)
Net income from continuing operations				7,028			10,727			9,309
Net income/(loss) from discontinued operations		30		10,766			(447	)		(17	)
Net income				17,794			10,280			9,292
Attributable to:
Shareholders of Novartis AG				17,783			10,210			9,175
Non-controlling interests				11			70			117
Basic earnings per share ($) from continuing operations				2.92			4.39			3.76
Basic earnings per share ($) from discontinued operations				4.48			(0.18	)		0.00
Total basic earnings per share ($)		7		7.40			4.21			3.76
Diluted earnings per share ($) from continuing operations				2.88			4.31			3.70
Diluted earnings per share ($) from discontinued operations				4.41			(0.18	)		0.00
Total diluted earnings per share ($)		7		7.29			4.13			3.70

The accompanying Notes form an integral part of the consolidated financial statements.

F-4

NOVARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(For the years ended December 31, 2015, 2014 and 2013)

	Note		2015			2014			2013
			$ m			$ m			$ m
Net income				17,794			10,280			9,292
Other comprehensive income to be eventually recycled into the consolidated income statement:
Fair value adjustments on marketable securities, net of taxes		8.1		28			89			132
Fair value adjustments on deferred cash flow hedges, net of taxes		8.1		20			21			41
Total fair value adjustments on financial instruments, net of taxes		8.1		48			110			173
Novartis share of other items recorded in comprehensive income recognized by associated companies, net of taxes		8.2		(48	)		(5	)		5
Currency translation effects		8.3		(1,662	)		(2,220	)		676
Total of items to eventually recycle				(1,662	)		(2,115	)		854
Other comprehensive income never to be recycled into the consolidated income statement:
Actuarial (losses)/gains from defined benefit plans, net of taxes		8.4		(147	)		(822	)		1,504
Total comprehensive income				15,985			7,343			11,650
Attributable to:
Shareholders of Novartis AG				15,977			7,274			11,538
Continuing operations				5,238			7,820			11,512
Discontinued operations				10,739			(546	)		26
Non-controlling interests				8			69			112

The accompanying Notes form an integral part of the consolidated financial statements.

F-5

NOVARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(For the years ended December 31, 2015, 2014 and 2013)

	Note		Share capital			Treasury shares			Retained earnings			Total value adjustments			Issued share capital and reserves attributable to Novartis shareholders			Non- controlling interests			Total equity
			$ m			$ m			$ m			$ m			$ m			$ m			$ m
Total equity at January 1, 2013				1,001			(92	)		70,220			(1,992	)		69,137			126			69,263
Net income										9,175						9,175			117			9,292
Other comprehensive income		8								5			2,358			2,363			(5	)		2,358
Total comprehensive income										9,180			2,358			11,538			112			11,650
Dividends		9.1								(6,100	)					(6,100	)					(6,100	)
Purchase of treasury shares		9.2					(22	)		(2,968	)					(2,990	)					(2,990	)
Increase in equity from exercise of options and employee transactions		9.5					19			1,672						1,691						1,691
Equity-based compensation		9.6					6			1,071						1,077						1,077
Impact of change in ownership of consolidated entities		9.8								(10	)					(10	)					(10	)
Changes in non-controlling interests		9.7																	(109	)		(109	)
Total of other equity movements							3			(6,335	)					(6,332	)		(109	)		(6,441	)
Total equity at December 31, 2013				1,001			(89	)		73,065			366			74,343			129			74,472
Net income										10,210						10,210			70			10,280
Other comprehensive income		8								(5	)		(2,931	)		(2,936	)		(1	)		(2,937	)
Total comprehensive income										10,205			(2,931	)		7,274			69			7,343
Dividends		9.1								(6,810	)					(6,810	)					(6,810	)
Purchase of treasury shares		9.2					(43	)		(6,883	)					(6,926	)					(6,926	)
Increase of Treasury share repurchase obligation under a share buy-back trading plan		9.4								(658	)					(658	)					(658	)
Increase in equity from exercise of options and employee transactions		9.5					23			2,377						2,400						2,400
Equity-based compensation		9.6					6			1,137						1,143						1,143
Changes in non-controlling interests		9.7																	(120	)		(120	)
Total of other equity movements							(14	)		(10,837	)					(10,851	)		(120	)		(10,971	)
Total equity at December 31, 2014				1,001			(103	)		72,433			(2,565	)		70,766			78			70,844
Net income										17,783						17,783			11			17,794
Other comprehensive income		8								(48	)		(1,758	)		(1,806	)		(3	)		(1,809	)
Total comprehensive income										17,735			(1,758	)		15,977			8			15,985
Dividends		9.1								(6,643	)					(6,643	)					(6,643	)
Purchase of treasury shares		9.2					(33	)		(6,086	)					(6,119	)					(6,119	)
Reduction of share capital		9.3		(10	)		15			(5	)
Decrease of treasury share repurchase obligation under a share buy-back trading plan		9.4								658						658						658
Increase in equity from exercise of options and employee transactions		9.5					14			1,578						1,592						1,592
Equity-based compensation		9.6					6			809						815						815
Changes in non-controlling interests		9.7																	(10	)		(10	)
Fair value adjustments related to divestments		8								(100	)		100
Total of other equity movements				(10	)		2			(9,789	)		100			(9,697	)		(10	)		(9,707	)
Total equity at December 31, 2015				991			(101	)		80,379			(4,223	)		77,046			76			77,122

The accompanying Notes form an integral part of the consolidated financial statements.

F-6

NOVARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(At December 31, 2015 and 2014)

	Note		2015			2014
			$ m			$ m
Assets
Non-current assets
Property, plant & equipment		10		15,982			15,983
Goodwill		11		31,174			29,311
Intangible assets other than goodwill		11		34,217			23,832
Investments in associated companies		4		15,314			8,432
Deferred tax assets		12		8,957			7,994
Financial assets		13		2,466			1,720
Other non-current assets		13		601			554
Total non-current assets related to continuing operations				108,711			87,826
Current assets
Inventories		14		6,226			6,093
Trade receivables		15		8,180			8,275
Marketable securities, commodities, time deposits and derivative financial instruments		16		773			839
Cash and cash equivalents		16		4,674			13,023
Other current assets		17		2,992			2,530
Total current assets related to continuing operations				22,845			30,760
Assets related to discontinued operations		30		0			6,801
Total current assets				22,845			37,561
Total assets				131,556			125,387
Equity and liabilities
Equity
Share capital		18		991			1,001
Treasury shares		18		(101	)		(103	)
Reserves				76,156			69,868
Issued share capital and reserves attributable to Novartis AG shareholders				77,046			70,766
Non-controlling interests				76			78
Total equity				77,122			70,844
Liabilities
Non-current liabilities
Financial debts		19		16,327			13,799
Deferred tax liabilities		12		6,355			6,099
Provisions and other non-current liabilities		20		8,044			7,672
Total non-current liabilities related to continuing operations				30,726			27,570
Current liabilities
Trade payables				5,668			5,419
Financial debts and derivative financial instruments		21		5,604			6,612
Current income tax liabilities				1,717			2,076
Provisions and other current liabilities		22		10,719			10,448
Total current liabilities related to continuing operations				23,708			24,555
Liabilities related to discontinued operations		30		0			2,418
Total current liabilities				23,708			26,973
Total liabilities				54,434			54,543
Total equity and liabilities				131,556			125,387

The accompanying Notes form an integral part of the consolidated financial statements.

F-7

NOVARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED CASH FLOW STATEMENTS

(For the years ended December 31, 2015, 2014 and 2013)

	Note		2015			2014			2013
			$ m			$ m			$ m
Net income from continuing operations				7,028			10,727			9,309
Reversal of non-cash items		23.1		9,070			6,725			7,179
Dividends received from associated companies and others				432			479			444
Interest received				34			35			40
Interest paid				(646	)		(668	)		(609	)
Other financial receipts				714			553			55
Other financial payments				(23	)		(24	)		(22	)
Taxes paid(1)				(2,454	)		(2,179	)		(2,054	)
Cash flows before working capital and provision changes from continuing operations				14,155			15,648			14,342
Payments out of provisions and other net cash movements in non-current liabilities				(1,207	)		(1,125	)		(947	)
Change in net current assets and other operating cash flow items		23.2		(863	)		(625	)		(778	)
Cash flows from operating activities from continuing operations				12,085			13,898			12,617
Cash flows used in/from operating activities from discontinued operations(1)				(188	)		(1	)		557
Total cash flows from operating activities				11,897			13,897			13,174
Purchase of property, plant & equipment				(2,367	)		(2,624	)		(2,903	)
Proceeds from sales of property, plant & equipment				237			60			48
Purchase of intangible assets				(1,138	)		(780	)		(475	)
Proceeds from sales of intangible assets				621			246			96
Purchase of financial assets				(264	)		(239	)		(152	)
Proceeds from sales of financial assets				166			431			313
Purchase of other non-current assets				(82	)		(60	)		(38	)
Proceeds from sales of other non-current assets				1			2			15
Divestments/acquisitions of interests in associated companies							1,370			(52	)
Acquisitions of businesses		23.3		(16,507	)		(331	)		(42	)
Purchase of marketable securities and commodities				(595	)		(169	)		(278	)
Proceeds from sales of marketable securities and commodities				262			2,086			249
Cash flows used in investing activities from continuing operations				(19,666	)		(8	)		(3,219	)
Cash flows from/used in investing activities from discontinued operations(1)		23.4		8,882			889			(133	)
Total cash flows used in/from investing activities				(10,784	)		881			(3,352	)
Dividends paid to shareholders of Novartis AG				(6,643	)		(6,810	)		(6,100	)
Acquisition of treasury shares				(6,071	)		(6,915	)		(2,930	)
Proceeds from exercise options and other treasury share transactions				1,581			2,400			1,693
Increase in non-current financial debts				4,596			6,024			93
Repayment of non-current financial debts				(3,086	)		(2,599	)		(2,022	)
Change in current financial debts				451			(107	)		596
Impact of change in ownership of consolidated entities										4
Dividends paid to non-controlling interests and other financing cash flows				(4	)		(140	)		(103	)
Cash flows used in financing activities				(9,176	)		(8,147	)		(8,769	)
Net effect of currency translation on cash and cash equivalents				(286	)		(295	)		82
Net change in cash and cash equivalents				(8,349	)		6,336			1,135
Cash and cash equivalents at January 1				13,023			6,687			5,552
Cash and cash equivalents at December 31				4,674			13,023			6,687

⁽¹⁾

In 2015, total tax payment amounted to $3.3 billion (2014: $2.6 billion) of which a refund of $94 million (2014: $7 million) was included in the cash flows used in operating activities of discontinued operations and a $965 million payment (2014: $459 million) in the cash flows from investing activities of discontinued operations.

The accompanying Notes form an integral part of the consolidated financial statements.

F-8

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS

1.     Significant Accounting Policies

        The Novartis Group (Novartis or Group) is a multinational group of companies specializing in the research, development, manufacturing and marketing of a broad range of healthcare products led by innovative pharmaceuticals and also including eye care products and cost saving generic pharmaceuticals. It is headquartered in Basel, Switzerland.

        The consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). They are prepared in accordance with the historical cost convention except for items that are required to be accounted for at fair value.

        The Group's financial year-end is December 31 which is also the annual closing date of the individual entities' financial statements incorporated into the Group's consolidated financial statements.

        The preparation of financial statements requires management to make certain estimates and assumptions, either at the balance sheet date or during the year that affect the reported amounts of assets and liabilities, including any contingent amounts, as well as of revenues and expenses. Actual outcomes and results could differ from those estimates and assumptions.

        Listed below are accounting policies of significance to Novartis or, in cases where IFRS provides alternatives, the option adopted by Novartis.

Scope of Consolidation

        The consolidated financial statements include all entities, including structured entities, over which Novartis AG, Basel, Switzerland, directly or indirectly has control (generally as a result of owning more than 50% of the entity's voting interest). Consolidated entities are also referred to as "subsidiaries".

        In cases where Novartis does not fully own a subsidiary it has elected to value any remaining outstanding non-controlling interest at the time of acquiring control of the subsidiary at its proportionate share of the fair value of the net identified assets.

        The contribution of a business to an associate or joint venture is accounted for by applying the option under IFRS that permits the accounting for the retained interest of the business contributed at its net book value at the time of the contribution.

        Investments in associated companies (generally defined as investments in entities in which Novartis holds between 20% and 50% of voting shares or over which it otherwise has significant influence) and joint ventures are accounted for using the equity method except for selected venture fund investments for which the Group has elected to apply the method of fair value through the consolidated income statement.

Foreign Currencies

        The consolidated financial statements of Novartis are presented in US dollars ($). The functional currency of subsidiaries is generally the local currency of the respective entity. The functional currency used for the reporting of certain Swiss and foreign finance entities is $ instead of their respective local currencies. This reflects the fact that the cash flows and transactions of these entities are primarily denominated in these currencies.

F-9

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

        For subsidiaries not operating in hyperinflationary economies, the subsidiary's results, financial position and cash flows that do not have $ as their functional currency are translated into $ using the following exchange rates:

–

income, expense and cash flows using for each month the average exchange rate with the US dollar values for each month being aggregated during the year.

–

balance sheets using year-end exchange rates.

–

resulting exchange rate differences are recognized in other comprehensive income.

        The only hyperinflationary economy applicable to Novartis is Venezuela. The financial statements of the major subsidiaries in this country are first adjusted for the effect of inflation with any gain or loss on the net monetary position recorded in the related functional lines in the consolidated income statement and then translated into $.

Acquisition of Assets

        Acquired assets are initially recognized on the balance sheet at cost if they meet the criteria for capitalization. If acquired as part of a business combination, the fair value of identified assets represents the cost for these assets. If separately acquired, the cost of the asset includes the purchase price and any directly attributable costs for bringing the asset into the condition to operate as intended. Expected costs for obligations to dismantle and remove property, plant and equipment when it is no longer used are included in their cost.

Property, Plant and Equipment

        Property, plant and equipment are depreciated on a straight-line basis in the consolidated income statement over their estimated useful lives. Leasehold land is depreciated over the period of its lease whereas freehold land is not depreciated. The related depreciation expense is included in the costs of the functions using the asset.

        Property, plant and equipment are assessed for impairment whenever there is an indication that the balance sheet carrying amount may not be recoverable using cash flow projections for the useful life.

        The following table shows the respective useful lives for property, plant and equipment:

	Useful life
Buildings		20 to 40 years
Machinery and other equipment
Machinery and equipment		7 to 20 years
Furniture and vehicles		5 to 10 years
Computer hardware		3 to 7 years

        Government grants obtained for construction activities, including any related equipment, are deducted from the gross acquisition cost to arrive at the balance sheet carrying value of the related assets.

F-10

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

Goodwill and Intangible Assets

Goodwill

        Goodwill arises in a business combination and is the excess of the consideration transferred to acquire a business over the underlying fair value of the net identified assets acquired. It is allocated to groups of cash generating units (CGUs) which are usually represented by the reported segments. Goodwill is tested for impairment annually at the CGU level and any impairment charges are recorded under "Other Expense" in the consolidated income statement.

Intangible Assets Available-for-Use

        Novartis has the following classes of available-for-use intangible assets: Currently marketed products; Marketing know-how; Technologies; Other intangible assets (including computer software) and the Alcon brand name.

        Currently marketed products represent the composite value of acquired intellectual property, patents, and distribution rights and product trade names.

        Marketing know-how represents the value attributable to the expertise acquired for marketing and distributing Alcon surgical equipment.

        Technologies represent identified and separable acquired know-how used in the research, development and production processes.

        Significant investments in internally developed and acquired computer software are capitalized and included in the "Other" category and amortized once available for use.

        The Alcon brand name is shown separately as it is the only Novartis intangible asset that is available for use with an indefinite useful life. Novartis considers that it is appropriate that the Alcon brand name has an indefinite life since Alcon has a history of strong revenue and cash flow performance, and Novartis has the intent and ability to support the brand with spending to maintain its value for the foreseeable future.

        Except for the Alcon brand name, intangible assets available for use are amortized over their estimated useful lives on a straight-line basis and evaluated for potential impairment whenever facts and circumstances indicate that their carrying value may not be recoverable. The Alcon brand name is not amortized, but evaluated for potential impairment annually.

F-11

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

        The following table shows the respective useful lives for available-for-use intangible assets and the location in the consolidated income statement in which the respective amortization and any potential impairment charge is recognized:

	Useful life	Income statement location for amortization and impairment charges
Currently marketed products	5 to 20 years	"Cost of goods sold"
Marketing know-how	25 years	"Cost of goods sold"
Technologies	10 to 30 years	"Cost of goods sold" or "Research and Development"
Other (including computer software)	3 to 5 years	In the respective functional expense
Alcon brand name	Not amortized, indefinite useful life	Not applicable

Intangible Assets Not Yet Available-for-Use

        Acquired research and development intangible assets, which are still under development and have accordingly not yet obtained marketing approval, are recognized as In-Process Research & Development (IPR&D). IPR&D assets are only capitalized if they are deemed to enhance the intellectual property of Novartis and include items such as initial upfront and milestone payments on licensed or acquired compounds.

        IPR&D is not amortized, but evaluated for potential impairment on an annual basis or when facts and circumstances warrant. Any impairment charge is recorded in the consolidated income statement under "Research & Development". Once a project included in IPR&D has been successfully developed it is transferred to the "Currently marketed product" category.

Impairment of Goodwill and Intangible Assets

        An asset is considered impaired when its balance sheet carrying amount exceeds its estimated recoverable amount, which is defined as the higher of its fair value less costs of disposal and its value in use. Usually, Novartis applies the fair value less costs of disposal method for its impairment assessment. In most cases no directly observable market inputs are available to measure the fair value less costs of disposal. Therefore, an estimate is derived indirectly and is based on net present value techniques utilizing post-tax cash flows and discount rates. In the limited cases where the value in use method would be applied, net present value techniques would be applied using pre-tax cash flows and discount rates.

        Fair value less costs of disposal reflects estimates of assumptions that market participants would be expected to use when pricing the asset or CGU, and for this purpose management considers the range of economic conditions that are expected to exist over the remaining useful life of the asset.

        The estimates used in calculating the net present values are highly sensitive and depend on assumptions specific to the nature of the Group's activities with regard to:

–

amount and timing of projected future cash flows;

–

outcome of R&D activities (compound efficacy, results of clinical trials, etc.);

–

amount and timing of projected costs to develop IPR&D into commercially viable products;

–

probability of obtaining regulatory approval;

–

long-term sales forecasts for periods of up to 25 years;

F-12

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

–

sales erosion rates after the end of patent or other intellectual property rights protection and timing of the entry of generic competition;

–

selected tax rate;

–

behavior of competitors (launch of competing products, marketing initiatives, etc.); and

–

selected discount rate.

        Generally, for intangible assets with a definite useful life Novartis uses cash flow projections for the whole useful life of these assets, and for goodwill and the Alcon brand name, Novartis utilizes cash flow projections for a five-year period based on management forecasts, with a terminal value based on cash flow projections usually in line with or lower than inflation rates for later periods. Probability-weighted scenarios are typically used.

        Discount rates used are based on the Group's estimated weighted average cost of capital adjusted for specific country and currency risks associated with cash flow projections as an approximation of the weighted average cost of capital of a comparable market participant.

        Due to the above factors, actual cash flows and values could vary significantly from forecasted future cash flows and related values derived using discounting techniques.

Impairment of Associated Companies Accounted For at Equity

        Novartis considers investments in associated companies for impairment evaluation whenever there is a quoted share price indicating a fair value less than the per-share balance sheet carrying value for the investment. For unquoted investments in associated companies recent financial information is taken into account to assess whether an impairment evaluation is necessary.

        If the recoverable amount of the investment is estimated to be lower than the balance sheet carrying amount an impairment charge is recognized for the difference in the consolidated income statement under "Income from associated companies".

Cash and Cash equivalents, Marketable Securities, Commodities, Derivative Financial Instruments and Non-Current Financial Assets

        Cash and cash equivalents include highly liquid investments with original maturities of three months or less which are readily convertible to known amounts of cash. Bank overdrafts are usually presented within current financial debts on the consolidated balance sheet except in cases where a right of offset has been agreed with a bank which then allows for presentation on a net basis.

        The Group defines "marketable securities" as those financial assets which are managed by the Group's Corporate Treasury and consist principally of quoted equity and quoted debt securities as well as fund investments which are principally traded in liquid markets. Certain marketable securities are managed independently of Corporate Treasury, and these are typically held for long-term strategic purposes and are therefore classified as non-current financial assets. They include equity securities and fund investments.

        Marketable securities are initially recorded at fair value on their trade date which is different from the settlement date when the transaction is ultimately effected. Quoted securities are re-measured at each

F-13

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

reporting date to fair value based on current market prices. If the market for a financial asset is not active or no market is available, fair values are established using valuation techniques. Apart from discounted cash flow analysis and other pricing models, for the majority of investments in what is known as the "Level 3" hierarchy, the valuation is based on the acquisition cost as the best approximation of the fair value of the investee. This is adjusted for a higher or lower valuation in connection with a partial disposal, a new round of financing and for the investee's performance below or above expectations. The fair value of investments in "Level 3" is reviewed regularly for a possible diminution in value.

        The Group has classified all its equity and quoted debt securities as well as fund investments as available-for-sale, as they are not acquired to generate profit from short-term fluctuations in price. Unrealized gains, except exchange gains related to quoted debt instruments, are recorded as a fair value adjustment in the consolidated statement of comprehensive income. They are recognized in the consolidated income statement when the financial asset is sold at which time the gain is transferred either to "Other financial income and expense" for the marketable securities managed by the Group's Corporate Treasury or to "Other income" in the consolidated income statement for all other equity securities and fund investments. Exchange gains related to quoted debt instruments are immediately recognized in the consolidated income statement under "Other financial income and expense".

        A security is assessed for impairment when its market value at the balance sheet date is less than initial cost reduced by any previously recognized impairment. Impairments on equity securities, quoted debt securities and fund investments, and exchange rate losses on quoted debt securities in a foreign currency which are managed by the Group's Corporate Treasury are immediately recorded in "Other financial income and expense". Impairments are recorded for all other equity securities and other fund investments in "Other expense" in the consolidated income statement.

        Commodities include gold bullion or coins which are valued at the lower of cost or fair value using current market prices. The changes in fair value below cost are immediately recorded in "Other financial income and expense".

        Other non-current financial assets including loans are carried at either amortized cost, which reflects the time value of money, or cost adjusted for any accrued interest, less any allowances for uncollectable amounts. Impairments and exchange rate gains and losses on other non-current financial assets, including loans, as well as interest income using the effective interest rate method, are immediately recorded in "Other income" or "Other expense" in the consolidated income statement.

        Derivative financial instruments are initially recognized in the balance sheet at fair value and are re-measured to their current fair value at the end of each subsequent reporting period. The valuation of a forward exchange rate contract is based on the discounted cash flow model, using interest curves and spot rates at the reporting date as observable inputs.

        Options are valued based on a modified Black-Scholes model using volatility and exercise prices as major observable inputs.

        The Group utilizes derivative financial instruments for the purpose of hedging to reduce the volatility in the Group's performance due to the exposure to various types of business risks. The Group, therefore, enters into certain derivative financial instruments which provide effective economic hedges. The risk reduction is obtained because the derivative's value or cash flows are expected, wholly or partly, to move inversely to the hedged item and, therefore, offset changes in the value or cash flows of the hedged item. The overall hedging strategy is aiming to mitigate the currency and interest exposure risk of positions

F-14

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

which are contractually agreed and to partially hedge the exposure risk of selected anticipated transactions. However, the Group generally does not hedge the translation risk related to its foreign investments.

        Not all of the financial impact of derivative financial instruments can be matched with the financial impact of the economically hedged item. A prerequisite for obtaining this accounting-hedge relationship is extensive documentation on inception and proving on a regular basis that the economic hedge is effective for accounting purposes. Changes in the fair value of any derivative instruments that do not qualify for cash flow hedge accounting are recognized immediately in "Other financial income and expense" in the consolidated income statement.

Inventories

        Inventory is valued at acquisition or production cost determined on a first-in first-out basis. This value is used for the "Cost of goods sold" in the consolidated income statement. Unsalable inventory is fully written off in the consolidated income statement under "Cost of goods sold".

Trade Receivables

        Trade receivables are initially recognized at their invoiced amounts including any related sales taxes less adjustments for estimated revenue deductions such as rebates, chargebacks and cash discounts.

        Provisions for doubtful trade receivables are established once there is an indication that it is likely that a loss will be incurred. These provisions represent the difference between the trade receivable's carrying amount in the consolidated balance sheet and the estimated net collectible amount. Significant financial difficulties of a customer, such as probability of bankruptcy, financial reorganization, default or delinquency in payments are considered indicators that recovery of the trade receivable is doubtful. Charges for doubtful trade receivables are recognized in the consolidated income statement within "Marketing & Sales" expenses.

Legal and Environmental Liabilities

        Novartis and its subsidiaries are subject to contingencies arising in the ordinary course of business such as patent litigation, environmental remediation liabilities and other product-related litigation, commercial litigation, and governmental investigations and proceedings. Provisions are made where a reliable estimate can be made of the probable outcome of legal or other disputes including related fees and expenses against the subsidiary. Novartis believes that its total provisions are adequate based upon currently available information, however, given the inherent difficulties in estimating liabilities in this area, Novartis may incur additional costs beyond the amounts provided. Management believes that such additional amounts, if any, would not be material to the Group's financial condition but could be material to the results of operations or cash flows in a given period.

Contingent Consideration

        In a business combination or divestment of a business, it is necessary to recognize contingent future payments to previous or from new owners representing contractually defined potential amounts as a liability or asset. Usually for Novartis, these are linked to milestone or royalty payments related to certain assets and are recognized as a financial liability or asset at their fair value which is then re-measured at

F-15

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

each subsequent reporting date. These estimations typically depend on factors such as technical milestones or market performance and are adjusted for the probability of their likelihood of payment and if material, appropriately discounted to reflect the impact of time. Changes in the fair value of contingent liabilities in subsequent periods are recognized in the consolidated income statement in "Cost of goods sold" for currently marketed products and in "Research & Development" for IPR&D. Changes in contingent assets are recognized in "Other income" or "Other expense". The effect of unwinding the discount over time is recognized in "Interest expense" in the consolidated income statement. Novartis does not recognize contingent consideration associated with asset purchases outside of a business combination that are conditional upon future events which are within its control until such time as there is an unconditional obligation. If the contingent consideration is outside the control of Novartis, a liability is recognized once it becomes probable that the contingent consideration will become due. In both cases, if appropriate, a corresponding asset is recorded.

Defined Benefit Pension Plans and Other Post-Employment Benefits

        The liability in respect of defined benefit pension plans and other post-employment benefits is the defined benefit obligation calculated annually by independent actuaries using the projected unit credit method. The current service cost for such post-employment benefit plans is included in the personnel expenses of the various functions where the associates are employed, while the net interest on the net defined benefit liability or asset is recognized as "Other expense" or "Other income".

Treasury Shares

        Treasury shares are initially recorded at fair value on their trade date which is different from the settlement date when the transaction is ultimately effected. Treasury shares are deducted from consolidated equity at their nominal value of CHF 0.50 per share. Differences between the nominal amount and the transaction price on purchases or sales of treasury shares with third parties, or the value of services received for the shares allocated to associates as part of share-based compensation arrangements, are recorded in "Retained earnings" in the consolidated statement of changes in equity.

Revenue Recognition

Revenue

        Revenue is recognized on the sale of Novartis Group products and services and recorded as "Net sales" in the consolidated income statement when there is persuasive evidence that a sales arrangement exists, title and risks and rewards for the products are transferred to the customer, the price is determinable and collectability is reasonably assured. When contracts contain customer acceptance provisions, sales are recognized upon the satisfaction of acceptance criteria. If products are stockpiled at the request of the customer, revenue is only recognized once the products have been inspected and accepted by the customer and there is no right of return or replenishment on product expiry.

        Provisions for rebates and discounts granted to government agencies, wholesalers, retail pharmacies, managed healthcare organizations and other customers are recorded as a deduction from revenue at the time the related revenues are recorded or when the incentives are offered. They are calculated on the basis of historical experience and the specific terms in the individual agreements. Provisions for refunds granted to healthcare providers under innovative pay-for-performance agreements are recorded as revenue deduction at the time the related sales are recorded. They are calculated on the basis of historical

F-16

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

experience and clinical data available for the product as well as the specific terms in the individual agreements. In cases where historical experience and clinical data are not sufficient for a reliable estimation of the outcome, revenue recognition is deferred until such history is available.

        Cash discounts are offered to customers to encourage prompt payment and are recorded as revenue deductions. Following a decrease in the price of a product, we generally grant customers a "shelf stock adjustment" for a customer's existing inventory for the involved product. Provisions for shelf stock adjustments, which are primarily relevant within the Sandoz Division, are determined at the time of the price decline or at the point of sale, if the impact of a price decline on the products sold can be reasonably estimated based on the customer's inventory levels of the relevant product. When there is historical experience of Novartis agreeing to customer returns and Novartis can reasonably estimate expected future returns, a provision is recorded for estimated sales returns. In doing so the estimated rate of return is applied, determined based on historical experience of customer returns and considering any other relevant factors. This is applied to the amounts invoiced also considering the amount of returned products to be destroyed versus products that can be placed back in inventory for resale. Where shipments are made on a re-sale or return basis, without sufficient historical experience for estimating sales returns, revenue is only recorded when there is evidence of consumption or when the right of return has expired.

        Provisions for revenue deductions are adjusted to actual amounts as rebates, discounts and returns are processed. The provision represents estimates of the related obligations, requiring the use of judgment when estimating the effect of these sales deductions.

Revenue from Lease Arrangements

        For surgical equipment, in addition to cash and instalment sales, revenue is recognized under finance and operating lease arrangements. An arrangement that is not in the legal form of a lease is accounted for as a lease if it is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Arrangements in which Novartis transfers substantially all the risks and rewards incidental to ownership to the customer are treated as finance lease arrangements. Revenue from finance lease arrangements is recognized at amounts equal to the fair values of the equipment, which approximate the present values of the minimum lease payments under the arrangements. As interest rates embedded in lease arrangements are approximately market rates, revenue under finance lease arrangements is comparable to revenue for outright sales. Finance income for arrangements in excess of twelve months is deferred and subsequently recognized based on a pattern that approximates the use of the effective interest method and recorded in "Other income". Operating lease revenue for equipment rentals is recognized on a straight-line basis over the lease term.

Other Revenue

        "Other revenue" includes royalty income and revenue from activities such as manufacturing services or other services rendered to the extent such revenue is not recorded under net sales.

Research & Development

        Internal Research & Development (R&D) costs are fully charged to "Research & Development" in the consolidated income statement in the period in which they are incurred. The Group considers that regulatory and other uncertainties inherent in the development of new products preclude the capitalization of internal development expenses as an intangible asset until marketing approval from a

F-17

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

regulatory authority is obtained in a major market such as the United States, the European Union, Switzerland or Japan.

        Payments made to third parties in compensation for subcontracted R&D, such as contract research and development organizations, that is deemed not to enhance the intellectual property of Novartis are expensed as internal R&D expenses in the period in which they are incurred. Such payments are only capitalized if they meet the criteria for recognition of an internally generated intangible asset, usually when marketing approval has been achieved from a regulatory authority in a major market.

        Payments made to third parties in order to in-license or acquire intellectual property rights, compounds and products, including initial upfront and subsequent milestone payments, are capitalized as are payments for other assets, such as technologies to be used in R&D activities. If additional payments are made to the originator company to continue to perform R&D activities, an evaluation is made as to the nature of the payments. Such additional payments will be expensed if they are deemed to be compensation for subcontracted R&D services not resulting in an additional transfer of intellectual property rights to Novartis. By contrast, such additional payments will be capitalized if they are deemed to be compensation for the transfer to Novartis of additional intellectual property developed at the risk of the originator company. Subsequent internal R&D costs in relation to IPR&D and other assets are expensed since the technical feasibility of the internal R&D activity can only be demonstrated by the receipt of marketing approval for a related product from a regulatory authority in a major market.

        Costs for post-approval studies performed to support the continued registration of a marketed product are recognized as marketing expenses. Costs for activities that are required by regulatory authorities as a condition for obtaining marketing approval are charged as development expenses as they are incurred, in cases where it is anticipated that the related product will be sold over a longer period than the activities required to be performed to obtain the marketing approval. As a result, all activities necessary as a condition to maintain a received approval, whether conditional or not, are expensed in the consolidated income statement.

        IPR&D assets are transferred to "Currently marketed products" once the related project has been successfully developed and then are amortized straight-line in the consolidated income statement over their useful life. Other acquired technologies included in intangible assets are amortized straight-line in the consolidated income statement over their estimated useful lives.

        Inventory produced ahead of regulatory approval is provisioned against and the charge is included in "Other expense" in the consolidated income statement as its ultimate use cannot be assured. If this inventory can be subsequently sold, the provision is released to "Other income" in the consolidated income statement either on approval by the appropriate regulatory authority or, exceptionally in Europe, on recommendation by the Committee for Medicinal Products for Human Use (CHMP) if approval is virtually certain.

Share-Based Compensation

        Vested Novartis shares and ADRs which are granted as compensation are valued at their market value on the grant date and are immediately expensed in the consolidated income statement.

        The fair values of unvested restricted shares, restricted share units (RSUs) and performance share units (PSUs) in Novartis shares and American Depositary Receipts (ADRs) and related options granted to associates as compensation are recognized as an expense over the related vesting period. The expense

F-18

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

recorded in the consolidated income statement is included in the personnel expenses of the various functions where the associates are employed.

        Unvested restricted shares, restricted ADRs and RSUs and any related options are only conditional on the provision of services by the plan participant during the vesting period. As a result, restricted shares, restricted ADRs, RSUs and any related options are valued using their market value on the grant date. The value of these grants, after making adjustment for assumptions related to their forfeiture during the vesting period, are expensed on a straight-line basis over the respective vesting period.

        PSUs require the plan participant to not only provide services during the vesting period but they are also subject to certain performance criteria being achieved during the vesting period. PSUs granted under plans defined as "Long-Term Performance Plans" are subject to performance criteria based on Novartis internal performance metrics. The expense is determined taking into account assumptions concerning performance during the period against targets and expected forfeitures due to plan participants not meeting their service conditions. These assumptions are periodically adjusted. Any change in estimates for past services are recorded immediately as an expense or income in the consolidated income statement and amounts for future periods are expensed over the remaining vesting period. As a result, at the end of the vesting period, the total charge during the whole vesting period represents the amount which will finally vest. The number of equity instruments that finally vest is determined at the vesting date.

        In 2014, a Long-Term Relative Performance Plan (LTRPP) was introduced. PSUs granted under this plan are not only conditional on the provision of services by the plan participant during the vesting period but are also conditional on the Total Shareholder Return (TSR) performance of Novartis relative to a specific peer group of companies over the vesting period. These performance conditions are based on variables which can be observed in the market. IFRS requires that these observations are taken into account in determining the fair value of these PSUs at the date of grant. Novartis has determined the fair value of these PSUs at the date of grant using a "Monte Carlo" simulation model. The total fair value of this grant is expensed on a straight-line basis over the vesting period. Adjustments to the number of equity instruments granted are only made if a plan participant does not fulfill the service conditions.

        If a plan participant leaves Novartis, for reasons other than retirement, disability or death, then unvested restricted shares, restricted ADRs, RSUs and related share options and PSUs are forfeited, unless determined otherwise by the provision of the plan rules or by the Compensation Committee, for example, in connection with a reorganization or divestment.

        Measuring the fair values of PSUs granted under the LTRPP and share and ADR options granted under other plans, requires an estimation of the probability of uncertain future events and various other factors used in the valuation models. The Monte Carlo simulation used for determining the fair value of the PSUs related to the LTRPP requires as input parameters the probability of factors related to uncertain future events; the term of the award; grant price of underlying shares or ADRs; expected volatilities; expected correlation matrix of the underlying equity instruments with those of the peer group of companies and the risk free interest rate. The fair values of options on Novartis shares and ADRs are calculated using the trinomial valuation method and has as input parameters the expected dividend yield and expected price volatility. Expected volatilities are based on those implied from listed financial instruments on Novartis shares, and—to the extent that equivalent values are not available—a future extrapolation based on historical volatility.

F-19

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

Government Grants

        Grants from governments or similar organizations are recognized at their fair value when there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

        Government grants related to income are deferred and recognized in the consolidated income statement over the period necessary to match them with the related costs which they are intended to compensate.

        The accounting policy for property, plant and equipment describes the treatment of any related grants.

Restructuring Charges

        Charges to increase restructuring provisions are included in "Other expense" in the consolidated income statements. Corresponding releases are recorded in "Other income" in the consolidated income statement.

Taxes

        Taxes on income are provided in the same periods as the revenues and expenses to which they relate and include any interest and penalties incurred during the period. Deferred taxes are determined using the comprehensive liability method and are calculated on the temporary differences that arise between the tax base of an asset or liability and its carrying value in the balance sheet prepared for consolidation purposes, except for those temporary differences related to investments in subsidiaries and associated companies, where the timing of their reversal can be controlled and it is probable that the difference will not reverse in the foreseeable future. Furthermore, withholding or other taxes on eventual distribution of a subsidiary's retained earnings are only taken into account when a dividend has been planned since generally the retained earnings are reinvested.

        The estimated amounts for current and deferred tax assets or liabilities, including any amounts related to any uncertain tax positions, are based on currently known facts and circumstances. Tax returns are based on an interpretation of tax laws and regulations and reflect estimates based on these judgments and interpretations. The tax returns are subject to examination by the competent taxing authorities which may result in an assessment being made requiring payments of additional tax, interest or penalties. Inherent uncertainties exist in the estimates of the tax positions.

Non-Current Assets Held for Sale or Related to Discontinued Operations

        Non-current assets are classified as assets held for sale or related to discontinued operations when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. Assets held for sale or included within a disposal group are not depreciated or amortized.

F-20

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Significant Accounting Policies (Continued)

Status of Adoption of Significant New or Amended IFRS Standards or Interpretations

        The adoption of new or amended standards and interpretations which are effective for the financial year beginning on January 1, 2015 did not have a material impact on the Group's consolidated financial statements.

        The following new IFRS standards will, based on a Novartis analysis, be of significance to the Group, but have not yet been early adopted:

–

IFRS 9 Financial Instruments will substantially change the classification and measurement of financial instruments; will require impairments to be based on a forward-looking model; will change the approach to hedging financial exposures and related documentation and also the recognition of certain fair value changes. The mandatory effective date for requirements issued as part of IFRS 9 is January 1, 2018 with early adoption permitted. The Group is currently assessing the impact of IFRS 9.

–

IFRS 15 Revenue from contracts with customers amends revenue recognition requirements and establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and related interpretations. The standard is effective for annual periods beginning on or after January 1, 2018 with earlier adoption permitted. The Group is currently assessing the impact of adopting IFRS 15.

–

IFRS 16 Leases substantially changes the financial statements as the majority of leases will become on-balance sheet liabilities with corresponding right of use assets on the balance sheet. The standard replaces IAS 17 Leases and is effective January 1, 2019. Early application is permitted for companies that also apply IFRS 15 Revenue from Contracts with Customers. The Group is currently assessing the impact of adopting IFRS 16.

        There are no other IFRS standards or interpretations which are not yet effective which would be expected to have a material impact on the Group.

2.     Significant Transactions

Significant Transactions in 2015

Portfolio Transformation Transactions

Transaction with Eli Lilly and Company

        On January 1, 2015, Novartis closed its transaction with Eli Lilly and Company, USA (Lilly) announced in April 2014 to divest its Animal Health business for $5.4 billion in cash. This resulted in a pre-tax gain of $4.6 billion which is recorded in operating income from discontinued operations.

F-21

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     Significant Transactions (Continued)

Transactions with GlaxoSmithKline plc

        On March 2, 2015, Novartis closed its transactions with GlaxoSmithKline plc, Great Britain (GSK) announced in April 2014, with the following consequences:

Pharmaceuticals—Acquisition of GSK oncology products

        Novartis acquired GSK's oncology products and certain related assets for an aggregate cash consideration of $16.0 billion. Up to $1.5 billion of this cash consideration at the acquisition date is contingent on certain development milestones. The fair value of this potentially refundable consideration is $0.1 billion. In addition, under the terms of the agreement, Novartis is granted a right of first negotiation over the co-development or commercialization of GSK's current and future oncology R&D pipeline, excluding oncology vaccines. The right of first negotiation is for a period of 12.5 years from the acquisition closing date. The purchase price allocation of the fair value of the consideration of $15.9 billion resulted in net identified assets of $13.5 billion and goodwill of $2.4 billion. Since the acquisition the business generated net sales of $1.8 billion. Management estimates net sales for the entire year 2015 would have amounted to $2.1 billion had the Oncology products been acquired at the beginning of the 2015 reporting period. The net results from operations on a reported basis since the acquisition date were not material.

Vaccines—Divestment

        Novartis has divested its Vaccines business (excluding its Vaccines influenza business) to GSK for up to $7.1 billion plus royalties. The $7.1 billion consists of $5.25 billion paid at closing and up to $1.8 billion in future milestone payments. The fair value of the contingent future milestones and royalties is $1.0 billion, resulting in a fair value of consideration received of $6.25 billion. Included in this amount, is a $450 million milestone payment received in late March 2015. The sale of this business resulted in a pre-tax gain of $2.8 billion which is recorded in operating income from discontinued operations.

        Novartis's Vaccines influenza business is excluded from the GSK Vaccines business acquisition. However, GSK has entered into a future option arrangement with Novartis in relation to the Vaccines influenza business, pursuant to which Novartis could have unilaterally required GSK to acquire the entire or certain parts of its Vaccines influenza business for consideration of up to $250 million (the Influenza Put Option) if the divestment to CSL Limited, Australia (CSL), discussed below, had not been completed. The option period was 18 months from the closing date of the GSK transaction, but terminated with the sale of the Vaccines influenza business to CSL on July 31, 2015. Novartis paid GSK a fee of $5 million in consideration for the grant of the Influenza Put Option.

Consumer Health—Combination of Novartis OTC with GSK consumer healthcare in a joint venture

        Novartis and GSK have agreed to create a combined Consumer Healthcare business through a joint venture between Novartis OTC and GSK Consumer Healthcare. On March 2, 2015, a new entity was formed via contribution of businesses from both Novartis and GSK. Novartis has a 36.5% interest in the newly created entity. Novartis has valued the contribution of 63.5% of its OTC Division in exchange for 36.5% of the GSK Consumer Healthcare business at fair value. Based on the estimates of fair values exchanged, an investment in an associated company of $7.6 billion was recorded. The resulting pre-tax gain, net of transaction related costs, of $5.9 billion is recorded in operating income from discontinued operations.

F-22

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     Significant Transactions (Continued)

        Novartis has four of eleven seats on the joint venture entity's Board of Directors. Furthermore, Novartis has customary minority rights and also exit rights at a pre-defined, market based pricing mechanism.

        The investment is accounted for using the equity method of accounting using estimated results for the last quarter of the year. Any differences between this estimate and actual results, when available, will be adjusted in the Group's 2016 consolidated financial statements.

Additional GSK related costs

        The GSK transaction resulted in $0.6 billion of additional transaction-related costs that were expensed.

Transaction with CSL

        On October 26, 2014, Novartis entered into an agreement with CSL to sell its Vaccines influenza business to CSL for $275 million. Entering into the separate divestment agreement with CSL resulted in the Vaccines influenza business being classified as a separate disposal group consisting of a group of cash generating units within the Vaccines Division, requiring the performance of a separate valuation of the Vaccines influenza business net assets. This triggered the recognition of an exceptional impairment charge in 2014 of $1.1 billion as the estimated net book value of the Vaccines influenza business net assets was above the $275 million consideration. The transaction with CSL was completed on July 31, 2015, resulting in a partial reversal of the impairment recorded in 2014 in the amount of $0.1 billion, which is included in operating income from discontinued operations.

Other Significant Transactions in 2015

Pharmaceuticals—Acquisition of Spinifex Pharmaceuticals, Inc.

        On June 29, 2015 Novartis entered into an agreement to acquire Spinifex Pharmaceuticals, Inc. (Spinifex), a US and Australian-based, privately held development stage company, focused on developing a peripheral approach to treat neuropathic pain. The transaction closed on July 24, 2015, and the total purchase consideration was $312 million. The amount consisted of an initial cash payment of $196 million and the net present value of the contingent consideration of $116 million due to previous Spinifex shareholders, which they are eligible to receive upon achievement of specified development and commercialization milestones. The purchase price allocation resulted in net identifiable assets of $263 million and goodwill of $49 million. Results of operations since the date of acquisition were not material.

Pharmaceuticals—Acquisition of Admune Therapeutics LLC

        On October 16, 2015, Novartis acquired Admune Therapeutics LLC (Admune), a US-based, privately held company, broadening Novartis' pipeline of cancer immunotherapies. The total purchase consideration amounted to $258 million. This amount consists of an initial cash payment of $140 million and the net present value of the contingent consideration of $118 million due to Admune's previous owners, which they are eligible to receive upon the achievement of specified development and commercialization milestones. The purchase price allocation resulted in net identifiable assets of

F-23

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     Significant Transactions (Continued)

$258 million. No goodwill was recognized. Results of operations since the date of acquisition were not material.

Significant Transaction in 2014

Vaccines—Divestment of Blood Transfusion Diagnostic Unit

        On January 9, 2014, Novartis completed the divestment of its blood transfusion diagnostics unit announced on November 11, 2013 to the Spanish company Grifols S.A., for $1.7 billion in cash. The pre-tax gain on this transaction is approximately $0.9 billion and was recorded in operating income from discontinued operations.

Pharmaceuticals—Acquisition of CoStim Pharmaceuticals Inc.

        On February 17, 2014, Novartis acquired all of the outstanding shares of CoStim Pharmaceuticals Inc., a Cambridge, Massachusetts, US-based, privately held biotechnology company focused on harnessing the immune system to eliminate immune-blocking signals from cancer, for a total purchase consideration of $248 million (excluding cash acquired). This amount consists of an initial cash payment and the net present value of contingent consideration of $153 million due to previous CoStim shareholders, which they are eligible to receive upon the achievement of specified development and commercialization milestones. The purchase price allocation resulted in net identified assets of $152 million (excluding cash acquired) and goodwill of $96 million. Results of operations since the acquisition were not material.

Pharmaceuticals—Divestment of Idenix Pharmaceuticals Inc. (Idenix) Shareholding

        On August 5, 2014, Merck & Co., USA completed a tender offer for Idenix. As a result, Novartis divested its 22% shareholding in Idenix and realized a gain of approximately $0.8 billion which was recorded in income from associated companies.

Alcon—Acquisition of WaveTec Vision Systems, Inc. (WaveTec)

        On October 16, 2014, Alcon acquired all of the outstanding shares of WaveTec, a privately held company, for $350 million in cash. The purchase price allocation resulted in net identified assets of $180 million and goodwill of $170 million. Results of operations since the acquisition were not material.

Corporate—Divestment of LTS Lohmann Therapie-Systeme AG (LTS) Shareholding

        On November 5, 2014, Novartis divested its 43% shareholding in LTS and realized a gain of approximately $0.4 billion which was recorded in income from associated companies.

Significant Transaction in 2013

        There were no significant acquisition or divestment transactions during 2013.

3.     Segmentation of Key Figures 2015, 2014 and 2013

        The businesses of Novartis are divided operationally on a worldwide basis into three reporting segments. In addition, we separately report Corporate activities.

F-24

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Segmentation of Key Figures 2015, 2014 and 2013 (Continued)

        Reporting segments are presented in a manner consistent with the internal reporting to the chief operating decision maker which is the Executive Committee of Novartis. The reporting segments are managed separately because they each research, develop, manufacture, distribute, and sell distinct products that require differing marketing strategies.

        The Executive Committee of Novartis is responsible for allocating resources and assessing the performance of the reporting segments.

        The reporting segments are as follows:

        Pharmaceuticals researches, develops, manufactures, distributes and sells patented prescription medicines. The Pharmaceuticals Division is organized into global business franchises responsible for the commercialization of various products. These franchises are: Oncology, Neuroscience, Retina, Immunology and Dermatology, Respiratory, Cardio-Metabolic, Established Medicines and Cell and Gene Therapies.

        Alcon researches, discovers, develops, manufactures, distributes and sells eye care products. The Alcon Division is the global leader in eye care with product offerings in surgical, ophthalmic pharmaceuticals and vision care. The Alcon Division is organized globally in three global business franchises as follows: In Surgical, Alcon develops, manufactures, distributes and sells ophthalmic surgical equipment, instruments, disposable products and intraocular lenses. In Ophthalmic Pharmaceuticals, Alcon discovers, develops, manufactures, distributes and sells medicines to treat chronic and acute diseases of the eye, as well as over-the-counter medicines for the eye. In Vision Care, Alcon develops, manufactures, distributes and sells contact lenses and lens care products.

        Sandoz develops, manufactures, distributes and sells prescription medicines, as well as pharmaceutical active substances, which are not protected by valid and enforceable third-party patents. The Sandoz Division is organized globally in three franchises, Retail Generics, Anti-Infectives and Biopharmaceuticals & Oncology Injectables. In Retail Generics, Sandoz develops, manufactures and markets active ingredients and finished dosage forms of pharmaceuticals to third parties. Retail Generics includes the areas of dermatology, respiratory and ophthalmics, as well as cardiovascular, metabolism, central nervous system, pain, gastrointestinal, and hormonal therapies. Finished dosage form anti-infectives sold to third parties are also part of Retail Generics. In Anti-Infectives, Sandoz manufactures active pharmaceutical ingredients and intermediates—mainly antibiotics- for internal use by Retail Generics and for sale to third party customers. In Biopharmaceuticals, Sandoz develops, manufactures and markets protein- or other biotechnology-based products known as biosimilars and provides biotechnology manufacturing services to other companies. In Oncology Injectables, Sandoz develops, manufactures and markets cytotoxic products for the hospital market.

        Income and expenses relating to Corporate include the costs of the Group headquarters and those of corporate coordination functions in major countries. In addition, Corporate includes other items of income and expense which are not attributable to specific segments such as certain expenses related to post-employment benefits, environmental remediation liabilities, charitable activities, donations and sponsorships. Usually, no allocation of Corporate items is made to the segments. As a result, Corporate assets and liabilities principally consist of net liquidity (cash and cash equivalents, marketable securities less financial debts), investments in associated companies and current and deferred taxes and non-segment specific environmental remediation and post-employment benefit liabilities.

F-25

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Segmentation of Key Figures 2015, 2014 and 2013 (Continued)

        Our divisions are supported by the Novartis Institutes for BioMedical Research and by Novartis Business Services.

–

The Novartis Institutes for BioMedical Research (NIBR) was created in 2003, and is headquartered in Cambridge, Massachusetts. NIBR conducts the Pharmaceuticals and Alcon divisions research activities.

–

Novartis Business Services (NBS) was created in July 2014 and started operations in January 2015 as a shared services organization providing business support services across the Group such as information technology, real estate and facility services, procurement, product lifecycle services, human resources and financial reporting and accounting operations.

        Following the Portfolio Transformation transactions described in Note 2, Novartis has separated the Group's reported financial data for the current and prior year into "continuing" operations and "discontinued" operations:

        Continuing operations comprise:

–

Pharmaceuticals: Innovative patent-protected prescription medicines

–

Alcon: Surgical, ophthalmic pharmaceutical and vision care products

–

Sandoz: Generic pharmaceuticals

–

Corporate activities

        Discontinued operations comprise:

–

Vaccines: Preventive human vaccines and the blood transfusion diagnostics unit. Excluded are certain intellectual property rights and related other revenues of the Vaccines Division which are now reported under Corporate activities.

–

Consumer Health: OTC (over-the-counter medicines) and Animal Health. These two divisions were managed separately. However, neither was material enough to the Group to be disclosed separately as a reporting segment.

–

Corporate: certain transactional and other expenses related to the portfolio transformation.

        The accounting policies mentioned in Note 1 are used in the reporting of segment results. Inter-segmental sales are made at amounts which are considered to approximate arm's length transactions. The Executive Committee of Novartis evaluates segmental performance and allocates resources among the segments based on a number of measures including net sales, operating income and net operating assets. Segment net operating assets consist primarily of property, plant and equipment, intangible assets, inventories and trade and other operating receivables less operating liabilities.

F-26

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Segmentation of Key Figures 2015, 2014 and 2013 (Continued)

SEGMENTATION—CONSOLIDATED INCOME STATEMENTS 2015 and 2014

	Pharmaceuticals						Alcon						Sandoz						Corporate (including eliminations)						Group
($ m)	2015			2014			2015			2014			2015			2014			2015			2014			2015			2014
Net sales to third parties from continuing operations		30,445			31,791			9,812			10,827			9,157			9,562									49,414			52,180
Sales to other segments		137			262			45			49			128			286			(284	)		(358	)		26			239
Net sales from continuing operations		30,582			32,053			9,857			10,876			9,285			9,848			(284	)		(358	)		49,440			52,419
Other revenues		790			629			25			34			25			12			107			540			947			1,215
Cost of goods sold		(7,379	)		(6,889	)		(5,153	)		(5,193	)		(5,325	)		(5,751	)		453			488			(17,404	)		(17,345	)
Gross profit from continuing operations		23,993			25,793			4,729			5,717			3,985			4,109			276			670			32,983			36,289
Marketing & Sales		(7,789	)		(8,178	)		(2,398	)		(2,474	)		(1,585	)		(1,725	)								(11,772	)		(12,377	)
Research & Development		(7,232	)		(7,331	)		(926	)		(928	)		(777	)		(827	)								(8,935	)		(9,086	)
General & Administration		(937	)		(1,009	)		(544	)		(613	)		(346	)		(376	)		(648	)		(618	)		(2,475	)		(2,616	)
Other income		1,145			734			58			79			109			97			737			481			2,049			1,391
Other expense		(1,583	)		(1,538	)		(125	)		(184	)		(381	)		(190	)		(784	)		(600	)		(2,873	)		(2,512	)
Operating income from continuing operations		7,597			8,471			794			1,597			1,005			1,088			(419	)		(67	)		8,977			11,089
Income from associated companies					812									2			4			264			1,102			266			1,918
Interest expense																										(655	)		(704	)
Other financial income and expense																										(454	)		(31	)
Income before taxes from continuing operations																										8,134			12,272
Taxes																										(1,106	)		(1,545	)
Net income from continuing operations																										7,028			10,727
Net income/(loss) from discontinued operations																										10,766			(447	)
Net income																										17,794			10,280
Attributable to:
Shareholders of Novartis AG																										17,783			10,210
Non-controlling interests																										11			70
Included in net income from continuing operations are:
Interest income																										33			33
Depreciation of property, plant & equipment		(796	)		(856	)		(280	)		(307	)		(277	)		(317	)		(117	)		(106	)		(1,470	)		(1,586	)
Amortization of intangible assets		(1,305	)		(287	)		(2,079	)		(2,080	)		(362	)		(403	)		(9	)		(5	)		(3,755	)		(2,775	)
Impairment charges on property, plant & equipment, net		39			(15	)		(1	)		1			(97	)		(7	)		(21	)		(23	)		(80	)		(44	)
Impairment charges on intangible assets, net		(19	)		(231	)		(120	)		(7	)		(27	)		(39	)								(166	)		(277	)
Impairment charges and fair value gains on financial assets, net		(32	)		(20	)											(1	)		(72	)		(48	)		(104	)		(69	)
Additions to restructuring provisions		(206	)		(433	)		(51	)		(64	)		(93	)		(4	)		(49	)		(3	)		(399	)		(504	)
Equity-based compensation of Novartis and Alcon equity plans		(600	)		(685	)		(86	)		(92	)		(53	)		(51	)		(164	)		(179	)		(903	)		(1,007	)

F-27

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Segmentation of Key Figures 2015, 2014 and 2013 (Continued)

SEGMENTATION—CONSOLIDATED INCOME STATEMENTS 2014 and 2013

	Pharmaceuticals						Alcon						Sandoz						Corporate (including eliminations)						Group
(In $ m)	2014			2013			2014			2013			2014			2013			2014			2013			2014			2013
Net sales to third parties from continuing operations		31,791			32,214			10,827			10,496			9,562			9,159									52,180			51,869
Sales to other segments		262			202			49			50			286			294			(358	)		(325	)		239			221
Net sales from continuing operations		32,053			32,416			10,876			10,546			9,848			9,453			(358	)		(325	)		52,419			52,090
Other revenues		629			497			34			27			12			18			540			84			1,215			626
Cost of goods sold		(6,889	)		(6,655	)		(5,193	)		(4,900	)		(5,751	)		(5,476	)		488			452			(17,345	)		(16,579	)
Gross profit from continuing operations		25,793			26,258			5,717			5,673			4,109			3,995			670			211			36,289			36,137
Marketing & Sales		(8,178	)		(8,514	)		(2,474	)		(2,452	)		(1,725	)		(1,672	)								(12,377	)		(12,638	)
Research & Development		(7,331	)		(7,242	)		(928	)		(1,042	)		(827	)		(787	)								(9,086	)		(9,071	)
General & Administration		(1,009	)		(1,051	)		(613	)		(589	)		(376	)		(374	)		(618	)		(589	)		(2,616	)		(2,603	)
Other income		734			699			79			79			97			106			481			321			1,391			1,205
Other expense		(1,538	)		(774	)		(184	)		(437	)		(190	)		(240	)		(600	)		(596	)		(2,512	)		(2,047	)
Operating income from continuing operations		8,471			9,376			1,597			1,232			1,088			1,028			(67	)		(653	)		11,089			10,983
Income from associated companies		812												4			2			1,102			597			1,918			599
Interest expense																										(704	)		(683	)
Other financial income and expense																										(31	)		(92	)
Income before taxes from continuing operations																										12,272			10,807
Taxes																										(1,545	)		(1,498	)
Net income from continuing operations																										10,727			9,309
Net loss from discontinued operations																										(447	)		(17	)
Net income																										10,280			9,292
Attributable to:
Shareholders of Novartis AG																										10,210			9,175
Non-controlling interests																										70			117
Included in net income are:
Interest income																										33			34
Depreciation of property, plant & equipment		(856	)		(822	)		(307	)		(319	)		(317	)		(307	)		(106	)		(106	)		(1,586	)		(1,554	)
Amortization of intangible assets		(287	)		(284	)		(2,080	)		(1,999	)		(403	)		(411	)		(5	)		(4	)		(2,775	)		(2,698	)
Impairment charges on property, plant & equipment, net		(15	)		(29	)		1			(4	)		(7	)		3			(23	)		(17	)		(44	)		(47	)
Impairment charges on intangible assets, net		(231	)		(29	)		(7	)		(57	)		(39	)		(20	)								(277	)		(106	)
Impairment charges/fair value gains on financial assets		(20	)		(16	)								(1	)					(48	)		(41	)		(69	)		(57	)
Additions to restructuring provisions		(433	)		(88	)		(64	)		(71	)		(4	)		(3	)		(3	)		(1	)		(504	)		(163	)
Equity-based compensation of Novartis and Alcon equity plans		(685	)		(610	)		(92	)		(105	)		(51	)		(38	)		(179	)		(139	)		(1,007	)		(892	)

F-28

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Segmentation of Key Figures 2015, 2014 and 2013 (Continued)

SEGMENTATION—CONSOLIDATED BALANCE SHEETS

	Pharmaceuticals						Alcon						Sandoz						Corporate (including eliminations)						Group
($ m)	2015			2014			2015			2014			2015			2014			2015			2014			2015			2014
Assets related to continuing operations		41,552			25,657			40,330			42,494			17,688			18,771			31,986			31,664			131,556			118,586
Assets related to discontinued operations																													6,801
Total assets		41,552			25,657			40,330			42,494			17,688			18,771			31,986			31,664			131,556			125,387
Liabilities related to continuing operations		(10,798	)		(10,532	)		(2,403	)		(2,709	)		(3,545	)		(3,449	)		(37,688	)		(35,435	)		(54,434	)		(52,125	)
Liabilities related to discontinued operations																													(2,418	)
Total liabilities		(10,798	)		(10,532	)		(2,403	)		(2,709	)		(3,545	)		(3,449	)		(37,688	)		(35,435	)		(54,434	)		(54,543	)
Total equity																										77,122			70,844
Net debt																										16,484			6,549
Net operating assets		30,754			15,125			37,927			39,785			14,143			15,322									93,606			77,393
Included in assets and liabilities related to continuing operations(1) are:
Total property, plant & equipment		9,985			9,732			2,504			2,413			2,788			3,123			705			715			15,982			15,983
Additions to property, plant & equipment(2)		1,309			1,676			565			517			421			531			224			180			2,519			2,904
Total goodwill and intangible assets		21,345			6,096			33,604			35,642			10,410			11,378			32			27			65,391			53,143
Additions to goodwill and intangible assets(2)		994			493			110			192			44			110			11			4			1,159			799
Total investment in associated companies		8			11									15			16			15,291			8,405			15,314			8,432
Additions to investment in associated companies(2)		5			9															57			44			62			53
Cash and cash equivalents, marketable securities, commodities, time deposits and derivative financial instruments																				5,447			13,862			5,447			13,862
Financial debts and derivative financial instruments																				21,931			20,411			21,931			20,411
Current income tax and deferred tax liabilities																				8,072			8,175			8,072			8,175

⁽¹⁾

Items reflect the allocation to continuing operations as described on page F-26.

⁽²⁾

Excluding impact of business combinations.

F-29

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Segmentation of Key Figures 2015, 2014 and 2013 (Continued)

        The following table shows countries that accounted for more than 5% of at least one of the respective Group totals and regional information for the years ended December 31, 2015, 2014 and 2013:

	Net sales(1)												Total of selected non-current assets(2)
$ m	2015		%		2014		%		2013		%		2015		%		2014		%
Country
Switzerland		774		2		658		1		625		1		47,054		49		34,399		44
United States		18,079		37		17,337		33		17,257		33		28,677		30		28,329		37
United Kingdom		1,277		3		1,379		3		1,267		2		7,769		8		612		1
Germany		3,262		7		3,742		7		3,628		7		2,908		3		3,365		4
France		2,269		5		2,638		5		2,779		5		188				228
Japan		3,163		6		3,781		7		4,412		9		142				141
Other		20,590		40		22,645		44		21,901		43		9,949		10		10,484		14
Group		49,414		100		52,180		100		51,869		100		96,687		100		77,558		100
Region
Europe		16,472		33		18,690		36		18,421		36		63,681		66		45,040		58
Americas		22,414		45		22,218		43		21,984		42		30,375		31		30,074		39
Asia/Africa/Australasia		10,528		22		11,272		21		11,464		22		2,631		3		2,444		3
Group		49,414		100		52,180		100		51,869		100		96,687		100		77,558		100

⁽¹⁾

Net sales from operations by location of third party customer.

⁽²⁾

Total of property, plant and equipment; goodwill; intangible assets; and investment in associated companies

        The Group's largest, second and third largest customer accounts for approximately 14%, 11% and 5% of net sales, respectively (2014: 12%, 11% and 5%; 2013: 15%, 10% and 7% respectively). No other customer accounted for 5% or more of net sales, in either year.

        The highest amounts of trade receivables outstanding were for these same three customers. They amounted to 13%, 9% and 6%, respectively, of the trade receivables at December 31, 2015 (2014: 13%, 9% and 5%).

F-30

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Segmentation of Key Figures 2015, 2014 and 2013 (Continued)

PHARMACEUTICALS BUSINESS FRANCHISE NET SALES

	2015		2014		Change (2014 to 2015)			2013		Change (2013 to 2014)
	$ m		$ m		$ %			$ m		$ %
Oncology
Gleevec/Glivec		4,658		4,746		(2	)		4,693		1
Tasigna		1,632		1,529		7			1,266		21
Subtotal Bcr-Abl franchise		6,290		6,275		0			5,959		5
Sandostatin		1,630		1,650		(1	)		1,589		4
Afinitor/Votubia		1,607		1,575		2			1,309		20
Exjade		917		926		(1	)		893		4
Votrient		565		0		nm			0		nm
Tafinlar/Mekinist		453		0		nm			0		nm
Jakavi		410		279		47			163		71
Revolade/Promacta		402		0		nm			0		nm
Femara		304		380		(20	)		384		(1	)
Zykadia		79		31		155			0		nm
Other		819		587		40			919		(36	)
Total Oncology		13,476		11,703		15			11,216		4
Neuroscience
Gilenya		2,776		2,477		12			1,934		28
Exelon/Exelon Patch		728		1,009		(28	)		1,032		(2	)
Comtan/Stalevo		294		371		(21	)		401		(7	)
Other		141		243		(42	)		237		3
Total Neuroscience		3,939		4,100		(4	)		3,604		14
Retina
Lucentis		2,060		2,441		(16	)		2,383		2
Other		50		63		(21	)		61		3
Total Retina		2,110		2,504		(16	)		2,444		2
Immunology and Dermatology
Neoral/Sandimmun(e)		570		684		(17	)		750		(9	)
Myfortic		441		543		(19	)		637		(15	)
Zortress/Certican		335		327		2			249		31
Cosentyx		261		0		nm			0		nm
Ilaris		236		199		19			119		67
Other		160		173		(8	)		169		2
Subtotal Immunology and Dermatology excluding Everolimus stent drug		2,003		1,926		4			1,924		0
Everolimus stent drug		134		205		(35	)		247		(17	)
Total Immunology and Dermatology		2,137		2,131		0			2,171		(2	)

nm = not meaningful

F-31

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Segmentation of Key Figures 2015, 2014 and 2013 (Continued)

PHARMACEUTICALS BUSINESS FRANCHISE NET SALES (Continued)

	2015		2014		Change (2014 to 2015)			2013		Change (2013 to 2014)
	$ m		$ m		$ %			$ m		$ %
Respiratory
Ultibro Breezhaler		260		118		120			6		nm
Onbrez Breezhaler/Arcapta Neohaler		166		220		(25	)		192		15
Seebri Breezhaler		150		146		3			58		152
Subtotal COPD(1) portfolio		576		484		19			256		89
Xolair(2)		755		777		(3	)		613		27
Other		263		320		(18	)		428		(25	)
Total Respiratory		1,594		1,581		1			1,297		22
Cardio-Metabolic
Galvus		1,140		1,224		(7	)		1,200		2
Entresto		21		0		nm			0		nm
Other		0		8		nm			0		nm
Total Cardio-Metabolic		1,161		1,232		(6	)		1,200		3
Established medicines
Diovan		1,284		2,345		(45	)		3,524		(33	)
Exforge		1,047		1,396		(25	)		1,456		(4	)
Voltaren		558		632		(12	)		675		(6	)
Ritalin/Focalin		365		492		(26	)		594		(17	)
Other		2,774		3,675		(25	)		4,033		(9	)
Total Established Medicines		6,028		8,540		(29	)		10,282		(17	)
Total Division net sales		30,445		31,791		(4	)		32,214		(1	)

⁽¹⁾

Chronic Obstructive Pulmonary Disease

⁽²⁾

Net sales reflect Xolair sales for all indications (e.g. including Xolair SAA and Xolair CSU, which are managed by the Immunology & Dermatology franchise).

nm = not meaningful

        The product portfolio of other segments is widely spread in 2015, 2014 and 2013.

F-32

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     Associated Companies

        Novartis has significant investments in Roche Holding AG, Basel (Roche) and in GlaxoSmithKline Consumer Healthcare Holdings Ltd, Brentford, Middlesex, UK as well as certain other smaller investments which are accounted for as associated companies:

	Balance sheet value
	2015		2014
	$ m		$ m
Roche Holding AG, Switzerland		7,919		8,159
GlaxoSmithKline Consumer Healthcare Holdings Ltd., UK		7,194
Others		201		273
Total		15,314		8,432

	Net income statement effect								Other comprehensive income effect									Total comprehensive income effect
	2015			2014		2013			2015			2014			2013			2015			2014		2013
	$ m			$ m		$ m			$ m			$ m			$ m			$ m			$ m		$ m
Roche Holding AG, Switzerland		343			599		604			(149	)		(51	)		(37	)		194			548		567
GlaxoSmithKline Consumer Healthcare Holdings Ltd., UK		(79	)							(4	)								(83	)
Idenix Pharmaceuticals Inc., US					812																	812
LTS Lohmann Therapie-Systeme AG, Germany					436		31									(6	)					436		25
Others		2			71		(36	)					20			11			2			91		(25	)
Associated companies related to continuing operations		266			1,918		599			(153	)		(31	)		(32	)		113			1,887		567

Roche Holding AG

        The Group's holding in Roche voting shares was 33.3% at December 31, 2015, 2014 and 2013. This investment represents approximately 6.3% of Roche's total outstanding voting and non-voting equity instruments at December 31, 2015, 2014 and 2013.

        Since full-year 2015 financial data for Roche are not available when Novartis produces its consolidated financial results, a survey of analyst estimates is used to estimate the Group's share of Roche's net income. Any differences between these estimates and actual results will be adjusted in the Group's 2016 consolidated financial statements when available.

F-33

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     Associated Companies (Continued)

        The following tables show summarized financial information of Roche, including current values of fair value adjustments made at the time of the acquisition of the shares, for the year ended December 31, 2014 and for the six months ended June 30, 2015 since full year 2015 data is not yet available:

	Current assets		Non-current assets		Current liabilities		Non-current liabilities
	CHF billions		CHF billions		CHF billions		CHF billions
December 31, 2014		31.1		63.5		23.1		31.0
June 30, 2015		25.2		61.3		21.7		28.0

	Revenue		Net income		Other comprehensive income			Total comprehensive income
	CHF billions		CHF billions		CHF billions			CHF billions
December 31, 2014		47.5		7.3		(2.3	)		5.0
June 30, 2015		23.6		4.1		(1.1	)		3.0

        A purchase price allocation was performed on the basis of publicly available information at the time of acquisition of the investment. The December 31, 2015 balance sheet value allocation is as follows:

	$ m
Novartis share of Roche's estimated net assets		2,314
Novartis share of re-appraised intangible assets		1,039
Implicit Novartis goodwill		2,879
Current value of share in net identifiable assets and goodwill		6,232
Accumulated equity accounting adjustments and translation effects less dividends received		1,687
December 31, 2015 balance sheet value		7,919

        The identified intangible assets principally relate to the value of currently marketed products and are amortized on a straight-line basis over their estimated average useful life of 20 years.

        In 2015, dividends received from Roche in relation to the distribution of its 2014 net income amounted to $429 million (2014: $473 million in relation with the distribution of its 2013 net income).

F-34

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     Associated Companies (Continued)

        The consolidated income statement effects from applying Novartis accounting principles for this investment in 2015, 2014 and 2013 are as follows:

	2015			2014			2013
	$ m			$ m			$ m
Novartis share of Roche's estimated current-year consolidated net income		650			813			817
Prior-year adjustment		(157	)		(56	)		(59	)
Amortization of fair value adjustments relating to intangible assets, net of taxes of $41 million (2014: $45 million, 2013: $45 million)		(150	)		(158	)		(154	)
Net income effect		343			599			604

        The publicly quoted market value of the Novartis interest in Roche (Reuters symbol: RO.S) at December 31, 2015, was $14.9 billion (2014: $14.4 billion).

GlaxoSmithKline Consumer Healthcare Holdings Ltd

        On March 2, 2015, Novartis closed its transactions with GlaxoSmithKline plc, Great Britain (GSK) announced in April 2014. As part of these transactions, Novartis and GSK have agreed to create a combined consumer healthcare business through a joint venture between Novartis OTC and GSK Consumer Healthcare. On March 2, 2015, a new entity GlaxoSmithKline Consumer Healthcare Holdings Ltd (GSK Consumer Healthcare) was formed via contribution of businesses from both Novartis and GSK.

        At December 31, 2015, Novartis has a 36.5% interest in GSK Consumer Healthcare and four of eleven seats on the joint venture entity's Board of Directors. Furthermore, Novartis has customary minority rights and also exit rights at a pre-defined, market based pricing mechanism.

        Novartis has valued the contribution of 63.5% of its OTC Division in exchange for 36.5% of the GSK Consumer Healthcare business at fair value. Based on the estimates of values exchanged, an investment in associated company of $7.6 billion was recorded on March 2, 2015.

        The December 31, 2015 balance sheet value allocation is as follows:

	$ m
Novartis share of GSK Consumer Healthcare's estimated net assets		957
Novartis share of re-appraised intangible assets		4,273
Implicit Novartis goodwill		1,941
Current value of share in net identifiable assets and goodwill		7,171
Accumulated equity accounting adjustments and translation effects		23
December 31, 2015 balance sheet value		7,194

        The identified intangible assets principally relate to the value of the indefinite life GSK Consumer Healthcare intangible assets. The identified intangible assets with a definite life are amortized on a straight-line basis over their estimated average useful life of 20 years.

F-35

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     Associated Companies (Continued)

        The following tables show interim unaudited financial information of GSK Consumer Healthcare, including current values of fair value adjustments made at the time of acquisition, for the seven months ended September 30, 2015 since full year 2015 data is not yet available:

	Current assets		Non-current assets		Current liabilities		Non-current liabilities
	GBP billions		GBP billions		GBP billions		GBP billions
September 30, 2015		3.3		21.3		1.8		2.1

	Revenue		Net income		Other comprehensive income			Total comprehensive income
	GBP millions		GBP millions		GBP millions			GBP millions
September 30, 2015		3,241		4		(44	)		(40	)

        Since full-year 2015 financial data for GSK Consumer Healthcare are not available when Novartis produces its consolidated financial results, a projection of the latest internal management reporting is used to estimate the Group's share of GSK Consumer Healthcare's net result for the year. Any differences between this estimate and actual results will be adjusted in the Group's 2016 consolidated financial statements when available.

        The consolidated income statement effects from applying Novartis accounting principles for this investment in 2015 are as follows:

	2015
	$ m
Novartis share of GSK Consumer Healthcare's estimated current-year consolidated net income		(17	)
Amortization of fair value adjustments relating to intangible assets and inventory, net of taxes of $18 million		(62	)
Net income effect		(79	)

Other Associated Companies

        During 2014, the shareholdings of 22% in Idenix Pharmaceuticals Inc. and 43% in LTS Lohmann Therapie-Systeme AG were sold realizing pre-tax gains of $812 million and $421 million, respectively. Others include a gain of $64 million recorded on investments in associated companies held by the Novartis Venture Funds, which are accounted at fair value from January 1, 2014 onwards, consistent with other investments held by these Funds.

F-36

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.    Interest Expense and Other Financial Income and Expense

Interest Expense

	2015			2014			2013
	$ m			$ m			$ m
Interest expense		(669	)		(701	)		(664	)
Income/(expense) due to discounting long-term liabilities		14			(3	)		(19	)
Total interest expense		(655	)		(704	)		(683	)

Other Financial Income and Expense

	2015			2014			2013
	$ m			$ m			$ m
Interest income		33			33			34
Dividend income		1			1			1
Net capital (losses)/gains on available-for-sale securities		(8	)		(2	)		28
Net capital losses on cash and cash equivalents								(1	)
Income on forward contracts and options		1			1			2
Impairment of commodities and available-for-sale securities		(132	)					(14	)
Other financial expense		(23	)		(25	)		(20	)
Monetary loss from hyperinflation accounting		(72	)		(61	)		(32	)
Currency result, net		(254	)		22			(90	)
Total other financial income and expense		(454	)		(31	)		(92	)

6.    Taxes

Income Before Taxes

	2015		2014			2013
	$ m		$ m			$ m
Switzerland		5,765		5,245			5,435
Foreign		2,369		7,027			5,372
Income before taxes from continuing operations		8,134		12,272			10,807
Income/(loss) before taxes from discontinued operations		12,479		(351	)		(72	)
Total income before taxes		20,613		11,921			10,735

F-37

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.    Taxes (Continued)

Current and Deferred Income Tax Expense

	2015			2014			2013
	$ m			$ m			$ m
Switzerland		(317	)		(661	)		(524	)
Foreign		(1,333	)		(1,952	)		(1,793	)
Current income tax expense from continuing operations		(1,650	)		(2,613	)		(2,317	)
Switzerland		(68	)		309			160
Foreign		612			759			659
Deferred tax income from continuing operations		544			1,068			819
Income tax expense from continuing operations		(1,106	)		(1,545	)		(1,498	)
Income tax (expense)/income from discontinued operations		(1,713	)		(96	)		55
Total income tax expense		(2,819	)		(1,641	)		(1,443	)

Analysis of Tax Rate

        The main elements contributing to the difference between the Group's overall expected tax rate (which can change each year since it is calculated as the weighted average tax rate based on pre-tax income of each subsidiary) and the effective tax rate are:

	2015			2014			2013
	%			%			%
Expected tax rate		12.4			11.7			12.9
Effect of disallowed expenditures		3.5			2.9			3.4
Effect of utilization of tax losses brought forward from prior periods		(0.2	)		(0.3	)		(0.1	)
Effect of income taxed at reduced rates		(0.3	)		(0.6	)		(0.1	)
Effect of tax credits and allowances		(2.7	)		(1.8	)		(2.0	)
Effect of write-off of deferred tax assets								0.1
Effect of tax rate change on opening balance		(0.5	)					(0.2	)
Effect of tax benefits expiring in 2017		(0.4	)		(0.8	)		(0.7	)
Effect of non-deductible losses in Venezuela		1.2
Effect of write down and reversal of write-down of investments in subsidiaries		(0.9	)		0.9
Prior year and other items		1.5			0.6			0.6
Effective tax rate for continuing operations		13.6			12.6			13.9
Effective tax rate for discontinued operations		13.7			(27.4	)		76.4
Effective tax rate		13.7			13.8			13.4

        The utilization of tax-loss carry-forwards lowered the tax charge by $15 million in 2015 and by $34 million and $13 million in 2014 and 2013 respectively.

F-38

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    Earnings per Share

        Basic earnings per share (EPS) is calculated by dividing net income attributable to shareholders of Novartis AG by the weighted average number of shares outstanding in a reporting period. This calculation excludes the average number of issued shares purchased by the Group and held as treasury shares.

	2015		2014			2013
Basic earnings per share
Weighted average number of shares outstanding (in millions)		2,403		2,426			2,441
Net income/(loss) attributable to shareholders of Novartis AG ($ m)
— Continuing operations		7,025		10,654			9,189
— Discontinued operations		10,758		(444	)		(14	)
— Total		17,783		10,210			9,175
Basic earnings per share ($)
— Continuing operations		2.92		4.39			3.76
— Discontinued operations		4.48		(0.18	)		0.00
— Total		7.40		4.21			3.76

        For diluted EPS, the weighted average number of shares outstanding is adjusted to assume the vesting of all restricted shares and the conversion of all potentially dilutive shares arising from options on Novartis shares that have been issued.

	2015		2014			2013
Diluted earnings per share
Weighted average number of shares outstanding (in millions)		2,403		2,426			2,441
Adjustment for vesting of restricted shares and dilutive shares from options (in millions)		35		44			38
Weighted average number of shares for diluted earnings per share (in millions)		2,438		2,470			2,479
Net income/(loss) attributable to shareholders of Novartis AG ($ m)
— Continuing operations		7,025		10,654			9,189
— Discontinued operations		10,758		(444	)		(14	)
— Total		17,783		10,210			9,175
Diluted earnings per share ($)
— Continuing operations		2.88		4.31			3.70
— Discontinued operations		4.41		(0.18	)		0.00
— Total		7.29		4.13			3.70

        No options were excluded from the calculation of diluted EPS in 2013, 2014 or 2015, as all options were dilutive in both years.

F-39

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    Changes in Consolidated Statements of Comprehensive Income

        The consolidated statements of comprehensive income include the Group's net income for the year as well as all other valuation adjustments recorded in the Group's consolidated balance sheet but which under IFRS are not recorded in the consolidated income statement. These include fair value adjustments to financial instruments, actuarial gains or losses on defined benefit pension and other post-employment plans and currency translation effects, net of tax.

        The following table summarizes these value adjustments and currency translation effects attributable to Novartis shareholders:

	Fair value adjustments on marketable securities		Fair value adjustments on deferred cash flow hedges			Actuarial losses from defined benefit plans			Cumulative currency translation effects			Total value adjustments
	$ m		$ m			$ m			$ m			$ m
Fair value adjustments at January 1, 2013		212		(100	)		(6,048	)		3,944			(1,992	)
Fair value adjustments on financial instruments		132		41									173
Net actuarial gains from defined benefit plans(1)							1,504						1,504
Currency translation effects(2)										681			681
Total fair value adjustments in 2013		132		41			1,504			681			2,358
Fair value adjustments at December 31, 2013		344		(59	)		(4,544	)		4,625			366
Fair value adjustments on financial instruments		89		21									110
Net actuarial losses from defined benefit plans(1)							(822	)					(822	)
Currency translation effects(2)										(2,219	)		(2,219	)
Total fair value adjustments in 2014		89		21			(822	)		(2,219	)		(2,931	)
Fair value adjustments at December 31, 2014		433		(38	)		(5,366	)		2,406			(2,565	)
Fair value adjustments on financial instruments		28		20									48
Net actuarial losses from defined benefit plans(1)							(147	)					(147	)
Currency translation effects(2)										(1,659	)		(1,659	)
Total value adjustments in 2015		28		20			(147	)		(1,659	)		(1,758	)
Fair value adjustments related to divestments							100						100
Value adjustments at December 31, 2015		461		(18	)		(5,413	)		747			(4,223	)

⁽¹⁾

Net actuarial gains of $10 million are attributable to discontinued operations up to the respective divestment dates (2014: net actuarial losses of $65 million, 2013: net actuarial gains of $39 million).

⁽²⁾

$29 million currency translation losses are attributable to discontinued operations up to the respective divestment dates (2014: losses of $37 million, 2013: gains of $1 million).

F-40

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    Changes in Consolidated Statements of Comprehensive Income (Continued)

8.1) The 2015, 2014 and 2013 changes in the fair value of financial instruments were as follows:

	Fair value adjustments on marketable securities			Fair value adjustments on deferred cash flow hedges			Total
	$ m			$ m			$ m
Fair value adjustments at January 1, 2015		433			(38	)		395
Changes in fair value:
— Available-for-sale marketable securities		(130	)					(130	)
— Available-for-sale financial investments		80						80
— Associated companies' movements in comprehensive income		(8	)					(8	)
Realized net gains transferred to the consolidated income statement:
— Marketable securities sold		(1	)					(1	)
— Other financial assets sold		(103	)					(103	)
Amortized net losses on cash flow hedges transferred to the consolidated income statement					21			21
Impaired financial assets transferred to the consolidated income statement		194						194
Deferred tax on above items		(4	)		(1	)		(5	)
Fair value adjustments during the year		28			20			48
Fair value adjustments at December 31, 2015		461			(18	)		443

F-41

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    Changes in Consolidated Statements of Comprehensive Income (Continued)

	Fair value adjustments on marketable securities			Fair value adjustments on deferred cash flow hedges			Total
	$ m			$ m			$ m
Fair value adjustments at January 1, 2014		344			(59	)		285
Changes in fair value:
— Available-for-sale marketable securities		(3	)					(3	)
— Available-for-sale financial investments		91						91
— Associated companies' movements in comprehensive income		5						5
Realized net gains transferred to the consolidated income statement:
— Marketable securities sold		(4	)					(4	)
— Other financial assets sold		(81	)					(81	)
Amortized net losses on cash flow hedges transferred to the consolidated income statement					23			23
Impaired financial assets transferred to the consolidated income statement		87						87
Deferred tax on above items		(6	)		(2	)		(8	)
Fair value adjustments during the year		89			21			110
Fair value adjustments at December 31, 2014		433			(38	)		395

F-42

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    Changes in Consolidated Statements of Comprehensive Income (Continued)

	Fair value adjustments on marketable securities			Fair value adjustments on deferred cash flow hedges			Total
	$ m			$ m			$ m
Fair value adjustments at January 1, 2013		212			(100	)		112
Changes in fair value:
— Available-for-sale marketable securities		3						3
— Available-for-sale financial investments		204						204
— Associated companies' movements in comprehensive income		7						7
Realized net gains transferred to the consolidated income statement:
— Marketable securities sold		(46	)					(46	)
— Other financial assets sold		(74	)					(74	)
Amortized net losses on cash flow hedges transferred to the consolidated income statement					44			44
Impaired financial assets transferred to the consolidated income statement		65						65
Deferred tax on above items		(27	)		(3	)		(30	)
Fair value adjustments during the year		132			41			173
Fair value adjustments at December 31, 2013		344			(59	)		285

8.2)    The Group has investments in associated companies, principally Roche Holding AG and GlaxoSmithKline Consumer Healthcare Holdings Ltd. The Group's share in movements in these companies' other comprehensive income are recognized directly in the respective categories of the Novartis consolidated statement of comprehensive income, net of tax. The currency translation effects and fair value adjustments of associated companies are included in the corresponding Group amounts. All other movements in these companies' statements of comprehensive income are recognized directly in the consolidated statement of comprehensive income under "Novartis share of other items recorded in comprehensive income recognized by associated companies, net of taxes". These amounted to a loss of $48 million (2014: loss of $5 million, 2013: income of $5 million).

8.3)    In 2015, cumulative currency translation losses of $10 million have been recycled through the income statement as a result of the divestments of subsidiaries (2014: nil, 2013: gain of $1 million as a result of the liquidation of a subsidiary).

        Currency translation losses of associated companies of $97 million were recognized in 2015 (2014: loss of $31 million, 2013: loss of $43 million).

F-43

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    Changes in Consolidated Statements of Comprehensive Income (Continued)

8.4)    Remeasurements from defined benefit plans arise as follows:

	2015			2014			2013
	$ m			$ m			$ m
Defined benefit pension plans before tax		(252	)		(999	)		1,977
Other post-employment benefit plans before tax		168			(235	)		163
Taxation on above items		(63	)		412			(636	)
Total after tax		(147	)		(822	)		1,504

8.5)    The following table shows contributions of associated companies to other comprehensive income:

	Note		2015			2014			2013
			$ m			$ m			$ m
Fair value adjustments attributable to associated companies				(8	)		5			6
Novartis share of other items recorded in comprehensive income recognized by associated companies, net of taxes.		8.2		(48	)		(5	)		5
Currency translation adjustments				(97	)		(31	)		(43	)
Other comprehensive income attributable to associated companies		4		(153	)		(31	)		(32	)

9.    Changes in Consolidated Equity

9.1)    A dividend of CHF 2.60 per share was approved at the 2015 Annual General meeting for the year ended December 31, 2014, resulting in a total dividend payment of $6.6 billion in 2015. (2014: the CHF 2.45 per share dividend amounted to $6.8 billion, 2013: the CHF 2.30 per share dividend payment amounted to $6.1 billion). The amount available for distribution as a dividend to shareholders is based on the available distributable retained earnings of Novartis AG determined in accordance with the legal provisions of the Swiss Code of Obligations.

9.2)    During 2015, 63.6 million shares were purchased for $6.1 billion (2014: 79.2 million shares for $6.9 billion, 2013: 40.3 million shares for $3.0 billion). These share purchases comprise of 9.6 million shares which were repurchased for $897 million on the SIX Swiss Exchange first trading line (2014: 46.8 million shares for $4.1 billion, 2013: 33.3 million shares for $2.5 billion), 4.1 million shares were acquired for $417 million from employees which were previously granted to them under the respective programs (2014: 5.4 million shares for $473 million, 2013: 4.8 million shares for $356 million), and in addition, Novartis repurchased 49.9 million shares for $4.8 billion on the SIX Swiss Exchange second trading line under the $5 billion share buy-back announced in November 2013, which was completed in November 2015, and also to offset the dilutive impact from equity-based participation plans (2014: 27.0 million shares for $2.4 billion, 2013: 2.2 million shares for $170 million).

9.3)    In 2015, Novartis reduced its share capital by cancelling a total of 29.2 million shares which were repurchased during 2013 and 2014 on the SIX Swiss Exchange second trading line. In 2014 and 2013, no shares were cancelled.

F-44

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.    Changes in Consolidated Equity (Continued)

9.4)    In 2014, Novartis has entered into an irrevocable, non-discretionary arrangement with a bank to repurchase Novartis own shares on the second trading line under its $5 billion share buy-back as well as to mitigate dilution from equity-based participation plans. The commitment under this arrangement amounted to $658 million as of December 31, 2014 (2013: nil), reflecting the expected purchases by the bank under such trading plan over a rolling 90 days period. This trading plan was fully executed and has expired. As a result, there is no contingent liability related to this plan as of December 2015.

9.5)    27.0 million shares were delivered as a result of options being exercised related to equity-based participation plans and delivery of treasury shares, which contributed $1.6 billion (2014: 41.4 million shares for $2.4 billion, 2013: 34.3 million shares for $1.7 billion). The average share price of the shares delivered was significantly below market price reflecting the strike price of the options exercised.

9.6)    Equity-settled share-based compensation is expensed in the consolidated income statement in accordance with the vesting period of the share-based compensation plans. The value for the shares and options granted is credited to consolidated equity over the respective vesting period. In 2015, 11.9 million shares were transferred to associates as part of equity-settled compensation (2014: 10.3 million shares, 2013: 11.5 million shares). In addition, tax benefits arising from tax deductible amounts exceeding the expense recognized in the income statement are credited to equity.

9.7)    Changes in non-controlling interests in subsidiaries resulted in a reduction in consolidated equity of $10 million (2014: reduction of $120 million, 2013: reduction of $109 million).

9.8)    In 2013 additional interests in subsidiaries were acquired. The reduction in equity of $10 million represents the excess of the amount paid over the amount recognized for the acquired non-controlling interest. In 2015 and 2014 no such transaction took place.

F-45

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.   Property, Plant & Equipment Movements

2015	Land			Buildings			Construction in progress			Machinery & other equipment			Total
	$ m			$ m			$ m			$ m			$ m
Cost
January 1		744			11,312			3,985			15,387			31,428
Reclassifications(1)		12			1,833			(2,601	)		756
Additions		4			408			1,665			442			2,519
Disposals and derecognitions(2)		(41	)		(332	)		(59	)		(704	)		(1,136	)
Currency translation effects		(31	)		(364	)		(180	)		(788	)		(1,363	)
December 31		688			12,857			2,810			15,093			31,448
Accumulated depreciation
January 1		(30	)		(5,093	)		(37	)		(10,285	)		(15,445	)
Depreciation charge		(3	)		(462	)					(1,005	)		(1,470	)
Accumulated depreciation on disposals and derecognitions(2)		2			246			32			594			874
Impairment charge		(12	)		(37	)		(4	)		(82	)		(135	)
Reversal of impairment charge					9						46			55
Currency translation effects		3			149			2			501			655
December 31		(40	)		(5,188	)		(7	)		(10,231	)		(15,466	)
Net book value at December 31		648			7,669			2,803			4,862			15,982
Net book value of property, plant & equipment under finance lease contracts														85
Commitments for purchases of property, plant & equipment														359

⁽¹⁾

Reclassifications between various asset categories due to completion of plant and other equipment under construction.

⁽²⁾

Derecognition of assets that are no longer used and are not considered to have a significant disposal value or other alternative use.

        Borrowing costs on new additions to property, plant and equipment eligible for capitalization have been capitalized and amounted to $21 million in 2015 (2014: $20 million). The capitalization rate used to determine the amount of borrowing costs eligible for capitalization is 25% (2014: 25%) and the interest rate used is 4% (2014: 4%).

F-46

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.   Property, Plant & Equipment Movements (Continued)

2014	Land			Buildings			Construction in progress			Machinery & other equipment			Total
	$ m			$ m			$ m			$ m			$ m
Cost
January 1		920			12,933			3,635			17,813			35,301
Cost of assets related to discontinued operations		(115	)		(1,175	)		(445	)		(1,597	)		(3,332	)
Reclassifications(1)					455			(1,291	)		836
Additions(2)		5			113			2,397			389			2,904
Disposals and derecognitions(3)		(8	)		(127	)		(15	)		(544	)		(694	)
Currency translation effects		(58	)		(887	)		(296	)		(1,510	)		(2,751	)
December 31		744			11,312			3,985			15,387			31,428
Accumulated depreciation
January 1		(29	)		(5,560	)		(29	)		(11,486	)		(17,104	)
Accumulated depreciation on assets related to discontinued operations		1			377			4			827			1,209
Depreciation charge(4)		(3	)		(450	)					(1,133	)		(1,586	)
Accumulated depreciation on disposals and derecognitions(3)		1			91						464			556
Impairment charge		(1	)		(10	)		(37	)		(18	)		(66	)
Reversal of impairment charge								21			1			22
Currency translation effects		1			459			4			1,060			1,524
December 31		(30	)		(5,093	)		(37	)		(10,285	)		(15,445	)
Net book value at December 31		714			6,219			3,948			5,102			15,983
Net book value of property, plant & equipment under finance lease contracts														1
Commitments for purchases of property, plant & equipment														826

⁽¹⁾

Reclassifications between various asset categories due to completion of plant and other equipment under construction.

⁽²⁾

Additions in discontinued operations, for the period from January 1, 2014 to the portfolio transformation announcement on April 22, 2014, were $50 million.

⁽³⁾

Derecognition of assets that are no longer used and are not considered to have a significant disposal value or other alternative use.

⁽⁴⁾

Depreciation charge in discontinued operations, for the period from January 1, 2014 to the portfolio transformation announcement on April 22, 2014, was $66 million.

F-47

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.   Goodwill and Intangible Assets Movements

2015	Goodwill			Acquired research & development			Alcon brand name		Technologies			Currently marketed products			Marketing know-how			Other intangible assets			Total of intangible assets other than goodwill
	$ m			$ m			$ m		$ m			$ m			$ m			$ m			$ m
Cost
January 1		29,737			2,843			2,980		6,658			20,916			5,960			1,251			40,608
Impact of business combinations		2,438			730								12,970						15			13,715
Reclassifications(1)					(36	)							5						31
Additions					881								217						61			1,159
Disposals and derecognitions(2)					(294	)							(26	)					(4	)		(324	)
Currency translation effects		(590	)		(5	)				(95	)		(697	)					(13	)		(810	)
December 31		31,585			4,119			2,980		6,563			33,385			5,960			1,341			54,348
Accumulated amortization
January 1		(426	)		(685	)				(2,539	)		(11,684	)		(954	)		(914	)		(16,776	)
Amortization charge										(580	)		(2,848	)		(238	)		(89	)		(3,755	)
Accumulated amortization on disposals and derecognitions(2)					68								241						4			313
Impairment charge					(33	)							(164	)					(9	)		(206	)
Reversal of impairment charge													40									40
Currency translation effects		15								49			194						10			253
December 31		(411	)		(650	)				(3,070	)		(14,221	)		(1,192	)		(998	)		(20,131	)
Net book value at December 31		31,174			3,469			2,980		3,493			19,164			4,768			343			34,217

⁽¹⁾

Reclassifications between various asset categories as a result of product launches of acquired In-Process Research & Development.

⁽²⁾

Derecognitions of assets that are no longer used or being developed and are not considered to have a significant disposal value or other alternative use.

F-48

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.   Goodwill and Intangible Assets Movements (Continued)

Segmentation of Goodwill and Intangible Assets

        The net book values at December 31, 2015 of goodwill and intangible assets are allocated to the Group's reporting segments as summarized below.

	Goodwill		Acquired research & development		Alcon brand name		Technologies		Currently marketed products		Marketing know-how		Other intangible assets		Total of intangible assets other than goodwill
	$ m		$ m		$ m		$ m		$ m		$ m		$ m		$ m
Pharmaceuticals		5,530		2,511				13		13,151				140		15,815
Alcon		17,947		461		2,980		2,850		4,435		4,768		163		15,657
Sandoz		7,690		490				630		1,578				22		2,720
Corporate		7		7										18		25
Total		31,174		3,469		2,980		3,493		19,164		4,768		343		34,217
Potential impairment charge, if any, if discounted cash flows fell by 5%										4
Potential impairment charge, if any, if discounted cash flows fell by 10%										9

2014	Goodwill			Acquired research & development			Alcon brand name		Technologies			Currently marketed products			Marketing know-how			Other intangible assets			Total of intangible assets other than goodwill
	$ m			$ m			$ m		$ m			$ m			$ m			$ m			$ m
Cost
January 1		31,554			2,648			2,980		7,104			24,160			5,960			1,479			44,331
Cost of assets related to discontinued operations		(1,222	)		(25	)				(346	)		(2,833	)					(359	)		(3,563	)
Impact of business combinations		131			248								234									482
Reclassifications(1)					(139	)				(125	)		95						169
Additions(2)					405					125			216						53			799
Disposals and derecognitions(3)					(159	)							(286	)					(18	)		(463	)
Currency translation effects		(726	)		(135	)				(100	)		(670	)					(73	)		(978	)
December 31		29,737			2,843			2,980		6,658			20,916			5,960			1,251			40,608
Accumulated amortization
January 1		(528	)		(575	)				(2,168	)		(11,953	)		(715	)		(1,079	)		(16,490	)
Accumulated amortization of assets related to discontinued operations		61			13					167			1,369						213			1,762
Amortization charge(4)										(587	)		(1,868	)		(239	)		(81	)		(2,775	)
Accumulated amortization on disposals and derecognitions(3)					159								283						17			459
Impairment charge					(271	)							(46	)					(30	)		(347	)
Reversal of impairment charge													70									70
Currency translation effects		41			(11	)				49			461						46			545
December 31		(426	)		(685	)				(2,539	)		(11,684	)		(954	)		(914	)		(16,776	)
Net book value at December 31		29,311			2,158			2,980		4,119			9,232			5,006			337			23,832

⁽¹⁾

Reclassifications between various asset categories as a result of product launches of acquired In-Process Research & Development.

⁽²⁾

Additions in discontinued operations, for the period from January 1, 2014 to the portfolio transformation announcement on April 22, 2014, were $11 million.

⁽³⁾

Derecognitions of assets that are no longer used or being developed and are not considered to have a significant disposal value or other alternative use.

⁽⁴⁾

Amortization charge in discontinued operations, for the period from January 1, 2014 to the portfolio transformation announcement on April 22, 2014, was $77 million.

F-49

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.   Goodwill and Intangible Assets Movements (Continued)

        The Pharmaceuticals, Alcon and Sandoz divisions' cash generating units, to which indefinite life intangibles and/or goodwill are allocated, each comprise a group of smaller cash generating units. The valuation method of the recoverable amount of the cash generating units, to which indefinite life intangibles and/or goodwill are allocated, is based on the fair value less costs of disposal. The following assumptions are used in the calculations:

	Pharmaceutical		Alcon		Sandoz
	%		%		%
Cash flows growth rate assumptions after forecast period		1		3		0 to 2
Discount rate (post-tax)		6		6		6

        In 2015, intangible asset impairment charges for continuing operations of $206 million were recognized, of which $120 million were recorded in the Alcon Division and $86 million in total in the Pharmaceuticals and Sandoz divisions.

        In 2014, intangible asset impairment charges in continuing operations amounted to $347 million ($302 million in the Pharmaceuticals Division and $45 million in total in the Sandoz and Alcon divisions).

        In 2015 the reversal of prior year impairment charges amounted to $40 million (2014: $70 million).

F-50

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.   Deferred Tax Assets and Liabilities

	Property, plant & equipment			Intangible assets			Pensions and other benefit obligations of associates			Inventories			Tax loss carryforwards			Other assets, provisions and accruals			Valuation allowance			Total
	$ m			$ m			$ m			$ m			$ m			$ m			$ m			$ m
Gross deferred tax assets at January 1, 2015		268			214			1,749			3,470			85			2,601			(14	)		8,373
Gross deferred tax liabilities at January 1, 2015		(639	)		(4,242	)		(410	)		(578	)		(3	)		(606	)					(6,478	)
Net deferred tax balance at January 1, 2015		(371	)		(4,028	)		1,339			2,892			82			1,995			(14	)		1,895
At January 1, 2015		(371	)		(4,028	)		1,339			2,892			82			1,995			(14	)		1,895
Credited/(charged) to income		(57	)		296			83			376			(22	)		(129	)		(3	)		544
Charged to equity																	(216	)					(216	)
(Charged)/credited to other comprehensive income								(63	)								29						(34	)
Impact of business combinations					390												(13	)					377
Other movements		5			(9	)		(30	)		(12	)		(3	)		73			12			36
Net deferred tax balance at December 31, 2015		(423	)		(3,351	)		1,329			3,256			57			1,739			(5	)		2,602
Gross deferred tax assets at December 31, 2015		216			611			1,730			3,821			62			2,871			(5	)		9,306
Gross deferred tax liabilities at December 31, 2015		(639	)		(3,962	)		(401	)		(565	)		(5	)		(1,132	)					(6,704	)
Net deferred tax balance at December 31, 2015		(423	)		(3,351	)		1,329			3,256			57			1,739			(5	)		2,602
After offsetting $349 million of deferred tax assets and liabilities within the same tax jurisdiction the balance amounts to:
Deferred tax assets at December 31, 2015																							8,957
Deferred tax liabilities at December 31, 2015																							(6,355	)
Net deferred tax balance at December 31, 2015																							2,602
Gross deferred tax assets at January 1, 2014		159			270			1,515			3,026			142			2,651			(22	)		7,741
Gross deferred tax liabilities at January 1, 2014		(886	)		(4,796	)		(448	)		(514	)		(4	)		(622	)					(7,270	)
Net deferred tax balance at January 1, 2014		(727	)		(4,526	)		1,067			2,512			138			2,029			(22	)		471
At January 1, 2014		(727	)		(4,526	)		1,067			2,512			138			2,029			(22	)		471
Net deferred tax balance related to discontinued operations		39			92			(73	)		(40	)		(19	)		(93	)					(94	)
Credited/(charged) to income		256			525			17			395			(60	)		(60	)		(5	)		1,068
Credited to equity																	157						157
Credited/(charged) to other comprehensive income								389									(8	)					381
Impact of business combinations					(159	)								30			(1	)					(130	)
Other movements		61			40			(61	)		25			(7	)		(29	)		13			42
Net deferred tax balance at December 31, 2014		(371	)		(4,028	)		1,339			2,892			82			1,995			(14	)		1,895
Gross deferred tax assets at December 31, 2014		268			214			1,749			3,470			85			2,601			(14	)		8,373
Gross deferred tax liabilities at December 31, 2014		(639	)		(4,242	)		(410	)		(578	)		(3	)		(606	)					(6,478	)
Net deferred tax balance at December 31, 2014		(371	)		(4,028	)		1,339			2,892			82			1,995			(14	)		1,895
After offsetting $379 million of deferred tax assets and liabilities within the same tax jurisdiction the balance amounts to:
Deferred tax assets at December 31, 2014																							7,994
Deferred tax liabilities at December 31, 2014																							(6,099	)
Net deferred tax balance at December 31, 2014																							1,895

F-51

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.   Deferred Tax Assets and Liabilities (Continued)

        A reversal of valuation allowance could occur when circumstances make the realization of deferred taxes probable. This would result in a decrease in the Group's effective tax rate.

        Deferred tax assets of $3.9 billion (2014: $3.6 billion) and deferred tax liabilities of $5.8 billion (2014: $5.6 billion) are expected to have an impact on current taxes payable after more than twelve months.

        At December 31, 2015, unremitted earnings of $65 billion (2014: $55 billion) have been retained by consolidated entities for reinvestment. Therefore, no provision is made for income taxes that would be payable upon the distribution of these earnings. If these earnings were remitted, an income tax charge could result based on the tax statutes currently in effect.

	2015			2014
	$ m			$ m
Temporary differences on which no deferred tax has been provided as they are permanent in nature related to:
—Investments in subsidiaries		2,644			7,802
—Goodwill from acquisitions		(28,202	)		(28,567	)

        The gross value of tax-loss carry-forwards that have, or have not, been capitalized as deferred tax assets, with their expiry dates is as follows:

	Not capitalized		Capitalized		2015 total
	$ m		$ m		$ m
One year		22		39		61
Two years		80		25		105
Three years		37		6		43
Four years		54		7		61
Five years		222				222
More than five years		465		712		1,177
Total		880		789		1,669

        In 2015, $13 million (2014: $14 million, 2013: $181 million) of tax-loss carry-forwards expired.

	Not capitalized		Capitalized		2014 total
	$ m		$ m		$ m
One year		12		3		15
Two years		22		26		48
Three years		14				14
Four years		13		5		18
Five years		52		8		60
More than five years		345		396		741
Total		458		438		896

F-52

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.   Deferred Tax Assets and Liabilities (Continued)

        Deferred tax assets related to taxable losses of relevant Group entities are recognized to the extent it is considered probable that future taxable profits will be available against which such losses can be utilized in the foreseeable future.

13.   Financial and Other Non-Current Assets

Financial Assets

	2015		2014
	$ m		$ m
Available-for-sale long-term financial investments		1,263		1,008
Long-term receivables from customers		317		334
Minimum lease payments from finance lease agreements		216		199
Contingent consideration receivables		550
Long-term loans, advances and security deposits		120		179
Total financial assets		2,466		1,720

Other Non-Current Assets

	2015		2014
	$ m		$ m
Deferred compensation plans		409		381
Prepaid post-employment benefit plans		36		37
Other non-current assets		156		136
Total other non-current assets		601		554

Minimum Finance Lease Payments

        The following table shows the receivables of the gross investments in finance leases and the net present value of the minimum lease payments, as well as unearned finance income. The finance income is recorded in "Other income".

	2015
$ m	Total future payments		Unearned interest income			Present value		Provision			Net book value
Not later than one year(1)		89		(6	)		83		(1	)		82
Between one and five years		221		(17	)		204		(10	)		194
Later than five years		61		(5	)		56		(34	)		22
Total		371		(28	)		343		(45	)		298

⁽¹⁾

The current portion of the minimum lease payments is recorded in trade receivables or other current assets (to the extent not yet invoiced).

F-53

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.   Financial and Other Non-Current Assets (Continued)

	2014
$ m	Total future payments		Unearned interest income			Present value		Provision			Net book value
Not later than one year(1)		50		(3	)		47		(1	)		46
Between one and five years		149		(8	)		141		(6	)		135
Later than five years		69		(5	)		64					64
Total		268		(16	)		252		(7	)		245

⁽¹⁾

The current portion of the minimum lease payments is recorded in trade receivables or other current assets (to the extent not yet invoiced).

14.   Inventories

	2015		2014
	$ m		$ m
Raw material, consumables		658		756
Finished products and work in progress		5,568		5,337
Total inventories		6,226		6,093

        The amount of inventory recognized as an expense in "Cost of goods sold" in the consolidated income statements during 2015 amounted to $10.5 billion (2014: $11.6 billion, 2013: $13.3 billion). The group recognized inventory provisions amounting to $356 billion (2014: $1.1 billion, 2013: $1.4 billion) and reversed inventory provisions amounting to $148 million (2014: $379 million, 2013: $474 million).

        The reversals mainly result from the release of products initially requiring additional quality control inspections and from the reassessment of inventory values manufactured prior to regulatory approval but for which approval was subsequently received.

15.   Trade Receivables

	2015			2014
	$ m			$ m
Total gross trade receivables		8,322			8,431
Provisions for doubtful trade receivables		(142	)		(156	)
Total trade receivables, net		8,180			8,275

F-54

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.   Trade Receivables (Continued)

        The following table summarizes the movement in the provision for doubtful trade receivables:

	2015			2014			2013
	$ m			$ m			$ m
January 1		(156	)		(195	)		(217	)
Provisions for doubtful trade receivables related to discontinued operations					15			1
Provisions for doubtful trade receivables charged to the consolidated income statement		(68	)		(92	)		(98	)
Utilization or reversal of provisions for doubtful trade receivables		71			101			120
Currency translation effects		11			15			(1	)
December 31		(142	)		(156	)		(195	)

        The following sets forth details of the age of trade receivables that are not overdue as specified in the payment terms and conditions established with Novartis customers as well as an analysis of overdue amounts and related provisions for doubtful trade receivables:

	2015			2014
	$ m			$ m
Not overdue		7,318			7,406
Past due for not more than one month		265			334
Past due for more than one month but less than three months		255			275
Past due for more than three months but less than six months		193			174
Past due for more than six months but less than one year		156			102
Past due for more than one year		135			140
Provisions for doubtful trade receivables		(142	)		(156	)
Total trade receivables, net		8,180			8,275

        Trade receivable balances include sales to drug wholesalers, retailers, private health systems, government agencies, managed care providers, pharmacy benefit managers and government-supported healthcare systems. Novartis continues to monitor sovereign debt issues and economic conditions in Greece, Italy, Portugal, Spain (GIPS) and other countries where the trade receivables are due directly from local governments or from government-funded entities, and evaluates trade receivables in these countries for potential collection risks. Deteriorating credit and economic conditions and other factors in these countries have resulted in, and may continue to result in an increase in the average length of time that it takes to collect these trade receivables and may require Novartis to re-evaluate the collectability of these trade receivables in future periods.

        With regard to the GIPS countries, the majority of the outstanding trade receivables from these countries are due directly from local governments or from government-funded entities. The gross trade receivables from GIPS countries at December 31, 2015 amount to $920 million (2014: $915 million), of which $58 million are past due for more than one year (2014: $69 million) and for which provisions of $37 million have been recorded (2014: $48 million). At December 31, 2015 amounts past due for more than one year are not significant in any of the GIPS countries on a standalone basis.

F-55

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.   Trade Receivables (Continued)

        Trade receivables include amounts denominated in the following major currencies:

Currency	2015		2014
	$ m		$ m
CHF		124		184
CNY		244		238
EUR		1,536		1,562
GBP		187		184
JPY		740		951
$		3,311		3,059
Other		2,038		2,097
Total trade receivables, net		8,180		8,275

16.   Marketable Securities, Commodities, Time Deposits, Derivative Financial Instruments and Cash and Cash Equivalents

Marketable Securities, Commodities, Time Deposits and Derivative Financial Instruments	2015		2014
	$ m		$ m
Debt securities		339		327
Equity securities		6		15
Fund investments		33		35
Total available-for-sale marketable securities		378		377
Commodities		86		97
Time deposits with original maturity more than 90 days		164		6
Derivative financial instruments		143		356
Accrued interest on debt securities and time deposits		2		3
Total marketable securities, commodities, time deposits and derivative financial instruments		773		839

        At December 31, 2015 all debt securities are denominated in $ except for $22 million in EUR (2014: $25 million). In addition, at December 31, 2014 debt securities of $1 million are denominated in CHF.

Cash and Cash Equivalents	2015		2014
	$ m		$ m
Current accounts		3,074		3,607
Time deposits and short-term investments with original maturity less than 90 days		1,600		9,416
Total cash and cash equivalents		4,674		13,023

F-56

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17.   Other Current Assets

	2015		2014
	$ m		$ m
VAT receivable		609		509
Withholding tax recoverable		97		144
Income tax receivables		171		202
Reimbursements from insurers				87
Prepaid expenses
—Third parties		617		547
—Associated companies		4		3
Other receivables
—Third parties		1,463		1,033
—Associated companies		31		5
Total other current assets		2,992		2,530

18.   Details of Share Capital and Share Movements

        The following table shows the movement in the share capital:

	Dec 31, 2013			Movement in year			Dec 31, 2014			Movement in year			Dec 31, 2015
	$ m			$ m			$ m			$ m			$ m
Share capital		1,001						1,001			(10	)		991
Treasury shares		(89	)		(14	)		(103	)		2			(101	)
Outstanding share capital		912			(14	)		898			(8	)		890

        The following table shows the movement in the shares:

	Number of shares(1)
	Dec 31, 2013			Movement in year			Dec 31, 2014			Movement in year			Dec 31, 2015
Total Novartis shares		2,706,193,000						2,706,193,000			(29,200,000	)		2,676,993,000
Total treasury shares		(280,108,692	)		(27,458,051	)		(307,566,743	)		4,468,560			(303,098,183	)
Total outstanding shares		2,426,084,308			(27,458,051	)		2,398,626,257			(24,731,440	)		2,373,894,817

⁽¹⁾

All shares are voting shares, which are registered, authorized, issued and fully paid.

        In 2015, Novartis reduced its share capital by cancelling a total of 29.2 million shares which were repurchased during 2013 and 2014 on the SIX Swiss Exchange second trading line.

        During 2015, 38.9 million treasury shares were delivered as a result of options being exercised and physical share deliveries related to equity-based participation plans (2014: 51.7 million shares). 9.6 million shares were repurchased on the SIX Swiss Exchange first trading line (2014: 46.8 million). 4.1 million

F-57

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18.   Details of Share Capital and Share Movements (Continued)

shares were acquired from employees which were previously granted to them under the respective programs (2014: 5.4 million). In addition, Novartis repurchased 49.9 million shares on the SIX Swiss Exchange second trading line under the $5 billion share buy-back announced in November 2013, which was completed in November 2015, and also to offset the dilutive impact from equity-based participation plans (2014: 27.0 million shares). With these transactions, the total number of shares outstanding was reduced by 24.7 million shares in 2015 (2014: reduction of 27.5 million shares) and the sixth share buy-back program which was approved by the shareholders at the AGM 2008 has been completed. The market maker has acquired 7 million written call options, originally issued as part of the share-based compensation for associates that have not yet been exercised. The weighted average exercise price of these options is $58.27 and they have contractual lives of 10 years.

F-58

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   Non-Current Financial Debt

	2015			2014
	$ m			$ m
Straight bonds		17,193			15,982
Liabilities to banks and other financial institutions(1)		706			803
Finance lease obligations		87			3
Total, including current portion of non-current financial debt		17,986			16,788
Less current portion of non-current financial debt		(1,659	)		(2,989	)
Total non-current financial debts		16,327			13,799
Straight bonds
3.625% CHF 800 million bond 2008/2015 of Novartis AG, Basel, Switzerland, issued at 100.35%					807
5.125% $3,000 million bond 2009/2019 of Novartis Securities Investment Ltd., Hamilton, Bermuda, issued at 99.822%		2,993			2,991
4.25% EUR 1,500 million bond 2009/2016 of Novartis Finance S.A., Luxembourg, Luxembourg, issued at 99.757%		1,639			1,821
2.9% $2,000 million bond 2010/2015 of Novartis Capital Corporation, New York, United States, issued at 99.522%					1,999
4.4% $1,000 million bond 2010/2020 of Novartis Capital Corporation, New York, United States, issued at 99.237%		994			993
2.4% $1,500 million bond 2012/2022 of Novartis Capital Corporation, New York, United States, issued at 99.225%		1,488			1,486
3.7% $500 million bond 2012/2042 of Novartis Capital Corporation, New York, United States, issued at 98.325%		488			488
3.4% $2,150 million bond 2014/2024 of Novartis Capital Corporation, New York, United States, issued at 99.287%		2,130			2,128
4.4% $1,850 million bond 2014/2044 of Novartis Capital Corporation, New York, United States, issued at 99.196%		1,823			1,823
0.75% EUR 600 million bond 2014/2021 of Novartis Finance S.A., Luxembourg, Luxembourg, issued at 99.134%		650			721
1.625% EUR 600 million bond 2014/2026 of Novartis Finance S.A., Luxembourg, Luxembourg, issued at 99.697%		652			725
0.25% CHF 500 million bond 2015/2025 of Novartis AG, Basel, Switzerland, issued at 100.64%		507
0.625% CHF 550 million bond 2015/2029 of Novartis AG, Basel, Switzerland, issued at 100.502%		557
1.050% CHF 325 million bond 2015/2035 of Novartis AG, Basel, Switzerland, issued at 100.479%		329
3.0% $1,750 million bond 2015/2025 of Novartis Capital Corporation, New York, United States, issued at 99.010%		1,726
4.0% $1,250 million bond 2015/2045 of Novartis Capital Corporation, New York, United States, issued at 98.029%		1,217
Total straight bonds		17,193			15,982

⁽¹⁾

Average interest rate 0.7% (2014: 0.9%)

F-59

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   Non-Current Financial Debt (Continued)

        The following tables provide a breakdown of total non-current financial debt, including current portion by maturity and currency:

	2015		2014
	$ m		$ m
Breakdown by maturity
2015				2,989
2016		1,659		1,838
2017		170		175
2018		335		342
2019		3,161		3,068
2020		998		1,004
After 2020		11,663		7,372
Total		17,986		16,788

	2015		2014
	$ m		$ m
Breakdown by currency
$		12,946		11,912
EUR		2,981		3,329
JPY		665		669
CHF		1,393		807
Others		1		71
Total		17,986		16,788

Fair value comparison	2015 Balance sheet		2015 Fair values		2014 Balance sheet		2014 Fair values
	$ m		$ m		$ m		$ m
Straight bonds		17,193		17,770		15,982		17,013
Others		793		793		806		806
Total		17,986		18,563		16,788		17,819

        The fair values of straight bonds are determined by quoted market prices. Other financial debts are recorded at notional amounts which are a reasonable approximation of the fair values.

Collateralized non-current financial debt and pledged assets	2015		2014
	$ m		$ m
Total amount of collateralized non-current financial debts		7		1
Total net book value of property, plant & equipment pledged as collateral for non-current financial debts		112		184

F-60

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   Non-Current Financial Debt (Continued)

        The Group's collateralized non-current financial debt consists of loan facilities at usual market conditions.

        The percentage of fixed rate financial debt to total financial debt was 82% at December 31, 2015 and December 31, 2014.

        Financial debts, including current financial debts, contain only general default covenants. The Group is in compliance with these covenants.

        The average interest rate on total financial debt in 2015 was 2.9% (2014: 3.4%, 2013: 3.3%).

20.   Provisions and Other Non-Current Liabilities

	2015		2014
	$ m		$ m
Accrued liability for employee benefits:
Defined benefit pension plans		3,952		3,839
Other long-term employee benefits and deferred compensation		507		518
Other post-employment benefits		960		1,054
Environmental remediation provisions		791		828
Provisions for product liabilities, governmental investigations and other legal matters		451		521
Contingent consideration		712		465
Other non-current liabilities		671		447
Total		8,044		7,672

Environmental Remediation Provisions

        The material components of the environmental remediation provisions consist of costs to sufficiently clean and refurbish contaminated sites to the extent necessary and to treat and where necessary continue surveillance at sites where the environmental remediation exposure is less significant. The provision recorded at December 31, 2015 totals $0.9 billion (2014: $0.9 billion) of which $80 million (2014: $95 million) is current.

        A substantial portion of the environmental remediation provisions relate to the remediation of Basel regional landfills in the adjacent border areas in Switzerland, Germany and France. The provisions are re-assessed on a yearly basis and are adjusted as necessary.

        In the United States, Novartis has been named under federal legislation (the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended) as a potentially responsible party (PRP) in respect of certain sites. Novartis actively participates in, or monitors, the clean-up activities at the sites in which it is a PRP. The provision takes into consideration the number of other PRPs at each site and the identity and financial position of such parties in light of the joint and several nature of the liability.

F-61

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

        The following table shows the movements in the environmental liability provisions during 2015, 2014 and 2013:

	2015			2014			2013
	$ m			$ m			$ m
January 1		923			1,061			1,120
Cash payments		(52	)		(33	)		(68	)
Releases		(5	)		(6	)		(19	)
Additions		6			2			2
Currency translation effects		(1	)		(101	)		26
December 31		871			923			1,061
Less current provision		(80	)		(95	)		(100	)
Non-current environmental remediation provisions at December 31		791			828			961

        The expected timing of the related cash outflows as of December 31, 2015 is currently projected as follows:

	Expected cash outflows
	$ m
Due within two years		180
Due later than two years, but within five years		118
Due later than five years but within ten years		457
Due after ten years		116
Total environmental remediation liability provisions		871

Provisions for Product Liabilities, Governmental Investigations and Other Legal Matters

        Novartis has established provisions for certain product liabilities, governmental investigations and other legal matters, including provisions for expected legal costs where a potential cash outflow is probable and Novartis can make a reliable estimate of the amount of the outflow. These provisions represent the Group's current best estimate of the total financial effect for the matters listed below and for other less significant matters. Potential cash outflows reflected in a provision might be fully or partially off-set by insurance in certain circumstances. Novartis has not established provisions for potential damage awards for certain additional legal claims against our subsidiaries if Novartis currently believes that a payment is either not probable or cannot be reliably estimated. In total, these not-provisioned-for matters include fewer than 500 individual product liability cases and certain other legal matters. Plaintiffs' alleged claims in these matters, which Novartis does not believe to be entirely remote but which do not fulfill the conditions for the establishment of provisions, currently aggregate to, according to Novartis' current best belief, approximately $1.2 billion. In addition, in some of these matters there are claims for punitive or multiple (treble) damages, civil penalties and disgorgement of profits that in Novartis' view are either wholly or partially unspecified or wholly or partially unquantifiable at present; the Group believes that

F-62

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

information about these amounts claimed by plaintiffs generally is not meaningful for purposes of determining a reliable estimate of a loss that is probable or more than remote. A number of other legal matters are in such early stages or the issues presented are such that the Group has not made any provisions other than for legal fees since it cannot currently estimate either a potential outcome or the amount of any potential losses. For these reasons, among others, the Group generally is unable to make a reliable estimate of possible loss with respect to such cases. It is therefore not practicable to provide information about the potential financial impact of those cases. There might also be cases for which the Group was able to make a reliable estimate of the possible loss or the range of possible loss, but the Group believes that publication of such information on a case-by-case basis would seriously prejudice the Group's position in ongoing legal proceedings or in any related settlement discussions. Accordingly, in such cases, information has been disclosed with respect to the nature of the contingency, but no disclosure is provided as to an estimate of the possible loss or range of possible loss.

Legal Matters

        A number of Novartis companies are, and will likely continue to be, subject to various legal proceedings and investigations that arise from time to time, including proceedings regarding product liability, sales and marketing practices, commercial disputes, employment, and wrongful discharge, antitrust, securities, health and safety, environmental, tax, international trade, privacy, and intellectual property matters. As a result, the Group may become subject to substantial liabilities that may not be covered by insurance and could affect our business and reputation. While Novartis does not believe that any of these legal proceedings will have a material adverse effect on its financial position, litigation is inherently unpredictable and large judgments sometimes occur. As a consequence, Novartis may in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations or cash flow.

        Governments and regulatory authorities around the world have been stepping up their compliance and law enforcement activities in recent years in key areas, including marketing practices, pricing, corruption, trade restrictions, embargo legislation, insider trading, antitrust, cyber security and data privacy. Further, when one government or regulatory authority undertakes an investigation, it is not uncommon for other governments or regulators to undertake investigations regarding the same or similar matters. Responding to such investigations is costly and requires an increasing amount of management's time and attention. In addition, such investigations may affect our reputation, create a risk of potential exclusion from government reimbursement programs in the US and other countries, and may lead to (or arise from) litigation. These factors have contributed to decisions by Novartis and other companies in the healthcare industry, when deemed in their interest, to enter into settlement agreements with governmental authorities around the world prior to any formal decision by the authorities or a court. Those government settlements have involved and may continue to involve, in current government investigations and proceedings, large cash payments, sometimes in the hundreds of millions of dollars or more, including the potential repayment of amounts allegedly obtained improperly and other penalties, including treble damages. In addition, settlements of government healthcare fraud cases often require companies to enter into corporate integrity agreements, which are intended to regulate company behavior for a period of years. Our affiliate Novartis Pharmaceuticals Corporation is a party to such an agreement, which will expire in 2020. Also, matters underlying governmental investigations and settlements may be the subject of separate private litigation.

F-63

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

        The following is a summary of significant legal proceedings to which Novartis or its subsidiaries are a party or were a party and that concluded in 2015.

Investigations and related litigations

Southern District of New York (SDNY) marketing practices investigation and litigation

        In April 2013, the US government filed a civil complaint in intervention to an individual qui tam action against Novartis Pharmaceuticals Corporation (NPC) in the United States District Court (USDC) for the SDNY involving several of NPC's cardiovascular medications. The suit is related to a previously disclosed 2011 investigation of the United States Attorney's Office (USAO) for the SDNY relating to marketing practices, including the remuneration of healthcare providers, in connection with three NPC products (Lotrel, Starlix and Valturna). The complaint, as subsequently amended, asserts federal False Claims Act and common law claims with respect to speaker programs and other promotional activities for certain NPC cardiovascular medications allegedly serving as mechanisms to provide kickbacks to healthcare professionals. It seeks unspecified damages, which according to the complaint are "substantial", including treble damages and maximum civil penalties per claim, as well as disgorgement of Novartis profits from the alleged unlawful conduct. In August 2013, New York State filed a civil complaint in intervention asserting similar claims. Neither government complaint in intervention adopted the individual relator's claims with respect to off-label promotion of Valturna, which were subsequently dismissed with prejudice by the court. The individual relator continues to litigate the kickback claims on behalf of other states and municipalities. NPC vigorously contests the SDNY, New York State and individual claims, both as to alleged liability and amount of damages and penalties.

SDNY / Western District of New York healthcare fraud investigation

        In 2011, Alcon Laboratories, Inc. (ALI) received a subpoena from the United States Department of Health & Human Services relating to an investigation into allegations of healthcare fraud. The subpoena requests the production of documents relating to marketing practices, including the remuneration of healthcare providers, in connection with certain ALI products (Vigamox, Nevanac, Omnipred, Econopred; surgical equipment). ALI is cooperating with the investigation, which is civil in nature.

Northern District of Texas (NDTX) investigation

        In 2012, Alcon was notified that the USAO for the NDTX is conducting an investigation relating to the export of Alcon products to various countries subject to United States trade sanctions, including Iran, allegedly in violation of applicable trade sanctions, and received a grand jury subpoena requesting the production of documents for a period beginning in 2005 relating to this investigation. Alcon is cooperating with the investigation.

SDNY Gilenya investigation

        In 2013, NPC received a civil investigative demand from the USAO for the SDNY requesting the production of documents and information relating to marketing practices for Gilenya, including the remuneration of healthcare providers in connection therewith. NPC is cooperating with this civil investigation.

F-64

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

New York state investigation

        In November 2014, ALI received a civil subpoena from the New York state attorney general relating to an investigation into a unilateral pricing policy program. ALI is cooperating with this civil investigation.

Lucentis/Avastin® matters in Italy and France

        In 2013, the Italian Competition Authority (ICA) opened an investigation to assess whether Novartis Farma S.p.A., Novartis AG (NAG), F. Hoffmann-La Roche AG, Genentech Inc. and Roche S.p.A. colluded to artificially preserve the market positions of Avastin® and Lucentis. In March 2014, the ICA imposed a fine equivalent to $125 million on NAG and Novartis Farma S.p.A. and a fine on F. Hoffmann-La Roche AG and Roche S.p.A. equivalent to $122 million. As required by Italian law, Novartis has paid the ICA fine, subject to the right to later claim recoupment. In February 2015, Novartis appealed at the council of state the decision of the Tribunale amministrativo regionale (TAR) del Lazio which had upheld the fines. The decision is pending. Novartis' appeal of a decision by the Italian Medicines Agency to include Avastin® in a list of drugs to be reimbursed off-label for age-related macular degeneration (AMD) was rejected by the TAR Lazio in January 2016. Novartis will appeal this decision. In the second quarter of 2014, the Italian Ministry of Health (MoH) indicated in a letter that it intended to seek a total equivalent of approximately $1.3 billion in damages from Novartis and Roche entities based on the above allegations, and in the first quarter of 2015 the Lombardia region sent a payment request equivalent to approximately $63 million. Novartis vigorously contests the MoH and Lombardia claims.

        In France, Novartis' appeal is pending against an inspection in April 2014 by the French Competition Authority on the premises of Novartis Groupe France and Roche with respect to the French market for anti-vascular endothelial growth factor (VEGF) products indicated for the treatment of wet AMD. Also in France, Novartis is appealing a temporary recommendation of use and reimbursement of off-label Avastin® for neovascular AMD by hospital ophthalmologists, in force since September 2015, as well as the decree on which the recommendation is based. In both Italy and France, Novartis believes that allowing the widespread off-label use and reimbursement of Avastin®, despite the presence of available licensed alternatives, would result in a breach of applicable regulations.

Japan investigation

        In December 2015, trial started against a former Novartis Pharma K.K. (NPKK) employee, and also NPKK under the dual liability concept in Japanese law, over allegations brought by the Tokyo District Public Prosecutor Office in two counts for alleged manipulation of data in sub-analysis publications of the Kyoto Heart Study regarding valsartan. The charges against NPKK are subject to a maximum total fine of JPY 4 million.

        In February 2015, the Japanese Ministry of Health, Labor and Welfare (MHLW) issued a business suspension order for failure to report adverse events, which required NPKK to halt manufacturing and sales in Japan for the period from March 5 to 19, 2015. NPKK has implemented a corrective and preventive action plan in response to a business improvement order and instruction issued by the MHLW in the fourth quarter of 2015 regarding additional instances of delayed adverse events reporting.

F-65

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

Internal travel agencies investigation

        After reports of Chinese government investigations of competitors for alleged improper use of certain China-based travel agencies to reward healthcare providers, Novartis commenced an internal investigation in 2013 concerning its local affiliates' relationships with China-based travel agencies (and other vendors). Novartis is communicating with the US Securities and Exchange Commission (SEC) about this internal investigation.

Italy MF59 investigation

        In May 2014, the public prosecutor of Siena initiated a criminal investigation with respect to allegations that the transfer price of the adjuvant MF59 was unlawfully marked up. The investigation concerns whether the Focetria and Fluad vaccines sold to the government were over-priced and whether the Italian Ministry of Health paid an inflated amount in a dispute settlement relating to the supply of Focetria during the 2009 pandemic.

Product liability matters

Reclast/Aclasta product liability litigation

        NPC is a defendant in 21 US product liability actions involving Reclast and alleging atypical femur fracture injuries, most of which are in New Jersey state or federal court coordinated with claims against other bisphosphonate manufacturers. There are also three Canadian putative class actions brought against numerous bisphosphonate manufacturers including NPC, Novartis Pharmaceuticals Canada Inc. and Novartis International AG in Quebec, Alberta and Saskatchewan. All claims are being vigorously contested.

Metoclopramide product liability litigation

        Sandoz is a defendant, along with numerous manufacturers of brand pharmaceuticals, in 395 product liability actions in the state courts in Pennsylvania and California claiming that the use of metoclopramide, the generic version of the brand name drug Reglan®, caused personal injuries including tardive dyskinesia. Sandoz denies the allegations and is vigorously contesting the claims.

Tekturna/Rasilez/Valturna product liability litigation

        NPC and certain other Novartis affiliates are defendants in 12 individual lawsuits pending in the USDC for the District of New Jersey (DNJ), and one in Alberta, Canada, claiming that treatment with Tekturna, Rasilez and/or Valturna caused renal failure, kidney disease or stroke. The claims are being vigorously contested.

Arbitration

Equa arbitration

        In 2013, Sanofi K.K. (Sanofi) commenced an arbitration against NPKK relating to the termination of a co-promotion agreement in Japan of Equa (Galvus), which is used to treat type 2 diabetes. Sanofi seeks an award equivalent to $356 million, at a minimum, together with a request for payment of additional

F-66

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

interest and expenses as well as legal and other costs of the proceedings. NPKK is vigorously defending the action as well as prosecuting a counterclaim against Sanofi.

Other matters

Average Wholesale Price (AWP) litigation

        Claims have been brought by various US state governmental entities against various pharmaceutical companies, including certain Sandoz entities and NPC, alleging that they fraudulently overstated the AWP that is or has been used by payors, including state Medicaid agencies, to calculate reimbursements to healthcare providers. NPC and Sandoz reached settlements in the first, third, and fourth quarters of 2015 of the Wisconsin and Utah claims against them for amounts that are not material to Novartis. Sandoz has filed a motion for reconsideration against a Mississippi Supreme Court decision which in the fourth quarter of 2015 upheld the $30 million Chancery Court verdict against it. NPC remains a defendant in an action brought by the state of Illinois and in a putative class action brought by private payors in New Jersey. The claims are being vigorously contested.

Qui tam actions

        NPC is a defendant in a relator's qui tam action in the USDC for the Eastern District of Pennsylvania asserting federal and state False Claims Act claims relating to certain alleged marketing practices involving Elidel®. The federal government and several states declined to intervene in the relator's action. NPC is vigorously contesting the claims.

        In 2006, 2010 and 2012, qui tam complaints were filed in the District of Massachusetts (D. Mass.) asserting various federal False Claims Act and state claims relating to certain alleged improper marketing practices involving Xolair against various Novartis, Genentech and Roche entities. In 2011, the US and various state governments declined to intervene in the relators' actions, and closed their investigations. In June 2014, the relator in the 2010 action voluntarily dismissed his complaint with prejudice; the US and various states subsequently consented to the dismissal. In the first quarter of 2015, the USDC for the D. Mass. dismissed with prejudice all claims in connection with alleged improper marketing practices asserted by the relators and dismissed without prejudice all claims asserted in the name of the federal and various state governments. The relators have appealed. Novartis continues to vigorously contest the claims.

Antitrust class actions

        Since the third quarter of 2013, approximately sixteen putative class action complaints have been filed against manufacturers of the brand drug Solodyn® and its generic equivalents, including Sandoz Inc. The cases have been consolidated and transferred for pretrial purposes to a federal district court in Massachusetts. The plaintiffs purport to represent direct and indirect purchasers of Solodyn® branded products and assert violations of federal and state antitrust laws, including allegations in connection with separate settlements by Medicis with each of the other defendants, including Sandoz Inc., of patent litigation relating to generic Solodyn®. Sandoz is vigorously contesting the claims.

        Since March 2015, more than 50 putative class action complaints have been filed in several courts across the US naming contact-lens manufacturers, including ALI, and alleging violations of federal antitrust law as well as state antitrust, consumer protection and unfair competition laws of various states in

F-67

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

connection with the sale of contact lenses. The cases have been consolidated in the Middle District of Florida by the Judicial Panel on Multidistrict Litigation and the claims are being vigorously contested.

        Since June 2015, NPC, Novartis Corporation (NC) and NAG have been sued in five putative class action complaints brought in federal district court in Massachusetts on behalf of proposed classes of all direct and indirect purchasers, including end-payors, of Gleevec. The complaints assert violations of federal antitrust law and various state laws, and seek to prevent Novartis from enforcing a previously reported 2014 agreement under which Sun Pharmaceuticals agreed not to launch a generic version of Gleevec, until February 1, 2016, as well as damages and other relief. The claims are being vigorously contested.

        In October 2015, Sandoz and Momenta Pharmaceuticals were sued in a putative antitrust class action in federal court in Tennessee alleging that Momenta and Sandoz engaged in anticompetitive conduct with regard to sales of enoxaparin, and the same allegations were made by Amphastar in a lawsuit filed in federal court in California (Sandoz, Momenta Pharmaceuticals and Amphastar are currently engaged in litigation concerning certain enoxaparin patents in federal court in Massachusetts). The claims are being vigorously contested.

Oriel litigation

        In October 2013, Shareholder Representative Services LLC filed a complaint in New York State Court against Sandoz Inc., two affiliates and two former officers of Sandoz AG asserting various common law and statutory contract, fraud and negligent misrepresentation claims arising out of the Sandoz Inc. purchase of Oriel Therapeutics, Inc. In March 2015, the court dismissed all claims except a breach of contract claim against Sandoz Inc. Sandoz Inc. continues to vigorously contest the claim.

Eye drop products consumer class actions

        Since November 2012, six putative consumer fraud class action litigations were commenced against Alcon (and in four cases Sandoz) in federal courts in the Southern Districts of Illinois (S.D. Ill.) and Florida and the Districts of Missouri, Massachusetts and New Jersey. They claim that Alcon's, Sandoz's and many other manufacturers defendants' eye drop products were deceptively designed so that the drop dosage is more than necessary to be absorbed in the eye or there is too much solution in each bottle for the course of the treatment, leading to wastage and higher costs to patient consumers. Three cases remain pending in the S.D. Ill., D. Mass. and DNJ. Novartis is vigorously contesting the claims.

Employment action

        In March 2015, ALI and NC were sued in an individual and collective action filed in the SDNY. The parties negotiated a class settlement and a settlement for the individual plaintiffs (excluding one plaintiff) for an amount that is not material to Novartis, which settlements and amended complaint were filed with the court for approval in December 2015. The claims assert inter alia gender discrimination, pay discrimination and retaliation at Alcon. The one remaining individual claim continues to be vigorously contested.

F-68

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

Concluded legal matters

Western District of Kentucky (WDKY) investigation

        In 2012, NPC received a subpoena from the USAO for the WDKY requesting the production of documents relating to marketing practices, including alleged remuneration of healthcare providers and off-label promotion, in connection with certain NPC products (including Tekturna, Valturna, Reclast, Exelon Patch and other products). In the third quarter of 2015, the USAO declined to intervene in the relators' complaint and has closed the investigation.

SDNY specialty pharmacies investigation and litigation

        In April 2013, the US government filed a civil complaint in intervention to a qui tam action against NPC in the USDC for the SDNY. The complaint, as subsequently amended, asserted federal False Claims Act and state law claims related to alleged unlawful contractual discounts and rebates to specialty pharmacies in connection with Myfortic, and alleged unlawful contractual discounts, rebates and patient referrals to one specialty pharmacy in connection with Exjade. In January 2014, eleven states filed three complaints in intervention asserting similar claims related to Exjade; and the qui tam relator served on NPC an amended complaint also asserting similar claims with respect to Myfortic and Exjade, as well as claims involving Tasigna, Gleevec and TOBI that the federal and various state governments declined to pursue. In the second half of 2015, NPC reached a settlement with all plaintiffs, including the United States Department of Justice, 45 states (made up of the eleven intervening states, as well as all the other states which were either part of the relator's complaint, or which reimbursed prescriptions of Myfortic and Exjade during the relevant time period), the District of Columbia and the qui tam relator. This resolves all the above-described claims related to Myfortic, Exjade, Tasigna, Gleevec and TOBI. As part of the settlement, NPC agreed to pay $390 million plus additional legal expenses to plaintiffs, and agreed with the Office of Inspector General of the US Department of Health & Human Services on an amendment and extension of its current Corporate Integrity Agreement until 2020.

DNJ investigation

        In late September 2014, ALI received a subpoena from the USAO for the DNJ relating to an investigation of Alcon sales practices. In the third quarter of 2015, the USAO declined to proceed, and no charges were brought or sanctions imposed. The relator dismissed the complaint voluntarily.

Italy Sandostatin investigation

        In January 2014, the ICA opened an investigation to assess whether Novartis Farma S.p.A. and Italfarmaco S.p.A. colluded on the supply of octreotide acetate (Sandostatin LAR and Longastatina® LAR, respectively). In consideration of commitments to amend certain provisions of the co-marketing agreement with Italfarmaco, the ICA decided to close the investigation with no finding of an infringement and thus without a fine. The decision became final in October 2015.

Zometa/Aredia product liability litigation

        NPC had been a defendant in more than 880 cases brought in US courts in which plaintiffs generally claimed to have experienced osteonecrosis of the jaw or atypical femur fracture after treatment with Zometa or Aredia, which are used to treat patients whose cancer has spread to the bones. Nearly all the

F-69

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   Provisions and Other Non-Current Liabilities (Continued)

cases have been resolved through voluntary dismissals, pre-trial motion practice, trial, or settlements, the payments of which were not material to Novartis. Three cases where NPC prevailed at the trial level remain on appeal, and one other case remains pending. The remaining claims are being vigorously contested, but they are not material to Novartis.

Solodyn® Federal Trade Commission (FTC) investigation

        The conduct challenged in the above-described Solodyn® antitrust class actions has also been the subject of an FTC investigation. In the fourth quarter of 2015, the FTC closed the investigation with no finding of an infringement or a fine. This matter is therefore concluded.

Excedrin consumer class actions

        Four putative class actions were brought in December 2013 and January 2014 against Novartis and its consumer health unit. They generally claim that it was a deceptive practice to sell Excedrin Migraine at a higher price than Excedrin Extra Strength when the two have the same active ingredients, even though the products have different labels and clearly disclose their active ingredients. In 2014, three of the four putative class actions were dismissed; the remaining one is not material to Novartis.

Summary of Product Liability, Governmental Investigations and Other Legal Matters Provision Movements:

	2015			2014			2013
	$ m			$ m			$ m
January 1		849			924			998
Provisions related to discontinued operations					(37	)
Cash payments		(256	)		(454	)		(373	)
Releases of provisions		(223	)		(135	)		(184	)
Additions to provisions		832			549			499
Currency translation effects		(8	)		2			(16	)
December 31		1,194			849			924
Less current portion		(743	)		(328	)		(461	)
Non-current product liabilities, governmental investigations and other legal matters provisions at December 31		451			521			463

        Novartis believes that its total provisions for investigations, product liability, arbitration and other legal matters are adequate based upon currently available information. However, given the inherent difficulties in estimating liabilities, there can be no assurance that additional liabilities and costs will not be incurred beyond the amounts provided.

F-70

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

21.   Current Financial Debt and Derivative Financial Instruments

	2015		2014
	$ m		$ m
Interest-bearing accounts of associates payable on demand		1,645		1,651
Bank and other financial debt		1,185		1,272
Commercial paper		1,085		648
Current portion of non-current financial debt		1,659		2,989
Fair value of derivative financial instruments		30		52
Total current financial debt and derivative financial instruments		5,604		6,612

        The consolidated balance sheet amounts of current financial debt, other than the current portion of non-current financial debt, approximate the estimated fair value due to the short-term nature of these instruments.

        The weighted average interest rate on the bank and other current financial debt (including employee deposits from the compensation of associates employed by Swiss entities) was 2.7% in 2015 and 2.6% in 2014.

        Details on commercial papers are provided in Note 29—Liquidity risk.

22.   Provisions and Other Current Liabilities

	2015		2014
	$ m		$ m
Taxes other than income taxes		551		549
Restructuring provisions		260		333
Accrued expenses for goods and services received but not invoiced		1,124		1,076
Accruals for royalties		550		561
Provisions for revenue deductions		3,790		3,533
Accruals for compensation and benefits including social security		1,932		1,968
Environmental remediation liabilities		80		95
Deferred income		385		329
Provision for product liabilities, governmental investigations and other legal matters		743		328
Accrued share-based payments		209		248
Contingent considerations		78		291
Commitment for repurchase of own shares (see Note 9)				658
Other payables		1,017		479
Total provisions and other current liabilities		10,719		10,448

        Provisions are based upon management's best estimate and adjusted for actual experience. Such adjustments to the historic estimates have not been material.

F-71

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

22.   Provisions and Other Current Liabilities (Continued)

Provision for Deductions from Revenue

        The following table shows the movement of the provision for deductions from revenue:

	2015			2014			2013
	$ m			$ m			$ m
January 1		3,533			4,182			4,072
Provisions related to discontinued operations					(234	)
Impact of business combinations		3
Additions		15,603			14,119			13,095
Payments/utilizations		(15,218	)		(13,907	)		(12,762	)
Changes in offset against gross trade receivables		50			(420	)		(224	)
Currency translation effects		(181	)		(207	)		1
December 31		3,790			3,533			4,182

Restructuring Provision Movements

	$ m
January 1, 2013		221
Additions		175
Cash payments		(134	)
Releases		(47	)
Transfers		(42	)
Currency translation effects		1
December 31, 2013		174
Provisions related to discontinued operations		(4	)
Additions		504
Cash payments		(295	)
Releases		(52	)
Currency translation effects		6
December 31, 2014		333
Additions		399
Cash payments		(435	)
Releases		(36	)
Currency translation effects		(1	)
December 31, 2015		260

        In 2015, additions to provisions of $399 million in continuing operations were to a large extent related to reorganizations in the Pharmaceuticals Division. Thereby two initiatives totaling $106 million were targeted at efficiency gains in the business franchises other than Oncology and Cell and Gene Therapies. The integration of the Oncology business acquired from GSK resulted in restructuring expenses of $78 million. Alcon extended its initiative to realize productivity opportunities ($45 million). Finally group

F-72

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

22.   Provisions and Other Current Liabilities (Continued)

wide initiatives to simplify the organizational structure ($159 million), mainly related to the manufacturing footprint and support services as well as a NIBR initiative ($11 million) resulted in an increase of the provision.

        In 2014, additions to provisions of $504 million in continuing operations were mainly related to reorganizations in the Pharmaceuticals Division. In Pharmaceuticals an initiative in Development totaling $72 million was targeted at establishing an organizational model for the development activities which allows for greater focus on high priority programs in specialty medicines, more flexibility to adapt to changes in the portfolio, and which strengthens operational excellence. Activities in the Pharmaceuticals Division were also subject to a restructuring program totaling $286 million which was targeted at increasing operational leverage. Alcon has established a $56 million initiative to realize productivity opportunities.

        In 2013, additions to provisions of $175 million in the Group were mainly related to reorganizations of the Pharmaceuticals research and development activities and the integration of Alcon.

        The releases to income in 2015 of $36 million in continuing operations, in 2014 of $52 million in continuing operations and $5 million in discontinued operations and in 2013 of $47 million for the entire Group, were mainly due to settlement of liabilities at lower amounts than originally anticipated.

	Third party costs(1)				Termination costs				Additions to provision
Restructuring initiatives	2015		2014		2015		2014		2015		2014
	$ m		$ m		$ m		$ m		$ m		$ m
Pharmaceuticals—Research & Development						11		72		11		72
Pharmaceuticals—Business Franchises				8		106		278		106		286
Pharmaceuticals—GSK Oncology Integration						78				78
Alcon initiative to increase operating leverage						45		56		45		56
Various Group initiatives to simplify organizational structure—including manufacturing sites and support services		31		1		128		89		159		90
Total		31		9		368		495		399		504

⁽¹⁾

Third party costs are mainly associated with lease and other obligations due to abandonment of certain facilities.

F-73

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23.   Details to the Consolidated Cash Flow Statements

23.1)    Adjustments for Non-Cash Items from Continuing Operations

	2015			2014			2013
	$ m			$ m			$ m
Taxes		1,106			1,545			1,498
Depreciation, amortization and impairments on:
Property, plant & equipment		1,550			1,630			1,601
Intangible assets		3,921			3,052			2,804
Financial assets(1)		104			69			57
Income from associated companies		(266	)		(1,918	)		(599	)
Gains on disposal of property, plant & equipment, intangible, financial and other non-current assets, net		(869	)		(622	)		(347	)
Equity-settled compensation expense		773			744			654
Change in provisions and other non-current liabilities		1,642			1,490			736
Net financial income		1,109			735			775
Total		9,070			6,725			7,179

⁽¹⁾

Including unrealized fair value gains

        In 2015, the Group acquired property, plant and equipment of $85 million through finance lease contracts.

23.2)    Cash Flows from Changes in Working Capital and Other Operating Items Included in Operating Cash Flow from Continuing Operations

	2015			2014			2013
	$ m			$ m			$ m
(Increase) in inventories		(482	)		(506	)		(454	)
(Increase) in trade receivables		(513	)		(367	)		(548	)
Increase in trade payables		378			142			414
Change in other net current assets and other operating cash flow items		(246	)		106			(190	)
Total		(863	)		(625	)		(778	)

F-74

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23.   Details to the Consolidated Cash Flow Statements (Continued)

23.3)    Cash Flow Arising from Acquisitions and Divestments of Businesses

        The following is a summary of the cash flow impact of acquisitions and divestments. The most significant transactions are described in Note 2.

	2015 Acquisitions			2015 Divestments			2014 Acquisitions			2014 Divestments
	$ m			$ m			$ m			$ m
Property, plant & equipment					1,000						145
Currently marketed products		(12,970	)		646			(234	)		91
(Acquired)/divested research & development		(730	)		13			(248	)
Technologies					113
Other intangible assets		(15	)		86
Financial and other assets including deferred tax assets(1)		(555	)		40			(53	)		7
Inventories					893			(1	)		87
Trade receivables and other current assets		(3	)		529			(3	)		159
Cash and cash equivalents		(25	)		311			(2	)
Current and non-current financial debts					(601	)
Trade payables and other liabilities including deferred tax liabilities		212			(841	)		186			(50	)
Net identifiable assets (acquired) or divested		(14,086	)		2,189			(355	)		439
Currency translation effects					98						(3	)
Acquired/(divested) liquidity		25			(479	)		2
Subtotal		(14,061	)		1,808			(353	)		436
Refinancing of intercompany financial debt, net					578
Goodwill(1)		(2,438	)		1,042			(131	)		267
Divestment gain					7,401						876
Taxes paid and other portfolio transformation related cash flows					(1,337	)					(566	)
Receivables and payables contingent consideration, net		(8	)		(519	)		153
Prepaid/deferred portion of sales price(2)					(49	)					47
Net cash flow		(16,507	)		8,924			(331	)		1,060
Of which:
Net cash flow from discontinued operations					8,924						1,060
Net cash flow used in continuing operations		(16,507	)					(331	)

⁽¹⁾

2014 Acquisitions include an adjustment regarding a previous acquisition to deferred tax assets of $21 million and goodwill of $135 million.

⁽²⁾

Divestments include $49 million proceeds for the divestment of the Animal Health business received in 2014.

        There were no significant acquisitions or divestments which had an impact on the cash flow statement in 2013, however $42 million were paid for contingent considerations regarding acquisitions from previous years.

        Notes 2 and 24 provide further information regarding acquisitions and divestments of businesses. All acquisitions were for cash.

F-75

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23.   Details to the Consolidated Cash Flow Statements (Continued)

23.4)    Cash Flow From Discontinued Operations

	2015			2014			2013
	$ m			$ m			$ m
Cash flows used in/from operating activities		(188	)		(1	)		557
Purchase of property, plant & equipment		(41	)		(223	)		(161	)
Proceeds from sales of property, plant & equipment		1			4			12
Purchase of intangible assets					(18	)		(32	)
Proceeds from sales of intangible assets					79			58
Purchase of financial and other non-current assets, net		(2	)		(13	)		(10	)
Divestments of businesses(1)		8,924			1,060
Cash flows from/used in investing activities		8,882			889			(133	)
Total net cash flows from discontinued operations		8,694			888			424

⁽¹⁾

Includes proceeds of $10,925 million reduced by $2,001 million, for payments of taxes, transaction-related costs and purchase price adjustments.

24.   Acquisitions of Businesses

Assets and Liabilities Arising from Acquisitions

Fair value	2015			2014
	$ m			$ m
Currently marketed products		12,970			234
Acquired research & development		730			248
Other intangible assets		15
Deferred tax assets(1)		555			53
Inventories					1
Trade receivables and other current assets		3			3
Cash and cash equivalents		25			2
Payables and other liabilities including deferred tax liabilities		(212	)		(186	)
Net identifiable assets acquired		14,086			355
Acquired liquidity		(25	)		(2	)
Goodwill(1)		2,438			131
Net assets recognized as a result of business combinations		16,499			484

⁽¹⁾

2014 includes an adjustment regarding a previous acquisition to deferred tax assets of $21 million and goodwill of $135 million.

        Note 2 details significant acquisition of businesses, which in 2015, were the GSK Oncology products, Spinifex and Admune. The goodwill arising out of these acquisitions is attributable to buyer specific synergies, assembled workforce and to the accounting for deferred tax liabilities on the acquired assets. Goodwill of $2.4 billion is tax deductible. In 2014 the significant transactions related to CoStim Pharmaceuticals and WaveTec.

        There were no significant acquisitions in 2013.

F-76

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

25.   Post-Employment Benefits for Associates

Defined Benefit Plans

        In addition to the legally required social security schemes, the Group has numerous independent pension and other post-employment benefit plans. In most cases these plans are externally funded in entities which are legally separate from the Group. For certain Group companies, however, no independent plan assets exist for the pension and other post-employment benefit obligations of associates. In these cases the related unfunded liability is included in the balance sheet. The defined benefit obligations (DBO) of all major pension and other post-employment benefit plans are reappraised annually by independent actuaries. Plan assets are recognized at fair value. The major plans are based in Switzerland, United States, United Kingdom, Germany and Japan, which represent 95% of the Group's total DBO for pension plans. Details of the plans in the two most significant countries of Switzerland and the US are provided below.

        Swiss-based pension plans represent the most significant portion of the Group's total DBO and plan assets. For the active insured members born on or after January 1, 1956, or having joined the plans after December 31, 2010 the benefits are partially linked to the contributions paid into the plan. Certain features of Swiss pension plans required by law preclude the plans being categorized as defined contribution plans. These factors include a minimum interest guarantee on retirement savings accounts, a pre-determined factor for converting the accumulated savings account balance into a pension and embedded death and disability benefits.

        All benefits granted under Swiss pension plans are vested and Swiss legislation prescribes that the employer has to contribute a fixed percentage of an associate's pay to an external pension fund. Additional employer's contributions may be required whenever the plan's statutory funding ratio falls below a certain level. The associate also contributes to the plan. The pension plans are run by separate legal entities, each governed by a Board of Trustees which for the principal plans consists of representatives nominated by Novartis and by the active insured associates. The Boards of Trustees are responsible for the plan design and the asset investment strategy.

        In June 2015 the Board of Trustees of the Novartis Swiss Pension Fund agreed to adjust the annuity conversion rate at retirement with effect from January 1, 2016. This amendment does not have an impact on existing members receiving benefits or on plan members, born before January 1, 1956. This amendment resulted in a net pre-tax curtailment gain of $110 million (CHF 103 million).

        The US pension plans represent the second largest component of the Group's total DBO and plan assets. The principal plans (Qualified Plans) are funded whereas plans providing additional benefits for executives (Restoration Plans) are unfunded. Employer contributions are required for Qualified Plans whenever the statutory funding ratio falls below a certain level. Furthermore, associates in the US are covered under other post-employment benefit plans and post-retirement medical plans.

F-77

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

25.   Post-Employment Benefits for Associates (Continued)

        The following tables are a summary of the funded and unfunded defined benefit obligation for pension and other post-employment benefit plans of associates at December 31, 2015 and 2014:

	Pension plans						Other post-employment benefit plans
	2015			2014			2015			2014
	$ m			$ m			$ m			$ m
Benefit obligation at January 1		24,178			24,801			1,253			1,069
Benefit obligations related to discontinued operations					(848	)					(21	)
Current service cost		451			418			32			35
Interest cost		399			654			46			49
Past service costs and settlements		(138	)		6						(89	)
Administrative expenses		23			21
Remeasurement (gains)/losses arising from changes in financial assumptions		(16	)		2,129			(34	)		164
Remeasurement (gains)/losses arising from changes in demographic assumptions		(41	)		229			(30	)		121
Experience related remeasurement losses/(gains)		56			(14	)		(110	)		(22	)
Currency translation effects		(358	)		(2,156	)		(14	)		(5	)
Benefit payments		(1,406	)		(1,282	)		(50	)		(48	)
Contributions of associates		223			210
Effect of acquisitions, divestments or transfers		31			10			39
Benefit obligation at December 31		23,402			24,178			1,132			1,253
Fair value of plan assets at January 1		20,434			21,481			199			209
Plan assets related to discontinued operations					(530	)
Interest income		300			550			6			10
Return on plan assets excluding interest income		(286	)		1,442			(6	)		28
Currency translation effects		(223	)		(1,917	)
Novartis Group contributions		494			485			23
Contributions of associates		223			210
Settlements		(3	)		(9	)
Benefit payments		(1,406	)		(1,282	)		(50	)		(48	)
Effect of acquisitions, divestments or transfers		3			4
Fair value of plan assets at December 31		19,536			20,434			172			199
Funded status		(3,866	)		(3,744	)		(960	)		(1,054	)
Limitation on recognition of fund surplus at January 1		(58	)		(45	)
Change in limitation on recognition of fund surplus (incl. exchange rate differences)		12			(9	)
Interest income on limitation of fund surplus		(4	)		(4	)
Limitation on recognition of fund surplus at December 31		(50	)		(58	)
Net liability in the balance sheet at December 31		(3,916	)		(3,802	)		(960	)		(1,054	)

F-78

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

25.   Post-Employment Benefits for Associates (Continued)

        The reconciliation of the net liability from January 1 to December 31 is as follows:

	Pension plans						Other post- employment benefit plans
	2015			2014			2015			2014
	$ m			$ m			$ m			$ m
Net liability at January 1		(3,802	)		(3,365	)		(1,054	)		(860	)
Less: Net liability related to discontinued operations					318						21
Current service cost		(451	)		(418	)		(32	)		(35	)
Net interest expense		(103	)		(108	)		(40	)		(39	)
Administrative expenses		(23	)		(21	)
Past service costs and settlements		135			(15	)					89
Remeasurements		(285	)		(902	)		168			(235	)
Currency translation effects		135			239			14			5
Novartis Group contributions		494			485			23
Effect of acquisitions, divestments or transfers		(28	)		(6	)		(39	)
Change in limitation on recognition of fund surplus		12			(9	)
Net liability at December 31		(3,916	)		(3,802	)		(960	)		(1,054	)
Amounts recognized in the consolidated balance sheet
Prepaid benefit cost		36			37
Accrued benefit liability		(3,952	)		(3,839	)		(960	)		(1,054	)

        The following table shows a breakdown of the DBO for pension plans by geography and type of member and the breakdown of plan assets into the geographical locations in which they are held.

	2015 $ m												2014 $ m
	Switzerland			US			Rest of the World			Total			Switzerland			US			Rest of the World			Total
Benefit obligation at December 31		15,453			3,783			4,166			23,402			15,578			4,092			4,508			24,178
Thereof unfunded					736			466			1,202						820			484			1,304
By type of member
Active		6,196			990			1,392			8,578			6,268			1,182			1,502			8,952
Deferred pensioners					909			1,489			2,398						947			1,499			2,446
Pensioners		9,257			1,884			1,285			12,426			9,310			1,963			1,507			12,780
Fair value of plan assets at December 31		14,347			2,358			2,831			19,536			14,869			2,521			3,044			20,434
Funded Status		(1,106	)		(1,425	)		(1,335	)		(3,866	)		(709	)		(1,571	)		(1,464	)		(3,744	)

F-79

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

25.   Post-Employment Benefits for Associates (Continued)

        The following table shows the principal weighted average actuarial assumptions used for calculating defined benefit plans and other post-employment benefits of associates:

	Pension plans			Other post-employment benefit plans
	2015	2014	2013	2015	2014	2013
	%	%	%	%	%	%
Weighted average assumptions used to determine benefit obligations at December 31
Discount rate	1.8%	1.8%	2.9%	4.4%	3.8%	4.7%
Expected rate of pension increase	0.4%	0.4%	1.1%
Expected rate of salary increase	2.9%	3.2%	3.5%
Interest on savings account	0.8%	0.9%	2.1%
Current average life expectancy for a 65-year-old male/female	21/24 years	21/24 years	21/23 years	21/23 years	22/24 years	19/21 years

        Changes in the above-mentioned actuarial assumptions can result in significant volatility in the accounting for the Group's pension plans in the consolidated financial statements. This can result in substantial changes in the Group's other comprehensive income, long-term liabilities and prepaid pension assets.

        The DBO is significantly impacted by assumptions regarding the rate that is used to discount the actuarially determined post-employment benefit liability. This rate is based on yields of high quality corporate bonds in the country of the plan. Decreasing corporate bond yields decrease the discount rate, so that the DBO increases and the funded status decreases.

        In Switzerland an increase in the DBO due to lower discount rates is slightly offset by lower future benefits expected to be paid on the associate's savings account where the assumption on interest accrued changes in line with the discount rate.

        The impact of decreasing interest rates on a plan's assets is more difficult to predict. A significant part of the plan assets is invested in bonds. Bond values usually rise when interest rates decrease and may therefore partially compensate for the decrease in the funded status. Furthermore, pension assets also include significant holdings of equity instruments. Share prices tend to rise when interest rates decrease and therefore often counteract the negative impact of the rising defined benefit obligation on the funded status although correlation of interest rates with equities is not as strong as with bonds, especially in the short term.

        The expected rate for pension increases significantly affects the DBO of most plans in Switzerland, Germany and the United Kingdom. Such pension increases also decrease the funded status although there is no strong correlation between the value of the plan assets and pension/inflation increases.

        Assumptions regarding life expectancy significantly impact the DBO. An increase in longevity increases the DBO. There is no offsetting impact from the plan assets as no longevity bonds or swaps are held by the pension funds. Generational mortality tables are used where this data is available.

F-80

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

25.   Post-Employment Benefits for Associates (Continued)

        The following table shows the sensitivity of the defined benefit pension obligation to the principal actuarial assumptions for the major plans in Switzerland, United States, United Kingdom, Germany and Japan on an aggregated basis:

	Change in 2015 year end defined benefit pension obligation
	$ m
25 basis point increase in discount rate		(736	)
25 basis point decrease in discount rate		781
1 year increase in life expectancy		797
25 basis point increase in rate of pension increase		491
25 basis point decrease in rate of pension increase		(111	)
25 basis point increase of interest on savings account		61
25 basis point decrease of interest on savings account		(60	)
25 basis point increase in rate of salary increase		69
25 basis point decrease in rate of salary increase		(71	)

        The healthcare cost trend rate assumptions for other post-employment benefits are as follows:

Healthcare cost trend rate assumptions used	2015		2014		2013
Healthcare cost trend rate assumed for next year		7.5%		7.0%		7.0%
Rate to which the cost trend rate is assumed to decline		5.0%		5.0%		5.0%
Year that the rate reaches the ultimate trend rate		2022		2021		2021

        The following table shows the weighted average plan asset allocation of funded defined benefit pension plans at December 31, 2015 and 2014:

	Pension plans
	Long-term target		2015		2014
	%		%		%
Equity securities		15–40		34		35
Debt securities		20–60		35		34
Real estate		5–20		14		13
Alternative investments		0–20		14		10
Cash and other investments		0–15		3		8
Total				100		100

        Cash, as well as most of the equity and debt securities have a quoted market price in an active market. Real estate and alternative investments, which include hedge fund and private equity investments usually do not have a quoted market price.

F-81

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

25.   Post-Employment Benefits for Associates (Continued)

        The strategic allocation of assets of the different pension plans are determined with the objective of achieving an investment return which, together with the contributions paid by the Group and its associates, is sufficient to maintain reasonable control over the various funding risks of the plans. Based upon the market and economic environments, actual asset allocations may temporarily be permitted to deviate from policy targets. The asset allocation currently includes investments in shares of Novartis AG which totaled at December 31, 2015, 11 million shares with a market value of $1.0 billion (2014: 11 million shares with a market value of $1.0 billion). The weighted average duration of the defined benefit obligation is 14.1 years (2014: 14.3 years). The Group's ordinary contribution to the various pension plans are based on the rules of each plan. Additional contributions are made whenever this is required by statute or law; i.e. usually when statutory funding levels fall below pre-determined thresholds. The only significant plans that are foreseen to require additional funding are those in UK.

        The expected future cash flows in respect of pension and other post-employment benefit plans at December 31, 2015 were as follows:

	Pension plans		Other post-employment benefit plans
	$ m		$ m
Novartis Group contributions
2016 (estimated)		531		58
Expected future benefit payments
2016		1,201		58
2017		1,232		61
2018		1,239		64
2019		1,243		66
2020		1,236		68
2021-2025		6,113		361

Defined Contribution Plans

        In many subsidiaries associates are covered by defined contribution plans. Contributions charged to the 2015 consolidated income statement for the defined contribution plans were $359 million (2014: $348 million, 2013: $332 million). The 2015 amount excludes $1 million (2014: $14 million, 2013: $19 million) related to discontinued operations.

26.   Equity-Based Participation Plans for Associates

        The expense related to all equity-based participation plans in the 2015 consolidated income statement was $968 million (2014: $1.1 billion, 2013 $987 million) resulting in total liabilities arising from equity-based payment transactions of $209 million (2014: $277 million of which $248 million were recognized in continuing operations, 2013: $255 million). Out of the total expense, an amount of $903 million (2014: $1.0 billion, 2013: $892 million) was recognized in continuing operations and $65 million (2014: $124 million, 2013: $95 million) was recognized in discontinued operations.

        Equity-based participation plans can be separated into the following plans.

F-82

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26.   Equity-Based Participation Plans for Associates (Continued)

Annual Incentive

        The Annual Incentive of the CEO and other key executives is paid 50% in cash in February or March of the year following the performance period, and 50% in Novartis restricted shares or Restricted Share Units (RSUs) that are deferred and restricted for three years. Each restricted share is entitled to voting rights and payment of dividends during the vesting period. Each RSU is equivalent in value to one Novartis share and is converted into one share at the vesting date. RSUs do not carry any dividend, dividend equivalent or voting rights. The executives may elect to also receive their cash incentive partially or fully in shares which will not be subject to vesting conditions. In 2015, 14 executives received 0.1 million restricted shares and RSUs.

Share Savings Plans

        A number of associates in certain countries and certain key executives worldwide are encouraged to invest their Annual Incentive, and in the United Kingdom also their salary, in a share savings plan. Under the share savings plan, participants may elect to receive their Annual Incentive fully or partially in Novartis shares in lieu of cash. As a reward for their participation in the share savings plan, at no additional cost to the participant, Novartis matches their investments in shares after a holding period of three or five years.

        Novartis currently has three share savings plans:

–

Worldwide 37 key executives were invited to participate in the Leveraged Share Savings Plan (LSSP) based on their performance in 2014. At the participant's election, the Annual Incentive is awarded partly or entirely in shares. The elected number of shares was delivered in 2015 and is subject to a holding period of five years. At the end of the holding period, Novartis will match the invested shares at a ratio of 1-to-1 (i.e. one share awarded for each invested share). In the US both the LSSP award and the corresponding match are cash settled.

–

In Switzerland, the Employee Share Ownership Plan (ESOP) was available to 12,796 associates in 2014. ESOP participants may choose to receive their Annual Incentive (i) 100% in shares, (ii) 50% in shares and 50% in cash or (iii) 100% in cash. After expiration of a three-year holding period for Novartis shares invested under the ESOP, each participant will receive one matching share for every two Novartis shares invested. A total of 5,945 associates chose to receive shares under the ESOP for their performance in 2014 and the invested shares were delivered in 2015.

–

In the United Kingdom, 1,618 associates can invest up to 5% of their monthly salary in shares (up to a maximum of GBP 125) and also may be invited to invest all or part of their net Annual Incentive in shares. Two invested shares are matched with one share with a holding period of three years. During 2015, 1,433 participants elected to participate in this plan.

        Following the introduction of the new compensation programs in 2014, the CEO and the other Executive Committee members are no longer eligible to participate in the share savings plans.

        Associates may only participate in one of these plans in any given year.

        During 2015, a total of 4.1 million shares (2014: 4.8 million shares) were delivered to associates in lieu of their annual incentive (in the UK, also their salary).

F-83

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26.   Equity-Based Participation Plans for Associates (Continued)

Novartis Equity Plan "Select"

        The Equity Plan "Select" is a global equity incentive plan under which eligible associates, including Executive Committee members up to performance year 2013, may annually be awarded a grant subject to a three year vesting period. For certain associates the grant is subject to the achievement of predetermined business and individual performance objectives typically set at the start of the calendar year prior to the date of grant. For these associates the Select award is capped at 200% of target. No awards are granted for performance ratings below a certain threshold.

        The Equity Plan "Select" currently allows its participants in Switzerland to choose the form of their equity compensation in restricted shares or restricted share units (RSUs). In all other jurisdictions, RSUs are typically granted. Until 2013, participants could also choose to receive part or the entire grant in the form of tradable share options.

        Tradable share options expire on their 10th anniversary from the grant date. Each tradable share option entitles the holder to purchase after vesting (and before the 10th anniversary from the grant date) one Novartis share at a stated exercise price that equals the closing market price of the underlying share at the grant date.

        The terms and conditions of the Novartis Equity Plan "Select" outside North America are substantially equivalent to the Novartis Equity Plan "Select" for North America.

Novartis Equity Plan "Select" outside North America

        Participants in this plan were granted in 2015 a total of 1.7 million restricted shares and RSUs at CHF 84.75 (2014: 2.1 million restricted shares and RSUs at CHF 73.75).

        The following table shows the activity associated with the share options during the period. The weighted average prices in the table below are translated from Swiss Francs into $ at historical rates.

	2015					2014
	Options			Weighted average exercise price		Options			Weighted average exercise price
	(millions)			($)		(millions)			($)
Options outstanding at January 1		16.1			59.2		26.4			57.3
Sold or exercised		(4.1	)		56.7		(9.8	)		54.0
Forfeited or expired		(0.3	)		66.0		(0.5	)		62.2
Outstanding at December 31		11.7			59.9		16.1			59.2
Exercisable at December 31		7.4			56.4		7.0			55.0

        All share options were granted at an exercise price which was equal to the closing market price of the Group's shares at the grant date. The weighted average exercise price during the period the options were sold or exercised in 2015 was $56.74. The weighted average share price at the dates of sale was $97.89.

F-84

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26.   Equity-Based Participation Plans for Associates (Continued)

        The following table summarizes information about share options outstanding at December 31, 2015:

	Options outstanding
Range of exercise prices ($)	Number outstanding		Average remaining contractual life		Weighted average exercise price
	(millions)		(years)		($)
45–49		0.8		3.0		46.8
50–54		1.6		3.1		54.4
55–59		4.6		4.1		57.8
65–70		4.7		7.0		66.0
Total		11.7		5.1		59.9

Novartis Equity Plan "Select" for North America

        Participants in this plan were granted a total of 3.9 million RSUs at $98.75 (2014: 5.1 million RSUs at $80.79).

        The following table shows the activity associated with the American Depositary Receipts (ADR) options during the period:

	2015					2014
	ADR options			Weighted average exercise price		ADR options			Weighted average exercise price
	(millions)			($)		(millions)			($)
Options outstanding at January 1		44.4			59.6		58.8			58.9
Sold or exercised		(11.8	)		57.8		(12.2	)		55.5
Forfeited or expired		(0.7	)		63.3		(2.2	)		62.6
Outstanding at December 31		31.9			60.2		44.4			59.6
Exercisable at December 31		19.2			56.3		16.3			54.7

        All ADR options were granted at an exercise price which was equal to the closing market price of the ADRs at the grant date. The weighted average exercise price during the period the ADR options were sold or exercised in 2015 was $57.75. The weighted average ADR price at the dates of sale or exercise was $100.58.

F-85

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26.   Equity-Based Participation Plans for Associates (Continued)

        The following table summarizes information about ADR options outstanding at December 31, 2015:

	ADR options outstanding
Range of exercise prices ($)	Number outstanding		Average remaining contractual life		Weighted average exercise price
	(millions)		(years)		($)
45–49		2.4		3.0		46.4
50–54		3.1		3.5		53.8
55–59		12.7		5.0		58.0
65–69		13.7		7.0		66.1
Total		31.9		5.6		60.2

Long-Term Performance Plans

        In 2014, a new LTPP was introduced for the CEO and other key executives designed to not only drive long-term shareholder value, but also innovation. From 2015 onwards, this LTPP was extended to all key executives who previously participated in the now discontinued Old LTPP (OLTPP).

        The rewards of the LTPP are based on three year performance objectives focused on financial and innovation measures. The financial measure is Novartis Cash Value Added (NCVA). The weighting of this measure is 75%. The NCVA target is approved by the Board of Directors.

        The innovation measure is based on a holistic approach under which divisional innovation targets are set at the beginning of the cycle, comprised of up to ten target milestones that represent the most important research and development project milestones for each division. At the end of the performance period, the Research & Development Committee assists the Board of Directors and the Compensation Committee in evaluating performance against the innovation targets at the end of the cycle. The weighting of this measure is 25%.

        Until 2014 (2013 for the CEO and other key executives), the OLTPP was available. The rewards are based on rolling three year performance objectives focused on the Novartis Economic Value Added (NVA). The NVA is calculated based on Group operating income and income from associated companies adjusted for interest, taxes and cost of capital charge. The performance realization of a plan cycle is obtained right after the end of the third plan year by adding together the annual NVA realizations of all plan years of the plan cycle. The performance ratio for a plan cycle is obtained by dividing the performance realization for the plan cycle with the performance target for the plan cycle, expressing the result as a percentage. The OLTPP only allows a payout if the actual NVA exceeds predetermined target thresholds. The payout is capped at 200% of target.

        Under the LTPP and OLTPP, participants are granted a target number of Performance Share Units (PSUs) at the beginning of every performance period, which are converted into Novartis shares after the performance period. PSUs do not carry voting rights, but do carry dividend equivalents that are reinvested in additional PSUs and paid at vesting to the extent that performance conditions have been met. PSUs granted under the OLTPPs do not carry any dividend, dividend equivalent or voting rights.

F-86

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26.   Equity-Based Participation Plans for Associates (Continued)

        At the end of the three-year performance period, the Compensation Committee adjusts the target number of PSUs earned based on actual performance. PSUs are converted into unrestricted Novartis shares without an additional vesting period.

        In 2015, 0.4 million LTPP PSUs (2014: 0.3 million LTPP PSUs) based on achieving 100% of target were granted to 164 key executives. No PSUs were granted in 2015 under the OLTPP (2014: 0.2 million OLTPP PSUs).

Long-Term Relative Performance Plan (LTRPP)

        The Long-Term Relative Performance Plan, was introduced in 2014, and is an equity plan for the CEO and other key executives. The target incentive is 100% of base compensation for the CEO and ranges from 30% to 90% for other key executives. It is capped at 200% of target. LTRPP is based on the achievement of long-term Group Total Shareholder Return (TSR) versus our peer group of 12 companies in the healthcare industry over rolling three-year performance periods. TSR is calculated in $ as share price growth plus dividends over the three-year performance period. The calculation will be based on Bloomberg standard published TSR data, which is publicly available. The position in the peer group determines the payout range.

        The fair value of the LTRPP award was determined to be CHF 48.58 and $56.60 as of the grant date. In 2015, a total of 0.1 million LTRPP PSUs (2014: 0.1 million LTRPP PSUs) based on achieving 100% of target were granted to 12 executives.

Other Share Awards

        Selected associates, excluding the Executive Committee members, may exceptionally receive Special Share Awards of restricted shares or RSUs. These Special Share Awards provide an opportunity to reward outstanding achievements or exceptional performance and aim at retaining key contributors. They are based on a formal internal selection process, in which the individual performance of each candidate is thoroughly assessed at several management levels. Special Share Awards generally have a five-year vesting period. In exceptional circumstances, Special Share Awards may be rewarded to attract special expertise and new talents into the organization. These grants are consistent with market practice and Novartis' philosophy to attract, retain and motivate best-in-class talents around the world.

        Worldwide 848 associates at different levels in the organization were awarded 0.8 million restricted shares and RSUs in 2015 (2014: 0.8 million restricted shares and RSUs).

        In addition, in 2015, Board members received 32,087 unrestricted shares as part of their regular compensation.

F-87

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26.   Equity-Based Participation Plans for Associates (Continued)

Summary of non-vested share movements

        The table below provides a summary of non-vested share movements (restricted shares, RSUs and PSUs) for all plans:

	2015						2014
	Number of shares in millions			Fair value in $ m			Number of shares in millions			Fair value in $ m
Non-vested shares at January 1		24.2			1,702.5			23.1			1,370.6
Granted		12.4			1,157.0			14.5			1,153.4
Vested		(14.4	)		(968.9	)		(11.5	)		(709.2	)
Forfeited		(2.1	)		(139.6	)		(1.9	)		(112.3	)
Non-vested shares at December 31		20.1			1,751.0			24.2			1,702.5

Alcon, Inc., Equity Plans Granted to Associates Prior to the Merger

        At the completion of the merger of Alcon, Inc., into Novartis on April 8, 2011, all awards outstanding under the Alcon equity plans were converted into awards based upon Novartis shares with a conversion factor of 3.0727 as defined in the Merger Agreement. There were no grants in 2015 and 2014, although certain of the unvested awards under the Alcon equity plans continued to have expense in 2014.

Share options and share-settled appreciation rights

        Share options entitle the recipient to purchase Novartis shares at the closing market price of the former Alcon, Inc., share on the day of grant divided by the conversion factor.

        Share-settled appreciation rights (SSAR) entitle the participant to receive, in the form of Novartis shares, the difference between the values of the former Alcon, Inc., share at the date of grant, converted into Novartis shares using the conversion factor, and the Novartis share price at the date of exercise.

F-88

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26.   Equity-Based Participation Plans for Associates (Continued)

        The following table shows the activity associated with the converted Novartis share options and SSARs during 2015 and 2014:

	Number of options			Weighted average exercise price		Number of SSARs			Weighted average exercise price
	(millions)			($)		(millions)			($)
Outstanding at January 1, 2014		1.2			27.7		3.1			36.3
Exercised		(0.5	)		24.4		(0.7	)		38.7
Outstanding at December 31, 2014		0.7			30.1		2.4			35.6
Exercisable at December 31, 2014		0.7			30.1		2.4			35.6
Outstanding at January 1, 2015		0.7			30.1		2.4			35.6
Exercised		(0.5	)		27.4		(0.6	)		32.5
Outstanding at December 31, 2015		0.2			36.8		1.8			36.6
Exercisable at December 31, 2015		0.2			36.8		1.8			36.6

27.   Transactions with Related Parties

Genentech/Roche

        Novartis has two agreements with Genentech, Inc., USA, a subsidiary of Roche Holding AG which is indirectly included in the consolidated financial statements using equity accounting since Novartis holds 33.3% of the outstanding voting shares of Roche.

Lucentis

        Novartis has licensed the exclusive rights to develop and market Lucentis outside the United States for indications related to diseases of the eye. As part of this agreement, Novartis paid Genentech/Roche an initial milestone and shared the cost for the subsequent development by making additional milestone payments upon the achievement of certain clinical development points and product approval. Novartis also pays royalties on the net sales of Lucentis products outside the United States. In 2015, Lucentis sales of $2.1 billion (2014: $2.4 billion, 2013: $2.4 billion) have been recognized by Novartis.

        In November 2015, Genentech/Roche entered into an agreement with Novartis resulting from an opt-in right related to Novartis entering into a Licensing and Commercialization agreement with Ophthotech Corporation to commercialize pegpleranib (otherwise known as Fovista and OAP030) to treat wet age-related macular degeneration (AMD) and various presentations or combinations with pegpleranib outside of the United States. Pursuant to the agreement, Novartis and Genentech/Roche will share in some development costs related to pegpleranib and if development is successful, Novartis will pay royalties on the net sales of pegpleranib outside of the United States.

F-89

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

27.   Transactions with Related Parties (Continued)

Xolair

        In February 2004, Novartis Pharma AG, Genentech, Inc., and Tanox, Inc., finalized a three-party collaboration to govern the development and commercialization of certain anti-IgE antibodies including Xolair and TNX-901. Under this agreement, all three parties co-developed Xolair. On August 2, 2007, Genentech, Inc. completed the acquisition of Tanox, Inc. and has taken over its rights and obligations. Novartis and Genentech/Roche are co-promoting Xolair in the United States where Genentech/Roche records all sales. Novartis records sales outside of the United States.

        Novartis markets Xolair and records all sales and related costs outside the United States as well as co-promotion costs in the United States. Genentech/Roche and Novartis share the resulting profits from sales in the United States, Europe and other countries, according to agreed profit-sharing percentages. In 2015, Novartis recognized total sales of Xolair of $755 million (2014: $777 million, 2013: $613 million) including sales to them for the United States market.

        The net expense for royalties, cost sharing and profit sharing arising out of the Lucentis and Xolair agreements with Genentech/Roche totaled $309 million in 2015 (2014: $536 million, 2013: $570 million).

        Furthermore, Novartis has several patent license, supply and distribution agreements with Roche.

Executive Officer and Non-Executive Director Compensation

        During 2015, there were 11 Executive Committee members ("Executive Officers"), including those who stepped down during the year (14 members in 2014 also including those who stepped down, 12 members in 2013 also including those who stepped down).

        The total compensation for members of the Executive Committee and the 12 Non-Executive Directors (14 in 2014, 15 in 2013) using the Group's accounting policies for equity-based compensation and pension benefits was as follows:

	Executive Officers						Non-Executive Directors						Total
	2015		2014		2013		2015		2014		2013		2015		2014		2013
	$ m		$ m		$ m		$ m		$ m		$ m		$ m		$ m		$ m
Benefits other than equity-based amounts		17.1		18.3		16.0		4.7		6.2		8.6		21.8		24.5		24.6
Post-employment benefits		1.9		2.1		1.9				0.1		1.4		1.9		2.2		3.3
Termination benefits						4.0												4.0
Equity-based compensation		52.9		81.7		46.5		4.4		4.9		5.7		57.3		86.6		52.2
Total		71.9		102.1		68.4		9.1		11.2		15.7		81.0		113.3		84.1

        During 2015, there was a decrease in the IFRS compensation expense for Executive Committee members compared to 2015, mainly due to the decrease in number of Executive Committee members.

F-90

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

27.   Transactions with Related Parties (Continued)

        During 2014, there was an increase in the IFRS expense, compared to 2013, for equity-based compensation for Executive Committee members principally due to the following factors:

–

In the year, certain Executive Committee members either retired or met the early retirement conditions resulting in an accelerated expense under IFRS, in accordance with the relevant plan terms.

–

There was a net increase in the number of Executive Committee members; higher equity-based compensation expense for prior year grants not yet fully vested; and the expense relating to the loss of equity-based entitlements from a previous employer.

        The annual incentive award, which is fully included in equity-based compensation even when paid out in cash, is granted in January in the year following the reporting period.

Transactions with Former Members of the Board of Directors

        During 2015 and 2014, no payments (or waivers of claims) were made to former Board members or to "persons closely" linked to them, except for the following amounts:

        Prof. Dr. William R. Brody and Prof. Dr. Rolf M. Zinkernagel, who stepped down from the Board of Directors at the 2014 AGM, received delegated Board membership fees for their work on the Boards of the Novartis Institute for Tropical Diseases (Prof. Dr. Zinkernagel) and the Genomics Institute of the Novartis Research Foundation (Prof. Dr. Brody and Prof. Dr. Zinkernagel). During 2015, an amount of CHF 100,000 and CHF 200,000 was paid to Prof. Dr. Brody and Prof. Dr. Zinkernagel, respectively, for their work on these Boards. Their mandate on the Board of the Genomics Institute of the Novartis Research Foundation ended as of November 19, 2015.

        Dr. Alex Krauer, Honorary Chairman, is entitled to an amount of CHF 60,000 for annual periods from one AGM to the next. This amount was fixed in 1998 upon his departure from the Board in 1999, and has not been revised since that date. An amount of CHF 60,000 was paid to Dr. Krauer during 2015. Due to a change in the timing of payments, an amount of CHF 45,000 was paid to Dr. Krauer, during 2014.

        In 2015, Dr. Daniel Vasella, Honorary Chairman, received the contractual minimum compensation of $250,000 (2014: $363,552) under an agreement which became effective on November 1, 2013 and will last until the end of 2016. Under this agreement, Dr. Vasella is compensated at a rate of $25,000 per day, with an annual guaranteed minimum fee of $250,000. This amount is in line with compensation practices at other large companies when retired Chairmen or CEOs were retained in consulting agreements after leaving the board of directors.

        In 2014, Dr. Vasella acquired an asset from a consolidated entity at fair value and exercised an option to acquire, at a future date, real estate in Risch, Zug, Switzerland. The real estate transaction closed in 2015 and Dr. Vasella acquired the Group assets from a consolidated entity for an arm's length transaction price determined on the basis of two independent external assessments.

        In 2013, Dr. Vasella received a total amount of CHF 5.1 million from the date of the AGM, when he stepped down as Chairman and Board member, to December 31, 2013.

F-91

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

27.   Transactions with Related Parties (Continued)

Transactions with a Future Executive Officer

        As announced on September 24, 2015, Dr. James E. Bradner will succeed Dr. Mark Fishman as President of the Novartis Institutes for BioMedical Research (NIBR) and member of the ECN with effect from March 1, 2016. In 2015, a subsidiary acquired Dr. Bradner's 10 million shares (7% interest) in a non-material entity for $10 million. The arm's length transaction price was determined based on the most recent round of financing of this entity.

        The above disclosures related to Dr. Vasella and Dr. Bradner are made on a voluntary basis.

28.   Commitments and Contingencies

Leasing Commitments

        The Group has entered into various fixed term operational leases, mainly for cars and real estate. As of December 31, 2015 the Group's commitments with respect to these leases, including estimated payment dates, were as follows:

	2015
	$ m
2016		273
2017		202
2018		133
2019		103
2020		104
Thereafter		2,181
Total		2,996
Expense of current year		313

Research & Development Commitments

        The Group has entered into long-term research agreements with various institutions which provide for potential milestone payments and other payments by Novartis that may be capitalized. As of

F-92

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

28.   Commitments and Contingencies (Continued)

December 31, 2015 the Group's commitments to make payments under those agreements, and their estimated timing, were as follows:

	Unconditional commitments		Potential milestone payments		Total 2015
	$ m		$ m		$ m
2016		88		601		689
2017		61		343		404
2018		86		438		524
2019		65		152		217
2020		200		474		674
Thereafter		150		397		547
Total		650		2,405		3,055

Other Commitments

        The Novartis Group entered into various purchase commitments for services and materials as well as for equipment in the ordinary course of business. These commitments are generally entered into at current market prices and reflect normal business operations.

Contingencies

        Group companies have to observe the laws, government orders and regulations of the country in which they operate.

        The Group's potential environmental remediation liability is assessed based on a risk assessment and investigation of the various sites identified by the Group as at risk for environmental remediation exposure. The Group's future remediation expenses are affected by a number of uncertainties. These uncertainties include, but are not limited to, the method and extent of remediation, the percentage of material attributable to the Group at the remediation sites relative to that attributable to other parties, and the financial capabilities of the other potentially responsible parties.

        A number of Group companies are currently involved in administrative proceedings, litigations and investigations arising out of the normal conduct of their business. These litigations include product liabilities, governmental investigations and other legal matters. While provisions have been made for probable losses, which management deems to be reasonable or appropriate, there are uncertainties connected with these estimates.

        Note 20 contains a more extensive discussion of these matters.

        A number of Group companies are involved in legal proceedings concerning intellectual property rights. The inherent unpredictability of such proceedings means that there can be no assurances as to their ultimate outcome. A negative result in any such proceeding could potentially adversely affect the ability of certain Novartis companies to sell their products or require the payment of substantial damages or royalties.

        In the opinion of management, however, the outcome of these actions will not materially affect the Group's financial position but could be material to the results of operations or cash flow in a given period.

F-93

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures

	Note		2015(1)			2014(1)
			$ m			$ m
Cash and cash equivalents		16		4,674			13,023
Financial assets—measured at fair value through other comprehensive income
Available-for-sale marketable securities
Debt securities		16		339			327
Equity securities		16		6			15
Fund investments		16		33			35
Total available-for-sale marketable securities				378			377
Available-for-sale long-term financial investments
Equity securities		13		1,173			937
Fund investments		13		90			71
Contingent consideration receivables		13		550
Total available-for-sale long-term financial investments				1,813			1,008
Total financial assets—measured at fair value through other comprehensive income				2,191			1,385
Financial assets—measured at amortized costs
Trade receivables and other current assets (excluding pre-payments)		15/17		10,551			10,255
Accrued interest on debt securities and time deposits		16		2			3
Time deposits with original maturity more than 90 days		16		164			6
Long-term loans and receivables from customers and finance lease, advances, security deposits		13		653			712
Total financial assets—measured at amortized costs				11,370			10,976
Financial assets—measured at fair value through the consolidated income statement
Associated companies at fair value through profit and loss				181			234
Derivative financial instruments		16		143			356
Total financial assets—measured at fair value through the consolidated income statement				324			590
Total financial assets				18,559			25,974
Financial liabilities—measured at amortized costs
Current financial debt
Interest bearing accounts of associates payable on demand		21		1,645			1,651
Bank and other financial debt		21		1,185			1,272
Commercial paper		21		1,085			648
Current portion of non-current debt		21		1,659			2,989
Total current financial debt				5,574			6,560
Non-current financial debt
Straight bonds		19		17,193			15,982
Liabilities to banks and other financial institutions		19		706			803
Finance lease obligations		19		87			3
Current portion of non-current debt		19		(1,659	)		(2,989	)
Total non-current financial debt				16,327			13,799
Trade payables and commitment for repurchase of own shares (see Note 22)				5,668			6,077
Total financial liabilites—measured at amortized costs				27,569			26,436
Financial liabilities—measured at fair value through the consolidated income statement
Contingent consideration (see Note 20/22) and other financial liabilities				1,105			756
Derivative financial instruments		21		30			52
Total financial liabilities—measured at fair value through the consolidated income statement				1,135			808
Total financial liabilities				28,704			27,244

⁽¹⁾

Except for straight bonds (see Note 19) the carrying amount is a reasonable approximation of fair value.

Derivative Financial Instruments

        The following tables show the contract or underlying principal amounts and fair values of derivative financial instruments analyzed by type of contract at December 31, 2015 and 2014. Contract or underlying principal amounts indicate the volume of business outstanding at the consolidated balance sheet date and

F-94

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

do not represent amounts at risk. The fair values are determined by reference to market prices or standard pricing models that use observable market inputs at December 31, 2015 and 2014.

	Contract or underlying principal amount				Positive fair values				Negative fair values
	2015		2014		2015		2014		2015			2014
	$ m		$ m		$ m		$ m		$ m			$ m
Currency related instruments
Forward foreign exchange rate contracts		8,795		10,072		142		283		(30	)		(52	)
Over-the-Counter currency options		459		1,715		1		73
Total of currency related instruments		9,254		11,787		143		356		(30	)		(52	)
Total derivative financial instruments included in marketable securities and in current financial debts		9,254		11,787		143		356		(30	)		(52	)

        The following table shows by currency contract or underlying principal amount the derivative financial instruments at December 31, 2015 and 2014:

December 31, 2015	EUR		$		JPY		Other		Total
	$ m		$ m		$ m		$ m		$ m
Currency related instruments
Forward foreign exchange rate contracts		2,828		4,713		42		1,212		8,795
Over-the-Counter currency options		459								459
Total of currency related instruments		3,287		4,713		42		1,212		9,254
Total derivative financial instruments		3,287		4,713		42		1,212		9,254

December 31, 2014	EUR		$		JPY		Other		Total
	$ m		$ m		$ m		$ m		$ m
Currency related instruments
Forward foreign exchange rate contracts		3,681		3,159		38		3,194		10,072
Over-the-Counter currency options		1,215		500						1,715
Total of currency related instruments		4,896		3,659		38		3,194		11,787
Total derivative financial instruments		4,896		3,659		38		3,194		11,787

Derivative financial instruments effective for hedge accounting purposes

        At the end of 2015 and 2014, there were no open hedging instruments for anticipated transactions.

F-95

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

Fair value by hierarchy

        As required by IFRS, financial assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. There are three hierarchical levels, based on an increasing amount of subjectivity associated with the inputs to derive fair valuation for these assets and liabilities, which are as follows:

        The assets carried at Level 1 fair value are equity and debt securities listed in active markets.

        The assets generally included in Level 2 fair value hierarchy are foreign exchange and interest rate derivatives and certain debt securities. Foreign exchange derivatives and interest rate derivatives are valued using corroborated market data. The liabilities generally included in this fair value hierarchy consist of foreign exchange and interest rate derivatives.

        Level 3 inputs are unobservable for the asset or liability. The assets generally included in Level 3 fair value hierarchy are various investments in hedge funds and unquoted equity security investments. Contingent consideration carried at fair value is included in this category.

2015	Level 1		Level 2			Level 3			Valued at amortized cost		Total
	$ m		$ m			$ m			$ m		$ m
Financial assets
Debt securities		316		23								339
Equity securities		6										6
Fund investments		29					4					33
Total available-for-sale marketable securities		351		23			4					378
Time deposits with original maturity more than 90 days										164		164
Derivative financial instruments				143								143
Accrued interest on debt securities										2		2
Total marketable securities, time deposits and derivative financial instruments		351		166			4			166		687
Available-for-sale financial investments		700					473					1,173
Fund investments							90					90
Contingent consideration receivables							550					550
Long-term loans and receivables from customers and finance lease, advances, security deposits										653		653
Financial investments and long-term loans		700					1,113			653		2,466
Associated companies at fair value through profit and loss							181					181
Financial liabilities
Contingent consideration payables							(790	)				(790	)
Other financial liabilities							(315	)				(315	)
Derivative financial instruments				(30	)							(30	)
Total financial liabilities at fair value				(30	)		(1,105	)				(1,135	)

F-96

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

2014	Level 1		Level 2			Level 3			Valued at amortized cost		Total
	$ m		$ m			$ m			$ m		$ m
Financial assets
Debt securities		301		26								327
Equity securities		15										15
Fund investments		29					6					35
Total available-for-sale marketable securities		345		26			6					377
Time deposits with original maturity more than 90 days										6		6
Derivative financial instruments				356								356
Accrued interest on debt securities										3		3
Total marketable securities, time deposits and derivative financial instruments		345		382			6			9		742
Available-for-sale financial investments		605					332					937
Fund investments							71					71
Long-term loans and receivables from customers and finance lease, advances, security deposits										712		712
Financial investments and long-term loans		605					403			712		1,720
Associated companies at fair value through profit and loss		66					168					234
Financial liabilities
Contingent consideration payables							(756	)				(756	)
Derivative financial instruments				(52	)							(52	)
Total financial liabilities at fair value				(52	)		(756	)				(808	)

        The analysis above includes all financial instruments including those measured at amortized cost or at cost.

F-97

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

        The change in carrying values associated with Level 3 financial instruments using significant unobservable inputs during the year ended December 31 are set forth below:

2015	Associated Companies at fair value through profit and loss			Fund investments			Available- for-sale financial investments			Contingent Consideration Receivables and other current financial assets			Contingent consideration payables and other financial liabilities
	$ m			$ m			$ m			$ m			$ m
January 1		168			77			332						756
Impact of business combinations											75
Fair value gains and other adjustments, including from divestments recognized in the consolidated income statement		9			7			41			1,000
Fair value losses (including impairments and amortizations) and other adjustments recognized in the consolidated income statement		(25	)		(1	)		(35	)		(75	)		644
Gains recognized in the consolidated statement of comprehensive income					17			22
Purchases		62			24			142						255
Cash receipts and payments											(450	)		(550	)
Proceeds from sales					(15	)		(56	)
At equity investments reclassified due to loss of significant influence								18
Reclassification		(33	)		(15	)		9
Currency translation effects
December 31		181			94			473			550			1,105
Total of fair value gains and losses recognized in the consolidated income statement for assets and liabilities held at December 31, 2015		(16	)		6			6			925			644

F-98

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

2014	Associated Companies at fair value through profit and loss			Equity securities			Fund investments			Available- for-sale financial investments			Contingent consideration payables
	$ m			$ m			$ m			$ m			$ m
January 1		0			26			63			366			572
Fair value gains recognized in the consolidated income statement		12						2			17			51
Fair value losses (including impairments and amortizations) recognized in the consolidated income statement		(24	)								(51	)		(20	)
Gains recognized in the consolidated statement of comprehensive income					3			3			7
Purchases		27						7			140			153
Proceeds from sales		(26	)					(9	)		(23	)
Reclassification		179			(29	)		16			(114	)
Currency translation effects								(5	)		(10	)
December 31		168			0			77			332			756
Total of fair value gains and losses recognized in the consolidated income statement for assets and liabilities held at December 31, 2014		(12	)					2			(34	)		31

        No significant transfers from one level to the other occurred during the reporting period. Realized gains and losses associated with Level 3 available-for-sale marketable securities are recorded in the consolidated income statement under "Other financial income and expense" and gains and losses associated with Level 3 available-for-sale financial investments are recorded in the consolidated income statement under "Other income" or "Other expense", respectively.

        If the pricing parameters for the Level 3 input were to change for associated companies at fair value through profit and loss, equity securities, fund investments and for available-for-sale financial investments by 10% positively or negatively, respectively, this would change the amounts recorded in the consolidated statement of comprehensive income by $75 million.

        For the determination of the fair value of a contingent consideration various unobservable inputs are used. A change in these inputs might result in a significantly higher or lower fair value measurement. The significance and usage of these inputs may vary amongst the existing contingent considerations due to differences in the triggering events for payments or in the nature of the asset the contingent consideration relates to. Amongst others, the inputs used are the probability of success, sales forecast and assumptions regarding the discount rate, timing and different scenarios of triggering events. The inputs are interrelated. If the most significant parameters for the Level 3 input were to change by 10% positively or negatively, or where the probability of success (POS) is the most significant input parameter 10% were to be added or deducted from the applied POS for contingent consideration payables and other financial liabilities and contingent consideration receivables and other current financial assets, this would change

F-99

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

the amounts recorded in the consolidated income statement by $201 million and $196 million, respectively.

Nature and Extent of Risks Arising From Financial Instruments

Market Risk

        Novartis is exposed to market risk, primarily related to foreign currency exchange rates, interest rates and the market value of the investments of liquid funds. The Group actively monitors and seeks to reduce, where it deems it appropriate to do so, fluctuations in these exposures. It is the Group's policy and practice to enter into a variety of derivative financial instruments to manage the volatility of these exposures and to enhance the yield on the investment of liquid funds. It does not enter any financial transactions containing a risk that cannot be quantified at the time the transaction is concluded. In addition, it does not sell short assets it does not have, or does not know it will have, in the future. The Group only sells existing assets or enters into transactions and future transactions (in the case of anticipatory hedges) that it confidently expects it will have in the future, based on past experience. In the case of liquid funds, the Group writes call options on assets it has or it writes put options on positions it wants to acquire and has the liquidity to acquire. The Group expects that any loss in value for these instruments generally would be offset by increases in the value of the underlying transactions.

Foreign currency Exchange Rate Risk

        The Group uses the $ as its reporting currency. As a result, the Group is exposed to foreign currency exchange movements, primarily in European, Japanese and emerging market currencies. Fluctuations in the exchange rates between the US dollar and other currencies can have a significant effect on both the Group's results of operations, including reported sales and earnings, as well as on the reported value of our assets, liabilities and cash flows. This in turn may significantly affect the comparability of period-to-period results of operations.

        Because our expenditures in Swiss francs are significantly higher than our revenues in Swiss francs, volatility in the value of the Swiss franc can have a significant impact on the reported value of our earnings, assets and liabilities, and the timing and extent of such volatility can be difficult to predict. In addition, there is a risk that certain countries could take other steps which could significantly impact the value of their currencies.

        The Group is exposed to a potential adverse devaluation risk on its intercompany funding and total investment in certain subsidiaries operating in countries with exchange controls. The most significant country in this respect is Venezuela, where the Group has an equivalent of approximately $0.2 billion of cash in local currency, which is only slowly being approved for remittance outside of the country. As a result, the Group is exposed to a potential devaluation loss in the income statement on its total intercompany balances with its subsidiaries in Venezuela, which at December 31, 2015 amounted to $0.3 billion.

        In 2014 and through October 2015, the exchange rate used by the Group for consolidation of the financial statements of its Venezuela subsidiaries was the official exchange rate for the Venezuela bolivar (VEF) of VEF 6.3/$, which is available for imports of specific goods and services of national priority, including medicines and medical supplies, as published by the Centro Nacional de Comercio Exterior (CENCOEX, formerly CADIVI).

F-100

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

        In November 2015, a Venezuela subsidiary of the Group agreed with CENCOEX to settle a substantial part of our intercompany trade payables dated on or before December 31, 2014 in a transaction that required the Venezuela subsidiary to purchase a $ denominated bond at par value issued by Petróleos de Venezuela (PDVSA), with a coupon rate of 6% per annum maturing in 2024. In Venezuela there are differing official exchange rates against the $ and for the settlement of these intercompany trade payables, through the purchase of the $ bond, CENCOEX set the exchange rate at VEF 11.0/$. As a result, from November 2015 the Group changed its exchange rate used for consolidation of the financial statements of its Venezuela subsidiaries. The use of the new exchange rate by the Venezuela subsidiaries resulted in a $211 million loss from the re-measurement of the intra-Group and third party liabilities.

        Novartis seeks to manage currency exposure by engaging in hedging transactions where management deems appropriate. Novartis may enter into various contracts that reflect the changes in the value of foreign currency exchange rates to preserve the value of assets, commitments and anticipated transactions. Novartis also uses forward contracts and foreign currency option contracts to hedge.

        Net investments in subsidiaries in foreign countries are long-term investments. Their fair value changes through movements of foreign currency exchange rates. The Group only hedges the net investments in foreign subsidiaries in exceptional cases.

Commodity Price Risk

        The Group has only a very limited exposure to price risk related to anticipated purchases of certain commodities used as raw materials by the Group's businesses. A change in those prices may alter the gross margin of a specific business, but generally by not more than 10% of the margin and thus below the Group's risk management tolerance levels. Accordingly, the Group does not enter into significant commodity futures, forward and option contracts to manage fluctuations in prices of anticipated purchases.

Interest Rate Risk

        The Group addresses its net exposure to interest rate risk mainly through the ratio of its fixed rate financial debt to variable rate financial debt contained in its total financial debt portfolio. To manage this mix, Novartis may enter into interest rate swap agreements, in which it exchanges periodic payments based on a notional amount and agreed upon fixed and variable interest rates.

Equity Risk

        The Group may purchase equities as investments of its liquid funds. As a policy, it limits its holdings in an unrelated company to less than 5% of its liquid funds. Potential investments are thoroughly analyzed. Call options are written on equities that the Group owns, and put options are written on equities which the Group wants to buy and for which cash is available.

Credit Risk

        Credit risks arise from the possibility that customers may not be able to settle their obligations as agreed. To manage this risk the Group periodically assesses the financial reliability of customers, taking

F-101

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

into account their financial position, past experience and other factors. Individual risk limits are set accordingly.

        The Group's largest customer accounts for approximately 14% of net sales, and the second and third largest customers account for 11% and 5% of net sales, respectively (2014: 12%, 11% and 5% respectively). No other customer accounted for 5% or more of net sales, in either year.

        The highest amounts of trade receivables outstanding were for these same three customers. They amounted to 13%, 9% and 6%, respectively, of the trade receivables at December 31, 2015. There is no other significant concentration of credit risk (2014: 13%, 9% and 5% respectively).

Counterparty Risk

        Counterparty risk encompasses issuer risk on marketable securities and money market instruments, credit risk on cash, time deposits and derivatives as well as settlement risk for different instruments. Issuer risk is reduced by only buying securities which are at least A- rated. Counterparty credit risk and settlement risk are reduced by a policy of entering into transactions with counterparties (banks or financial institutions) that feature a strong credit rating. For short-term investments of less than six months of maturity, the counterparty must be at least A-1/P-1/F-1 rated. Exposure to these risks is closely monitored and kept within predetermined parameters. The limits are regularly assessed and determined based upon credit analysis including financial statement and capital adequacy ratio reviews. In addition, reverse repurchasing agreements are contracted and Novartis has entered into credit support agreements with various banks for derivative transactions.

        The Group's cash and cash equivalents are held with major regulated financial institutions, the three largest ones hold approximately 21.8%, 9.6% and 8.6%, respectively (2014: 11.8%, 7.7% and 7.7%, respectively).

        The Group does not expect any losses from non-performance by these counterparties and does not have any significant grouping of exposures to financial sector or country risk.

Liquidity Risk

        Liquidity risk is defined as the risk that the Group could not be able to settle or meet its obligations on time or at a reasonable price. Group Treasury is responsible for liquidity, funding as well as settlement management. In addition, liquidity and funding risks, related processes and policies are overseen by management. Novartis manages its liquidity risk on a consolidated basis based on business needs, tax, capital or regulatory considerations, if applicable, through numerous sources of financing in order to maintain flexibility. Management monitors the Group's net debt or liquidity position through rolling forecasts on the basis of expected cash flows.

        Novartis has two US commercial paper programs under which it can issue up to $9 billion in the aggregate of unsecured commercial paper notes. Novartis also has a Japanese commercial paper program under which it can issue up to JPY 150 billion (approximately $1.25 billion) of unsecured commercial paper notes. Commercial paper notes totaling $1.1 billion under these three programs were outstanding as per December 31, 2015. Novartis further has a committed credit facility of $6 billion, entered into on September 23, 2015. This credit facility is provided by a syndicate of banks and is intended to be used as a backstop for the US commercial paper programs. It matures in September 2020 and was undrawn as per December 31, 2015.

F-102

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

        The following table sets forth how management monitors net debt or liquidity based on details of the remaining contractual maturities of current financial assets and liabilities excluding trade receivables and payables and contingent considerations at December 31, 2015 and 2014:

December 31, 2015	Due within one month			Due later than one month but less than three months			Due later than three months but less than one year			Due later than one year but less than five years			Due after five years			Total
	$ m			$ m			$ m			$ m			$ m			$ m
Current assets
Marketable securities and time deposits		22			11			200			247			62			542
Commodities														86			86
Derivative financial instruments and accrued interest		40			67			38									145
Cash and cash equivalents		4,674															4,674
Total current financial assets		4,736			78			238			247			148			5,447
Non-current liabilities
Financial debt											(4,664	)		(11,663	)		(16,327	)
Financial debt—undiscounted											(4,676	)		(11,797	)		(16,473	)
Total non-current financial debt											(4,664	)		(11,663	)		(16,327	)
Current liabilities
Financial debt		(3,258	)		(289	)		(2,027	)								(5,574	)
Financial debt—undiscounted		(3,258	)		(289	)		(2,028	)								(5,575	)
Derivative financial instruments		(8	)		(20	)		(2	)								(30	)
Total current financial debt		(3,266	)		(309	)		(2,029	)								(5,604	)
Net debt		1,470			(231	)		(1,791	)		(4,417	)		(11,515	)		(16,484	)

F-103

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

December 31, 2014	Due within one month			Due later than one month but less than three months			Due later than three months but less than one year			Due later than one year but less than five years			Due after five years			Total
	$ m			$ m			$ m			$ m			$ m			$ m
Current assets
Marketable securities and time deposits		21			68			37			181			76			383
Commodities		97															97
Derivative financial instruments and accrued interest		161			126			72									359
Cash and cash equivalents		9,623			3,400												13,023
Total current financial assets		9,902			3,594			109			181			76			13,862
Non-current liabilities
Financial debt											(5,423	)		(8,376	)		(13,799	)
Financial debt—undiscounted											(5,434	)		(8,470	)		(13,904	)
Total non-current financial debt											(5,423	)		(8,376	)		(13,799	)
Current liabilities
Financial debt		(2,678	)		(335	)		(3,547	)								(6,560	)
Financial debt—undiscounted		(2,678	)		(335	)		(3,549	)								(6,562	)
Derivative financial instruments		(18	)		(32	)		(2	)								(52	)
Total current financial debt		(2,696	)		(367	)		(3,549	)								(6,612	)
Net debt		7,206			3,227			(3,440	)		(5,242	)		(8,300	)		(6,549	)

        The consolidated balance sheet amounts of financial liabilities included in the above analysis are not materially different to the contractual amounts due on maturity. The positive and negative fair values on derivative financial instruments represent the net contractual amounts to be exchanged at maturity.

F-104

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

        The Group's contractual undiscounted potential cash flows from derivative financial instruments to be settled on a gross basis are as follows:

December 31, 2015	Due within one month			Due later than one month but less than three months			Due later than three months but less than one year			Total
	$ m			$ m			$ m			$ m
Derivative financial instruments and accrued interest on derivative financial instruments
Potential outflows in various currencies—from financial derivative liabilities		(1,418	)		(2,800	)		(1,602	)		(5,820	)
Potential inflows in various currencies—from financial derivative assets		1,448			2,819			1,601			5,868

December 31, 2014	Due within one month			Due later than one month but less than three months			Due later than three months but less than one year			Total
	$ m			$ m			$ m			$ m
Derivative financial instruments and accrued interest on derivative financial instruments
Potential outflows in various currencies—from financial derivative liabilities		(3,549	)		(3,695	)		(2,527	)		(9,771	)
Potential inflows in various currencies—from financial derivative assets		3,688			3,780			2,646			10,114

F-105

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

        Other contractual liabilities which are not part of management's monitoring of the net debt or liquidity consist of the following items:

December 31, 2015	Due later than one month but less than three months			Due later than three months but less than one year			Due later than one year but less than five years			Due after five years			Total
	$ m			$ m			$ m			$ m			$ m
Contractual interest on non-current liabilities		(104	)		(499	)		(1,878	)		(4,332	)		(6,813	)
Trade payables		(5,668	)											(5,668	)

December 31, 2014	Due later than one month but less than three months			Due later than three months but less than one year			Due later than one year but less than five years			Due after five years			Total
	$ m			$ m			$ m			$ m			$ m
Contractual interest on non-current liabilities		(154	)		(436	)		(1,778	)		(3,087	)		(5,455	)
Trade payables and commitment for repurchase of own shares (see Note 22)		(6,077	)											(6,077	)

Capital Risk Management

        Novartis strives to maintain a strong credit rating. In managing its capital, Novartis focuses on maintaining a strong balance sheet. Moody's rated the Group as Aa3 for long-term maturities and P-1 for short-term maturities and Standard & Poor's had a rating of AA- for long-term and A-1+ for short-term maturities. Fitch had a long-term rating of AA and a short-term rating of F1+.

        The debt/equity ratio decreased to 0.28:1 at December 31, 2015 compared to 0.29:1 at the beginning of the year.

Value at Risk

        The Group uses a value at risk (VAR) computation to estimate the potential ten-day loss in the fair value of its financial instruments.

F-106

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

        A ten-day period is used because of an assumption that not all positions could be undone in one day given the size of the positions. Apart from contingent consideration, finance lease obligations, and long-term loans and receivables, advances and security deposits the VAR computation includes all financial assets and financial liabilities as set forth above in this Note. Trade payables and receivables are considered only to the extent they comprise a foreign currency exposure. In addition, commodities are included in the computation.

        The VAR estimates are made assuming normal market conditions, using a 95% confidence interval. The Group uses a "Delta Normal" model to determine the observed inter-relationships between movements in interest rates, stock markets and various currencies. These inter-relationships are determined by observing interest rate, stock market movements and forward foreign currency rate movements over a sixty-day period for the calculation of VAR amounts.

        The estimated potential ten-day loss in pre-tax income from the Group's foreign currency instruments, the estimated potential ten-day loss of its equity holdings, and the estimated potential ten-day loss in fair value of its interest rate sensitive instruments (primarily financial debt and investments of liquid funds under normal market conditions) as calculated in the VAR model are the following:

	2015		2014
	$ m		$ m
All financial instruments		387		272
Analyzed by components:
Instruments sensitive to foreign currency exchange rates		224		272
Instruments sensitive to equity market movements		50		48
Instruments sensitive to interest rates		353		254

        The average, high, and low VAR amounts are as follows:

2015	Average		High		Low
	$ m		$ m		$ m
All financial instruments		337		387		237
Analyzed by components:
Instruments sensitive to foreign currency exchange rates		313		418		173
Instruments sensitive to equity market movements		55		111		33
Instruments sensitive to interest rates		294		380		251

2014	Average		High		Low
	$ m		$ m		$ m
All financial instruments		240		306		193
Analyzed by components:
Instruments sensitive to foreign currency exchange rates		154		272		83
Instruments sensitive to equity market movements		32		48		18
Instruments sensitive to interest rates		177		254		96

        The VAR computation is a risk analysis tool designed to statistically estimate the maximum potential ten day loss from adverse movements in foreign currency exchange rates, equity prices and interest rates

F-107

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   Financial Instruments—Additional Disclosures (Continued)

under normal market conditions. The computation does not purport to represent actual losses in fair value on earnings to be incurred by the Group, nor does it consider the effect of favorable changes in market rates. The Group cannot predict actual future movements in such market rates and it does not claim that these VAR results are indicative of future movements in such market rates or to be representative of any actual impact that future changes in market rates may have on the Group's future results of operations or financial position.

        In addition to these VAR analyses, the Group uses stress testing techniques that aim to reflect a worst case scenario on the marketable securities which are monitored by Group Treasury. For these calculations, the Group uses the six-month period with the worst performance observed over the past twenty years in each category. For 2015 and 2014, the worst case loss scenario was calculated as follows:

	2015		2014
	$ m		$ m
All financial instruments		12		16
Analyzed by components:
Instruments sensitive to foreign currency exchange rates		1		1
Instruments sensitive to equity market movements		4		8
Instruments sensitive to interest rates		7		7

        In the Group's risk analysis, Novartis considered this worst case scenario acceptable as it could reduce income, but would not endanger the solvency or the investment grade credit standing of the Group.

F-108

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

30.   Discontinued Operations

Discontinued Operations Consolidated Income Statement Segmentation

	Vaccines						Consumer Health(1)						Corporate (including eliminations)						Total discontinued operations
($ m)	2015			2014			2015			2014			2015			2014			2015			2014
Net sales to third parties of discontinued operations		145			1,537			456			4,279									601			5,816
Sales to continuing segments		18			65			1			13									19			78
Net sales of discontinued operations		163			1,602			457			4,292									620			5,894
Other revenues		18			32			5			33									23			65
Cost of goods sold		(192	)		(1,336	)		(184	)		(1,737	)								(376	)		(3,073	)
Gross profit of discontinued operations		(11	)		298			278			2,588									267			2,886
Marketing & Sales		(57	)		(280	)		(187	)		(1,532	)								(244	)		(1,812	)
Research & Development		(151	)		(545	)		(30	)		(312	)								(181	)		(857	)
General & Administration		(26	)		(118	)		(32	)		(313	)								(58	)		(431	)
Other income		2,870			905			10,558			99			(8	)		3			13,420			1,007
Other expense		(57	)		(812	)		(14	)		(60	)		(656	)		(274	)		(727	)		(1,146	)
Operating income/(loss) of discontinued operations		2,568			(552	)		10,573			470			(664	)		(271	)		12,477			(353	)
Income from associated companies		2			2															2			2
Income/(loss) before taxes of discontinued operations																				12,479			(351	)
Taxes																				(1,713	)		(96	)
Net income/(loss) of discontinued operations																				10,766			(447	)

⁽¹⁾

Consumer Health is the aggregation of the OTC and Animal Health divisions.

F-109

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

30.   Discontinued Operations (Continued)

Discontinued Operations Consolidated Income Statement Segmentation (Continued)

	Vaccines(1)						Consumer Health(2)						Transfers to continuing Corporate(3)				Corporate (including eliminations)						Total discontinued operations
(In $ m)	2014			2013			2014			2013			2014	2013			2014			2013			2014			2013
Net sales to third parties of discontinued operations		1,537			1,987			4,279			4,064													5,816			6,051
Sales to continuing segments		65			61			13			11													78			72
Net sales of discontinued operations		1,602			2,048			4,292			4,075													5,894			6,123
Other revenues		32			333			33			36				(84	)								65			285
Cost of goods sold		(1,336	)		(1,578	)		(1,737	)		(1,751	)			7									(3,073	)		(3,322	)
Gross profit of discontinued operations		298			803			2,588			2,360				(77	)								2,886			3,086
Marketing & Sales		(280	)		(334	)		(1,532	)		(1,577	)												(1,812	)		(1,911	)
Research & Development		(545	)		(476	)		(312	)		(305	)												(857	)		(781	)
General & Administration		(118	)		(140	)		(313	)		(316	)									(1	)		(431	)		(457	)
Other income		905			70			99			79							3			25			1,007			174
Other expense		(812	)		(88	)		(60	)		(63	)			4			(274	)		(37	)		(1,146	)		(184	)
Operating (loss)/income of discontinued operations		(552	)		(165	)		470			178				(73	)		(271	)		(13	)		(353	)		(73	)
Income from associated companies		2			1																			2			1
Loss before taxes of discontinued operations																								(351	)		(72	)
Taxes																								(96	)		55
Net loss of discontinued operations																								(447	)		(17	)

⁽¹⁾

As previously published, including the blood transfusion diagnostics unit.

⁽²⁾

Consumer Health is the aggregation of the OTC and Animal Health divisions.

⁽³⁾

Other revenue contains royalties and out-licensing revenues of Vaccines which are to be retained by Novartis.

F-110

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

30.   Discontinued Operations (Continued)

        The following are included in net income from discontinued operations:

	2015			2014			2013
	$ m			$ m			$ m
Depreciation of property, plant & equipment					(66	)		(201	)
Amortization of intangible assets					(77	)		(278	)
Impairment charges on property, plant & equipment, net		83			(736	)		(33	)
Impairment charges on intangible assets, net					(405	)		(8	)
Impairment charges on financial assets								(8	)
Additions to restructuring provisions		(1	)		(14	)		(12	)
Equity-based compensation of Novartis equity plans		(65	)		(124	)		(95	)

Discontinued Operations Consolidated Balance Sheet

	2014
	$ m
Assets of disposal groups classified as discontinued operations
Property, plant and equipment		1,411
Goodwill		1,119
Intangible assets other than goodwill		1,343
Investments in associated companies		1
Deferred tax assets		304
Other non-current assets		47
Inventories		1,155
Trade receivables		1,085
Other current assets		336
Total		6,801
Liabilities of disposal groups classified as discontinued operations
Deferred tax liabilities		209
Provisions and other non-current liabilities		497
Trade payables		612
Current income tax liabilities		176
Provisions and other current liabilities		924
Total		2,418

31.   Events Subsequent to the December 31, 2015 Consolidated Balance Sheet Date

Dividend proposal for 2015 and approval of the Group's 2015 consolidated financial statements

        On January 26, 2016, the Novartis AG Board of Directors proposed the acceptance of the 2015 consolidated financial statements of the Novartis Group for approval by the Annual General Meeting on February 23, 2016. Furthermore, also on January 26, 2016, the Board proposed a dividend of CHF 2.70 per share to be approved at the Annual General Meeting on February 23, 2016. If approved, total dividend payments would amount to approximately $6.6 billion (2014: $6.6 billion) using the CHF/$ December 31, 2015 exchange rate.

F-111

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32.   Principal Group Subsidiaries and Associated Companies

        The following table lists the principal subsidiaries controlled by Novartis and associated companies in which Novartis is deemed to have significant influence. The equity interest percentage shown in the table also represents the share in voting rights in those entities, except where explicitly noted.

As at December 31, 2015	Share/paid-in capital(1)				Equity interest %		Activities
Algeria
Société par actions SANDOZ, Algiers		DZD	650.0 m			100		‹*›	\*/
Argentina
Novartis Argentina S.A., Buenos Aires		ARS	246.3 m			100		‹*›		▲
Alcon Laboratorios Argentina S.A., Buenos Aires		ARS	83.9 m			100		‹*›
Sandoz S.A., Buenos Aires		ARS	88.0 m			100		‹*›
Australia
Novartis Australia Pty Ltd., North Ryde, NSW		AUD	11.0 m			100	/*/
Novartis Pharmaceuticals Australia Pty Ltd., North Ryde, NSW		AUD	3.8 m			100		‹*›		▲
Alcon Laboratories (Australia) Pty Ltd., Frenchs Forest, NSW		AUD	2.6 m			100		‹*›
Sandoz Pty Ltd., North Ryde, NSW		AUD	11.6 m			100		‹*›
Austria
Novartis Austria GmbH, Vienna		EUR	1.0 m			100	/*/
Novartis Pharma GmbH, Vienna		EUR	1.1 m			100		‹*›
Alcon Ophthalmika GmbH, Vienna		EUR	36,336.4			100		‹*›
Sandoz GmbH, Kundl		EUR	32.7 m			100	/*/	‹*›	\*/	▲
EBEWE Pharma Ges.m.b.H Nfg., Unterach am Attersee		EUR	1.0 m			100		‹*›	\*/	▲
Bangladesh
Novartis (Bangladesh) Limited, Gazipur		BDT	162.5 m			60		‹*›	\*/
Belgium
N.V. Novartis Pharma S.A., Vilvoorde		EUR	7.1 m			100		‹*›
S.A. Alcon-Couvreur N.V., Puurs		EUR	360.6 m			100		‹*›	\*/
N.V. Alcon S.A., Vilvoorde		EUR	141,856			100		‹*›
N.V. Sandoz S.A., Vilvoorde		EUR	19.2 m			100		‹*›
Bermuda
Triangle International Reinsurance Ltd., Hamilton		CHF	1.0 m			100	/*/
Novartis Securities Investment Ltd., Hamilton		CHF	30,000			100	/*/
Novartis International Pharmaceutical Ltd., Hamilton		CHF	100,000			100	/*/	‹*›	\*/	▲
Trinity River Insurance Co. Ltd., Hamilton	$		370,000			100	/*/
Novartis Investment Limited, Hamilton	$		30,000			100	/*/
Novartis Pharmaceutical Proprietary Ltd., Hamilton		CHF	100,000			100	/*/	‹*›	\*/	▲
Brazil
Novartis Biociências S.A., São Paulo		BRL	265.0 m			100		‹*›	\*/
Sandoz do Brasil Indústria Farmacêutica Ltda., Cambé, PR		BRL	190.0 m			100		‹*›	\*/	▲
Canada
Novartis Pharmaceuticals Canada Inc., Dorval/Quebec		CAD	0	(2)		100		‹*›		▲
Alcon Canada Inc., Mississauga, Ontario		CAD	0	(2)		100		‹*›
CIBA Vision Canada Inc., Mississauga, Ontario		CAD	1			100			\*/
Sandoz Canada Inc., Boucherville, Quebec		CAD	76.8 m			100		‹*›	\*/	▲
Chile
Novartis Chile S.A., Santiago de Chile		CLP	2.0 bn			100		‹*›
Alcon Laboratorios Chile Limitada, Santiago de Chile		CLP	2.0 bn			100		‹*›

F-112

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32.   Principal Group Subsidiaries and Associated Companies (Continued)

As at December 31, 2015	Share/paid-in capital(1)			Equity interest %		Activities
China
Beijing Novartis Pharma Co., Ltd., Beijing	$		30.0 m		100		‹*›	\*/
Novartis Pharmaceuticals (HK) Limited, Hong Kong		HKD	200		100		‹*›
China Novartis Institutes for BioMedical Research Co., Ltd., Shanghai	$		260.0 m		100				▲
Suzhou Novartis Pharma Technology Co., Ltd., Changshu	$		103.4 m		100			\*/
Shanghai Novartis Trading Ltd., Shanghai	$		3.1 m		100		‹*›	\*/
Alcon Hong Kong Limited, Hong Kong		HKD	77,000		100		‹*›
Alcon (China) Ophthalmic Product Co., Ltd., Beijing	$		2.2 m		100		‹*›
Sandoz (China) Pharmaceutical Co., Ltd., Zhongshan	$		36.5 m		100		‹*›	\*/
Colombia
Novartis de Colombia S.A., Santafé de Bogotá		COP	7.9 bn		100		‹*›
Laboratorios Alcon de Colombia S.A., Santafé de Bogotá		COP	20.9 m		100		‹*›
Croatia
Sandoz d.o.o., Zagreb		HRK	25.6 m		100		‹*›
Czech Republic
Novartis s.r.o., Prague		CZK	51.5 m		100		‹*›
Sandoz s.r.o., Prague		CZK	44.7 m		100		‹*›
Alcon Pharmaceuticals (Czech Republic) s.r.o., Prague		CZK	31.0 m		100		‹*›
Denmark
Novartis Healthcare A/S, Copenhagen		DKK	14.0 m		100		‹*›
Alcon Nordic A/S, Copenhagen		DKK	0.5 m		100		‹*›
Sandoz A/S, Copenhagen		DKK	10.0 m		100		‹*›
Ecuador
Novartis Ecuador S.A., Quito	$		4.0 m		100		‹*›
Egypt
Novartis Pharma S.A.E., Cairo		EGP	33.8 m		99		‹*›	\*/
Sandoz Egypt Pharma S.A.E., New Cairo		EGP	250,000		100		‹*›
Finland
Novartis Finland Oy, Espoo		EUR	459,000		100		‹*›
France
Novartis Groupe France S.A., Rueil-Malmaison		EUR	103.0 m		100	/*/
Novartis Pharma S.A.S., Rueil-Malmaison		EUR	43.4 m		100		‹*›	\*/	▲
Laboratoires Alcon S.A., Rueil-Malmaison		EUR	12.9 m		100		‹*›	\*/
Sandoz S.A.S., Levallois-Perret		EUR	5.4 m		100		‹*›		▲
Germany
Novartis Deutschland GmbH, Wehr		EUR	155.5 m		100	/*/
Novartis Pharma GmbH, Nuremberg		EUR	25.6 m		100		‹*›		▲
Novartis Pharma Produktions GmbH, Wehr		EUR	2.0 m		100			\*/
Alcon Pharma GmbH, Freiburg		EUR	512,000		100		‹*›
WaveLight GmbH, Erlangen		EUR	6.6 m		100		‹*›
CIBA Vision GmbH, Grosswallstadt		EUR	15.4 m		100		‹*›	\*/	▲
Sandoz International GmbH, Holzkirchen		EUR	100,000		100	/*/
Sandoz Industrial Products GmbH, Frankfurt a. M.		EUR	2.6 m		100		‹*›	\*/
1 A Pharma GmbH, Oberhaching		EUR	26,000		100		‹*›
Salutas Pharma GmbH, Barleben		EUR	42.1 m		100		‹*›	\*/
Hexal AG, Holzkirchen		EUR	93.7 m		100	/*/	‹*›	\*/	▲
Gibraltar
Novista Insurance Limited, Gibraltar		CHF	130.0 m		100	/*/

F-113

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32.   Principal Group Subsidiaries and Associated Companies (Continued)

As at December 31, 2015	Share/paid-in capital(1)			Equity interest %		Activities
Greece
Novartis (Hellas) S.A.C.I., Metamorphosis/Athens		EUR	23.4 m		100		‹*›
Alcon Laboratories Hellas Commercial & Industrial S.A., Maroussi/Athens		EUR	5.7 m		100		‹*›
Hungary
Novartis Hungary Healthcare Limited Liability Company, Budapest		HUF	545.6 m		100		‹*›
Sandoz Hungary Limited Liability Company, Budapest		HUF	883.0 m		100		‹*›
India
Novartis India Limited, Mumbai		INR	159.8 m		75		‹*›
Novartis Healthcare Private Limited, Mumbai		INR	60.0 m		100		‹*›		▲
Alcon Laboratories (India) Private Limited, Bangalore		INR	1.1 bn		100		‹*›
Sandoz Private Limited, Mumbai		INR	32.0 m		100		‹*›	\*/
Indonesia
PT Novartis Indonesia, Jakarta		IDR	7.7 bn		100		‹*›	\*/
PT CIBA Vision Batam, Batam		IDR	11.9 bn		100			\*/
Ireland
Novartis Ireland Limited, Dublin		EUR	25,000		100		‹*›
Novartis Ringaskiddy Limited, Ringaskiddy, County Cork		EUR	2.0 m		100			\*/
Alcon Laboratories Ireland Limited, Cork City		EUR	541,251		100			\*/
Israel
Novartis Israel Ltd., Petach Tikva		ILS	1,000		100		‹*›		▲
Italy
Novartis Farma S.p.A., Origgio		EUR	18.2 m		100	/*/	‹*›	\*/	▲
Alcon Italia S.p.A., Milan		EUR	3.7 m		100		‹*›
Sandoz S.p.A., Origgio		EUR	1.7 m		100		‹*›
Sandoz Industrial Products S.p.A., Rovereto		EUR	2.6 m		100			\*/
Japan
Novartis Holding Japan K.K., Tokyo		JPY	10.0 m		100	/*/
Novartis Pharma K.K., Tokyo		JPY	6.0 bn		100		‹*›		▲
Alcon Japan Ltd., Tokyo		JPY	500.0 m		100		‹*›
Sandoz K.K., Tokyo		JPY	100.0 m		100		‹*›	\*/	▲
Luxembourg
Novartis Investments S.à r.l., Luxembourg-Ville	$		100.0 m		100	/*/
Novartis Finance S.A., Luxembourg-Ville	$		100,000		100	/*/
Malaysia
Novartis Corporation (Malaysia) Sdn. Bhd., Kuala Lumpur		MYR	3.3 m		100		‹*›
Alcon Laboratories (Malaysia) Sdn. Bhd., Petaling Jaya		MYR	1.0 m		100		‹*›
CIBA Vision Johor Sdn. Bhd., Gelang Patah		MYR	5.0 m		100			\*/
Mexico
Novartis Farmacéutica, S.A. de C.V., Mexico City		MXN	205.0 m		100		‹*›	\*/
Alcon Laboratorios, S.A. de C.V., Mexico City		MXN	5.9 m		100		‹*›	\*/
Sandoz, S.A. de C.V., Mexico City		MXN	468.2 m		100		‹*›	\*/
Morocco
Novartis Pharma Maroc SA, Casablanca		MAD	80.0 m		100		‹*›	\*/

F-114

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32.   Principal Group Subsidiaries and Associated Companies (Continued)

As at December 31, 2015	Share/paid-in capital(1)			Equity interest %		Activities
Netherlands
Novartis Netherlands B.V., Arnhem		EUR	1.4 m		100	/*/
Novartis Pharma B.V., Arnhem		EUR	4.5 m		100		‹*›		▲
Alcon Nederland B.V., Breda		EUR	18,151		100		‹*›
Sandoz B.V., Almere		EUR	907,560		100		‹*›	\*/
New Zealand
Novartis New Zealand Ltd., Auckland		NZD	820,000		100		‹*›
Norway
Novartis Norge AS, Oslo		NOK	1.5 m		100		‹*›		▲
Pakistan
Novartis Pharma (Pakistan) Limited, Karachi		PKR	3.9 bn		100		‹*›
Panama
Novartis Pharma (Logistics), Inc., Ciudad de Panama	$		10,000		100		‹*›
Alcon Centroamerica S.A., Ciudad de Panama		PAB	1,000		100		‹*›
Philippines
Novartis Healthcare Philippines, Inc., Makati/Manila		PHP	298.8 m		100		‹*›
Sandoz Philippines Corporation, Manila		PHP	30.0 m		100		‹*›	\*/
Alcon Laboratories (Philippines), Inc., Manila		PHP	16.5 m		100		‹*›
Poland
Novartis Poland Sp. z o.o., Warszawa		PLN	44.2 m		100		‹*›		▲
Alcon Polska Sp. z o.o., Warszawa		PLN	750,000		100		‹*›
Sandoz Polska Sp. z o.o., Warszawa		PLN	25.6 m		100		‹*›
Lek S.A., Strykow		PLN	11.4 m		100		‹*›	\*/
Portugal
Novartis Portugal SGPS Lda., Porto Salvo		EUR	500,000		100	/*/
Novartis Farma—Produtos Farmacêuticos S.A., Porto Salvo		EUR	2.4 m		100		‹*›
Alcon Portugal-Produtos e Equipamentos Oftalmologicos Lda., Porto Salvo		EUR	4.5 m		100		‹*›
Sandoz Farmacêutica Lda., Porto Salvo		EUR	499,900		100		‹*›
Puerto Rico
Alcon (Puerto Rico) Inc., Catano	$		15.5		100		‹*›
Romania
Sandoz S.R.L., Targu-Mures		RON	105.2 m		100		‹*›	\*/
Novartis Pharma Services Romania S.R.L., Bucharest		RON	3.0 m		100		‹*›
Alcon Romania S.R.L., Bucharest		RON	10.8 m		100		‹*›
Russian Federation
Novartis Pharma LLC, Moscow		RUB	20.0 m		100		‹*›
Alcon Farmacevtika LLC, Moscow		RUB	44.1 m		100		‹*›
ZAO Sandoz, Moscow		RUB	57.4 m		100		‹*›
Novartis Neva LLC, St. Petersburg		RUB	1.3 bn		100			\*/
Saudi Arabia
Saudi Pharmaceutical Distribution Co. Ltd., Riyadh		SAR	26.8 m		75		‹*›
Singapore
Novartis (Singapore) Pte Ltd., Singapore		SGD	100,000		100		‹*›
Novartis Singapore Pharmaceutical Manufacturing Pte Ltd., Singapore		SGD	45.0 m		100			\*/
Novartis Asia Pacific Pharmaceuticals Pte Ltd., Singapore		SGD	39.0 m		100		‹*›	\*/

F-115

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32.   Principal Group Subsidiaries and Associated Companies (Continued)

As at December 31, 2015	Share/paid-in capital(1)			Equity interest %			Activities
Novartis Institute for Tropical Diseases Pte Ltd., Singapore		SGD	2,004		100					▲
Alcon Singapore Manufacturing Pte Ltd., Singapore		SGD	101,000		100				\*/
CIBA Vision Asian Manufacturing and Logistics Pte Ltd., Singapore		SGD	1.0 m		100				\*/
Alcon Pte Ltd, Singapore		SGD	164,000		100			‹*›
Slovakia
Novartis Slovakia s.r.o., Bratislava		EUR	2.0 m		100			‹*›
Slovenia
Lek Pharmaceuticals d.d., Ljubljana		EUR	48.4 m		100		/*/	‹*›	\*/	▲
Sandoz Pharmaceuticals d.d., Ljubljana		EUR	1.5 m		100			‹*›
South Africa
Novartis South Africa (Pty) Ltd., Kempton Park		ZAR	86.3 m		100			‹*›
Alcon Laboratories (South Africa) (Pty) Ltd., Bryanston, Gauteng		ZAR	201,820		100			‹*›
Sandoz South Africa (Pty) Ltd., Kempton Park		ZAR	3.0 m		100			‹*›		▲
South Korea
Novartis Korea Ltd., Seoul		KRW	24.5 bn		99			‹*›
Alcon Korea Ltd., Seoul		KRW	33.8 bn		100			‹*›
Sandoz Korea Ltd., Seoul		KRW	17.8 bn		100			‹*›
Spain
Novartis Farmacéutica, S.A., Barcelona		EUR	63.0 m		100		/*/	‹*›	\*/
Alcon Cusi S.A., El Masnou		EUR	11.6 m		100			‹*›	\*/	▲
Sandoz Farmacéutica, S.A., Madrid		EUR	270,450		100			‹*›
Sandoz Industrial Products, S.A., Les Franqueses del Vallés/Barcelona		EUR	9.3 m		100			‹*›	\*/	▲
Sweden
Novartis Sverige AB, Täby/Stockholm		SEK	5.0 m		100			‹*›
Switzerland
Novartis International AG, Basel		CHF	10.0 m		100		/*/
Novartis Holding AG, Basel		CHF	100.2 m		100		/*/
Novartis Research Foundation, Basel		CHF	29.3 m		100		/*/
Novartis Foundation for Management Development, Basel		CHF	100,000		100		/*/
Novartis Foundation for Employee Participation, Basel		CHF	100,000		100		/*/
Novartis Sanierungsstiftung, Basel		CHF	2.0 m		100		/*/
Novartis Pharma AG, Basel		CHF	350.0 m		100		/*/	‹*›	\*/	▲
Novartis Pharma Services AG, Basel		CHF	20.0 m		100			‹*›
Novartis Pharma Schweizerhalle AG, Schweizerhalle		CHF	18.9 m		100				\*/
Novartis Pharma Stein AG, Stein		CHF	251,000		100				\*/	▲
Novartis Pharma Schweiz AG, Rotkreuz		CHF	5.0 m		100			‹*›		▲
Alcon Switzerland SA, Rotkreuz		CHF	100,000		100			‹*›
Alcon Pharmaceuticals Ltd., Fribourg		CHF	200,000		100		/*/	‹*›	\*/	▲
ESBATech, a Novartis Company GmbH, Schlieren		CHF	14.0 m		100					▲
Sandoz AG, Basel		CHF	5.0 m		100		/*/	‹*›	\*/	▲
Sandoz Pharmaceuticals AG, Risch		CHF	100,000		100			‹*›
Roche Holding AG, Basel		CHF	160.0 m		33/6	(3)	/*/
Taiwan
Novartis (Taiwan) Co., Ltd., Taipei		TWD	170.0 m		100			‹*›

F-116

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32.   Principal Group Subsidiaries and Associated Companies (Continued)

As at December 31, 2015	Share/paid-in capital(1)			Equity interest %		Activities
Thailand
Novartis (Thailand) Limited, Bangkok		THB	302.0 m		100		‹*›
Alcon Laboratories (Thailand) Ltd., Bangkok		THB	228.1 m		100		‹*›
Turkey
Novartis Saglik, Gida ve Tarim Ürünleri Sanayi ve Ticaret A.S., Istanbul		TRY	98.0 m		100		‹*›	\*/
Alcon Laboratuvarlari Ticaret A.S., Istanbul		TRY	25.2 m		100		‹*›
Sandoz Ilaç Sanayi ve Ticaret A.S., Istanbul		TRY	165.2 m		100		‹*›	\*/
United Arab Emirates
Novartis Middle East FZE, Dubai		AED	7.0 m		100		‹*›
United Kingdom
Novartis UK Limited, Frimley/Camberley		GBP	25.5 m		100	/*/
Novartis Pharmaceuticals UK Limited, Frimley/Camberley		GBP	5.4 m		100		‹*›	\*/	▲
Novartis Grimsby Limited, Frimley/Camberley		GBP	250.0 m		100			\*/
Alcon Eye Care (UK) Limited, Frimley/Camberley		GBP	550,000		100		‹*›
Sandoz Limited, Frimley/Camberley		GBP	2.0 m		100		‹*›
Glaxosmithkline Consumer Healthcare Holdings Limited, Brentford, Middlesex		GBP	100,000		36.5	/*/
United States of America
Novartis Corporation, East Hanover, NJ	$		72.2 m		100	/*/
Novartis Finance Corporation, New York, NY	$		1,002		100	/*/
Novartis Capital Corporation, New York, NY	$		1		100	/*/
Novartis Pharmaceuticals Corporation, East Hanover, NJ	$		5.2 m		100		‹*›	\*/	▲
Novartis Institutes for BioMedical Research, Inc., Cambridge, MA	$		1		100				▲
CoStim Pharmaceuticals, Inc., Cambridge, MA	$		1		100				▲
Novartis Institute for Functional Genomics, Inc., San Diego, CA	$		21,000		100				▲
Genoptix, Inc., Carlsbad, CA	$		1		100		‹*›		▲
Alcon Laboratories, Inc., Fort Worth, TX	$		1,000		100	/*/	‹*›	\*/
Alcon Refractive Horizons, LLC, Fort Worth, TX	$		10		100			\*/
Alcon Research, Ltd., Fort Worth, TX	$		12.5		100			\*/	▲
Alcon LenSx, Inc., Alisio Viejo, CA	$		100		100			\*/
WaveTec Vision Systems, Inc., Alisio Viejo, CA	$		1		100		‹*›	\*/	▲
Sandoz Inc., Princeton, NJ	$		25,000		100		‹*›	\*/	▲
Fougera Pharmaceuticals, Inc., Melville, NY	$		1		100		‹*›	\*/	▲
Eon Labs, Inc., Princeton, NJ	$		1		100		‹*›	\*/
Novartis Vaccines and Diagnostics, Inc., Cambridge, MA	$		3.0		100		‹*›
Novartis Services, Inc., East Hanover, NJ	$		1		100	/*/
Venezuela
Novartis de Venezuela, S.A., Caracas		VEF	1.4 m		100		‹*›
Alcon Pharmaceutical, C.A., Caracas		VEF	5.5 m		100		‹*›

In addition, the Group is represented by subsidiaries and associated companies in the following countries: Bosnia/Herzegovina, Bulgaria, Dominican Republic, Guatemala, the Former Yugoslav Republic of Macedonia, Peru, Ukraine and Uruguay.

⁽¹⁾

Share/paid-in capital may not reflect the taxable share/paid-in capital amount and does not include any paid-in surplus.

⁽²⁾

Shares without par value

⁽³⁾

Approximately 33% of voting shares; approximately 6% of total net income and equity attributable to Novartis

m = million; bn = billion

F-117

NOTES TO THE NOVARTIS GROUP

CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32.   Principal Group Subsidiaries and Associated Companies (Continued)

        The following describe the various types of entities within the Group:

/*/	Holding/Finance: This entity is a holding company and/or performs finance functions for the Group.
‹*›	Sales: This entity performs sales and marketing activities for the Group.
\*/	Production: This entity performs manufacturing and/or production activities for the Group.
▲	Research and Development: This entity performs research and development activities for the Group.

F-118

EX-1.1

Exhibit 1.1

Articles of Incorporation of Novartis AG

February 27, 2015

The Articles of Incorporation were adopted at the Extraordinary General Meeting of Novartis AG held on October 15, 1996.

Alterations adopted by General Meetings of:

April 21, 1999

October 11, 2000 (extraordinary GM)

March 22, 2001

March 21, 2002

March 4, 2003

February 24, 2004

March 1, 2005

February 28, 2006

February 26, 2008

February 24, 2009

February 26, 2010

April 8, 2011 (extraordinary GM)

February 23, 2012

February 27, 2015

(The original German text remains, in all matters, binding and definitive).

Novartis AG

4002 Basel, Switzerland

© February 2015, Novartis AG

Section 1	Corporate Name, Registered Office, Purpose and Duration	2
Section 2	Share Capital	2
Section 3	Corporate Bodies	4
	A. General Meeting of Shareholders	4
	B. Board of Directors	7
	C. Auditors	11
Section 4	Compensation of the Board of Directors and the Executive Committee	11
Section 5	Annual Financial Statements, Consolidated Financial Statements and Profit Allocation	15
Section 6	Publications and Place of Jurisdiction	15

1

Section 1		Corporate Name, Registered Office, Purpose and Duration
		Article 1
Corporate name, Registered office		Under the Corporate name Novartis AG Novartis SA Novartis Inc. there exists a company limited by shares with its registered office in Basel.
		Article 2
Purpose	1	Purpose of the Company is to hold interests in enterprises in the area of health care or nutrition. The Company may also hold interests in enterprises in the areas of biology, chemistry, physics, information technology or related areas.
	2	The Company may acquire, mortgage, liquidate or sell real estate and intellectual property rights in Switzerland or abroad.
	3	In pursuing its purpose, the Company strives to create sustainable value.
		Article 3
Duration		The duration of the Company is unlimited.
Section 2		Share Capital
		Article 4
Share capital	1	The share capital of the Company is CHF 1,338,496,500, fully paid-in and divided into 2,676,993,000 registered shares. Each share has a nominal value of CHF 0.50.
	2	Upon resolution of the General Meeting of Shareholders registered shares may be converted into bearer shares and reversed bearer shares may be converted into registered shares.
		Article 5
Shareholders register and restrictions of registration, Nominees	1	The Company shall maintain a shareholders register showing the last names, first names, domicile, address and nationality (in the case of legal entities the registered office) of the holders or usufructuaries of registered shares.
	2	Upon request acquirers of registered shares are registered in the shareholders register as shareholders with the right to vote, provided that they declare explicitly to have acquired the registered shares in their own name and for their own account. Subject to the restrictions set forth in paragraph 6 of this article, no person or entity shall be registered with the right to vote for more than

2

		2% of the registered share capital as set forth in the commercial register. This restriction of registration also applies to persons who hold some or all of their shares through nominees pursuant to this article. All of the foregoing is subject to Article 685d paragraph 3 of the Swiss Code of Obligations.
	3	The Board of Directors may register nominees with the right to vote in the share register to the extent of up to 0.5% of the registered share capital as set forth in the commercial register. Registered shares held by a nominee that exceed this limit may be registered in the shareholders register if the nominee discloses the names, addresses and the number of shares of the persons for whose account it holds 0.5% or more of the registered share capital as set forth in the commercial register. Nominees within the meaning of this provision are persons who do not explicitly declare in the request for registration to hold the shares for their own account and with whom the Board of Directors has entered into a corresponding agreement.
	4	Corporate bodies and partnerships or other groups of persons or joint owners who are interrelated to one another through capital ownership, voting rights, uniform management or otherwise linked as well as individuals or corporate bodies and partnerships who act in concert to circumvent the regulations concerning the limitation of participation or the nominees (especially as syndicates), shall be treated as one single person or nominee within the meaning of paragraphs 2 and 3 of this article.
	5	After hearing the registered shareholder or nominee, the Board of Directors may cancel registrations in the shareholders register with retroactive effect as of the date of registration if the registration was effected based on false information. The respective shareholder or nominee shall be informed immediately of the cancellation of the registration.
	6	The Board of Directors shall specify the details and give the necessary orders concerning the adherence to the preceding regulations. In particular cases it may allow exemptions from the limitation for registration in the share register or the regulation concerning nominees. It may delegate its duties.
	7	The limitation for registration in the share register provided for in this article shall also apply to shares acquired or subscribed by the exercise of subscription, option or conversion rights.
		Article 6
Form of shares	1	Subject to paragraphs 2 and 4 of this article, the registered shares of the Company are issued as uncertificated securities (in terms of the Swiss Code of Obligations) and as book entry securities (in terms of the Book Entry Securities Act).

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	2	The Company may withdraw shares issued as book entry securities from the custodian system (Verwahrungssystem).
	3	Provided that the shareholder is registered in the shareholders register, the shareholder may request from the Company a statement of his or her registered shares at any time.
	4	The shareholder has no right to the printing and delivery of certificates. The Company may, however, print and deliver certificates (individual share certificates, certificates or global certificates) for shares at any time. The Company may, with the consent of the shareholder, cancel issued certificates that are returned to the Company.
		Article 7
Exercise of rights	1	The shares are not divisible. The Company accepts only one representative per share.
	2	The right to vote and the other rights associated with a registered share may only be exercised vis-à-vis the Company by a shareholder, usufructuary or nominee who is registered in the share register.
Section 3		Corporate Bodies
		A. General Meeting of Shareholders
		Article 8
Competence		The General Meeting of Shareholders is the supreme body of the Company.
		Article 9
General Meetings a. Annual General Meeting		The Annual General Meeting of Shareholders shall be held each year within six months after the close of the financial year of the Company; at the latest twenty days before the meeting the annual report and the reports of the auditors shall be made available for inspection by the Shareholders at the registered office of the Company. Notification thereof may be made by way of a publication in the publication organs set forth in Article 38 of these Articles of Incorporation.

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		Article 10
b. Extraordinary General Meetings of Shareholders	1	Extraordinary General Meetings of Shareholders shall take place upon request of the Board of Directors or the Auditors.
	2	Furthermore, Extraordinary General Meetings of Shareholders shall be convened upon resolution of a General Meeting of Shareholders or if it is required by one or more shareholders who are representing in the aggregate not less than one tenth of the share capital and submit a petition signed by such shareholder or shareholders specifying the items for the agenda and the proposals.
		Article 11
Convening of General Meetings of Shareholders	1	General Meetings of Shareholders shall be convened by the Board of Directors at the latest twenty days before the date of the meeting. The meeting shall be convened by way of a notice appearing once in the official publication organs of the Company. Registered shareholders may also be informed by mail.
	2	The notice of a meeting shall state the items on the agenda and the proposals of the Board of Directors and as the case may be of the shareholders who demanded that a General Meeting of Shareholders be convened and, in case of elections, the names of the nominated candidates.
		Article 12
Agenda	1	One or more shareholders whose combined shareholdings represent an aggregate nominal value of at least CHF 1 million may demand that an item be included in the agenda of a General Meeting of Shareholders. Such a demand must be made in writing at the latest forty-five days before the meeting and shall specify the items and the proposals of such a shareholder.
	2	No resolution shall be passed at a General Meeting of Shareholders on matters for which no proper notice was given. This provision shall not apply to proposals to convene an Extraordinary General Meeting of Shareholders or to initiate a special audit.
		Article 13
Presiding officer, Minutes, Vote counters	1	The General Meeting of Shareholders shall take place at the registered office of the Company, unless the Board of Directors decides otherwise. The Chairman of the Board of Directors or in his absence a Vice-Chairman or any other member of the Board of Directors designated by the Board of Directors shall take the chair.

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	2	The presiding officer shall appoint a secretary and the vote counters. The minutes shall be signed by the presiding officer and the secretary.
		Article 14
Proxies	1	The Board of Directors may issue regulations regarding the participation and the representation at the General Meeting of Shareholders and may allow electronic proxies without qualified signatures.
	2	A shareholder shall only be represented by his legal representative, another shareholder with the right to vote, or the Independent Proxy (in German: Unabhängiger Stimmrechtsvertreter).
	3	The General Meeting of Shareholders shall elect the Independent Proxy for a term of office lasting until completion of the next Annual General Meeting of Shareholders. Re-election is possible.
	4	If the Company does not have an Independent Proxy, the Board of Directors shall appoint the Independent Proxy for the next General Meeting of Shareholders.
		Article 15
Voting rights		Each share provides entitlement to one vote.
		Article 16
Resolutions, Elections	1	Unless the law requires otherwise, the General Meeting passes resolutions and elections with the absolute majority of the votes validly represented.
	2	Resolutions and elections shall be taken either on a show of hands or by electronic voting, unless the General Meeting decides for, or the presiding officer orders, a secret ballot.
	3	The presiding officer may at any time order to repeat an election or resolution taken on a show of hands with a secret ballot, if he doubts the results of the vote. In this case, the preceding election or resolution taken on a show of hands is deemed not to have taken place.
	4	If no election has taken place at the first ballot and if there is more than one candidate, the presiding officer shall order a second ballot in which the relative majority shall be decisive.

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	Article 17
Powers of the General Meeting of Shareholders	The following powers shall be vested exclusively in the General Meeting of Shareholders:
	a)To adopt and amend the Articles of Incorporation;
	b)To elect and remove the members of the Board of Directors, the Chairman of the Board of Directors, the members of the Compensation Committee, the Independent Proxy and the Auditors;
	c)To approve the management report (if required) and the consolidated financial statements;
	d)To approve the financial statements and to decide on the appropriation of available earnings shown on the balance sheet, in particular with regard to dividends;
	e)To approve the aggregate amounts of compensation of the Board of Directors and the Executive Committee in accordance with Article 29 of these Articles of Incorporation;
	f)To grant discharge to the members of the Board of Directors and to the members of the Executive Committee;
	g)To decide on matters that are reserved by law or by the Articles of Incorporation to the General Meeting of Shareholders.
	Article 18
Special quorum	The approval of at least two-thirds of the votes represented is required for resolutions of the General Meeting of Shareholders on:
	a)An alteration of the purpose of the Company;
	b)The creation of shares with increased voting powers;
	c)An implementation of restrictions on the transfer of registered shares and the removal of such restrictions;
	d)An authorized or conditional increase of the share capital;
	e)An increase of the share capital out of equity, by contribution in kind or for the purpose of an acquisition of property and the grant of special rights;
	f)A restriction or suspension of rights of option to subscribe;
	g)A change of location of the registered office of the Company;
	h)The dissolution of the Company.
	B. Board of Directors
	Article 19
Number of Directors	The Board of Directors shall consist of a minimum of 8 and a maximum of 16 members.

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		Article 20
Term of office	1	The members of the Board of Directors and the Chairman of the Board of Directors shall be elected individually by the General Meeting of Shareholders for a term of office lasting until completion of the next Annual General Meeting of Shareholders.
	2	Members whose term of office has ended may be immediately re-elected, subject to paragraph 3 hereinafter.
	3	Individuals who have turned 70 years of age at the date of the General Meeting of Shareholders may no longer be elected as members of the Board of Directors. The General Meeting of Shareholders may, under special circumstances, grant exceptions to this rule.
		Article 21
Organization	1	The Board of Directors constitutes itself in compliance with legal requirements and taking into consideration the resolutions of the General Meeting of Shareholders. It shall elect one or two Vice-Chairmen. It shall appoint a secretary, who need not be a member of the Board of Directors.
	2	If the office of the Chairman of the Board of Directors is vacant, the Board of Directors shall appoint a new Chairman from amongst its members for the remaining term of office.
		Article 22
Convening of meetings		The Chairman shall convene meetings of the Board of Directors if and when the need arises or if a member so requires in writing.
		Article 23
Resolutions	1	For the Board of Directors to pass resolutions, at least a majority of its members must be present. No such quorum shall be required for resolutions of the Board of Directors providing for the confirmation of capital increases or for the amendment of the Articles of Incorporation in connection with increases of the share capital.
	2	The adoption of resolutions by the Board of Directors requires a majority of the votes cast. The Chairman shall not have the deciding vote.
	3	Resolutions may also be passed via teleconference, or, unless a member calls for an oral deliberation, in writing by way of a circular or electronic data transfer.

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		Article 24
Powers of the Board of Directors	1	The Board of Directors has in particular the following non-delegable and inalienable duties:
		a)The ultimate direction of the Company’s business and issuing of the necessary directives;
		b)The determination of the organization of the Company;
		c)The determination of the principles of accounting, financial controlling and financial planning;
		d)The appointment and removal of the persons entrusted with the management and representation of the Company (including the CEO and the other members of the Executive Committee);
		e)The ultimate supervision of the persons entrusted with the management of the Company, specifically in view of their compliance with the law, Articles of Incorporation, regulations and directives;
		f)The preparation of the annual report and the compensation report in accordance with the provisions of the law and the Articles of Incorporation;
		g)The preparations for the General Meeting of Shareholders and carrying out of the resolutions of the General Meeting of Shareholders;
		h)The notification to the court in the event of over-indebtedness; and
		i)The adoption of resolutions concerning increases in share capital to the extent that such power is vested in the Board of Directors (Article 651 paragraph 4 of the Swiss Code of Obligations), as well as resolutions concerning the confirmation of capital increases and respective amendments to the Articles of Incorporation.
	2	In addition, the Board of Directors can pass resolutions with respect to all matters which are not reserved to the authority of the General Meeting of Shareholders by law or by these Articles of Incorporation.
		Article 25
Delegation of powers		The Board of Directors may, within the limits of the law and the Articles of Incorporation, delegate the management of the Company in whole or in part to one or several of its members (including to ad hoc or permanent committees of the Board of Directors) or to third persons (Executive Committee).

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		Article 26
Signature power		The Board of Directors shall designate those of its members as well as those third persons who shall have legal signatory power for the Company, and shall further determine the manner in which such persons may sign on behalf of the Company.
		Article 27
Organization and powers of the Compensation Committee	1	The Compensation Committee shall consist of a minimum of 3 and a maximum of 5 members of the Board of Directors.
	2	The members of the Compensation Committee shall be elected individually by the General Meeting of Shareholders for a term of office lasting until completion of the next Annual General Meeting of Shareholders. Members of the Compensation Committee whose term of office has expired shall be immediately eligible for re-election.
	3	If there are vacancies on the Compensation Committee, the Board of Directors shall appoint substitutes for the remaining term of office.
	4	The Board of Directors shall elect a chairman of the Compensation Committee. The Board of Directors shall, within the limits of the law and the Articles of Incorporation, define the organization of the Compensation Committee in regulations.
	5	The Compensation Committee has the following powers:
		a)Develop a compensation strategy in line with the principles described in the Articles of Incorporation and submit it for approval to the Board of Directors;
		b)Propose to the Board of Directors the principles and structure of the compensation plans;
		c)Support the Board of Directors in preparing the proposals to the General Meeting of Shareholders regarding the compensation of the members of the Board of Directors and the Executive Committee;
		d)Submit the compensation report to the Board of Directors for approval;
		e)Inform the Board of Directors about policies, programs and key decisions as well as comparisons of compensation levels at key competitors;
		f)Regularly report to the Board of Directors on the decisions and deliberations of the Compensation Committee;
		g)Assume other responsibilities assigned to it by law, the Articles of Incorporation or by the Board of Directors.

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	6	The Board of Directors issues regulations to determine for which positions of the Board of Directors and of the Executive Committee the Compensation Committee shall submit proposals regarding compensation, and for which positions it shall determine the compensation in accordance with the Articles of Incorporation.
		C. Auditors
		Article 28
Term, Powers and Duties		The Auditors, who shall be elected by the General Meeting of Shareholders each year, shall have the powers and duties vested in them by law.
Section 4		Compensation of the Board of Directors and the Executive Committee
		Article 29
Approval of compensation by the General Meeting of Shareholders	1	The General Meeting of Shareholders shall approve annually and separately the proposals of the Board of Directors in relation to the maximum aggregate amount of:
		a)Compensation of the Board of Directors for the period until the next Annual General Meeting of Shareholders; and
		b)Compensation of the Executive Committee paid, promised or granted for the following financial year.
		The Board of Directors may submit for approval by the General Meeting of Shareholders additional proposals relating to the same or different periods.
	2	If the General Meeting of Shareholders rejects the proposal of the Board of Directors for the total compensation of the Board of Directors and/or the Executive Committee, the decision on how to proceed shall reside with the Board of Directors. The options for the Board of Directors shall be to either convene an Extraordinary General Meeting to submit a new compensation proposal, or to determine the compensation for the corresponding period on an interim basis, subject to approval at the next Annual General Meeting of Shareholders.
	3	Notwithstanding the preceding paragraphs, the Company or companies controlled by it may pay out compensation prior to approval by the General Meeting of Shareholders subject to subsequent approval by a General Meeting of Shareholders.
	4	The Board of Directors shall submit the compensation report to an advisory vote of the General Meeting of Shareholders.

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		Article 30
Additional amount		If the maximum aggregate amount of compensation already approved by the General Meeting of Shareholders is not sufficient to also cover the compensation of one or more members who become members of or are promoted within the Executive Committee during a compensation period for which the General Meeting of Shareholders has already approved the compensation of the Executive Committee, the Company or companies controlled by it shall be authorized to pay or grant to such member(s) an additional amount during the compensation period(s) already approved. The total additional amount for each relevant compensation period for which approval by the General Meeting of Shareholders has already been obtained shall not exceed (in full and not pro rata temporis) 40% of the aggregate amount of compensation of the Executive Committee last approved by the General Meeting of Shareholders per compensation period.
		Article 31
General compensation principles	1	Compensation of the non-executive members of the Board of Directors comprises fixed compensation elements only. In particular, non-executive members of the Board of Directors shall receive no company contributions to any pension plan, no performance-related elements and no financial instruments (e.g. options).
	2	Compensation of the members of the Executive Committee comprises fixed and variable compensation elements. Fixed compensation comprises the base salary and may comprise other compensation elements and benefits. Variable compensation may comprise short-term and long-term compensation elements.
	3	Compensation (to non-executive members of the Board of Directors and to members of the Executive Committee) may be paid or granted in the form of cash, shares, other benefits or in kind. Compensation to members of the Executive Committee may also be paid or granted in the form of financial instruments or similar units. Compensation may be paid by the Company or companies controlled by it. The Board of Directors determines the valuation of each compensation element on the basis of the principles that apply to the establishment of the compensation report.
		Article 32
Variable compensation	1	The variable compensation paid or granted to the members of the Executive Committee in a certain year shall consist of compensation elements from short- and long-term compensation plans (as defined in this Article 32).

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	2	The short-term compensation plans are based on performance metrics that take into account the performance of the Novartis Group and/or parts thereof, and/or individual targets. Achievements are generally measured based on the one-year period to which the short-term compensation relates. The short-term compensation pay-outs shall be subject to caps that may be expressed as predetermined multipliers of the respective target levels.
	3	The long-term compensation plans are based on performance metrics that take into account strategic objectives of the Novartis Group (such as financial, innovation, Shareholder return and/or other metrics). Achievements are generally measured based on a period of not less than three years. The long-term compensation pay-outs shall be subject to caps that may be expressed as predetermined multipliers of the respective target levels.
	4	The Board of Directors or, to the extent delegated to it, the Compensation Committee determines performance metrics, target levels, and their achievement.
	5	The Board of Directors or, to the extent delegated to it, the Compensation Committee determines grant, vesting, blocking, exercise and forfeiture conditions of the compensation; they may provide for continuation, acceleration or removal of vesting and exercise conditions, for payment or grant of compensation assuming target achievement or for forfeiture in the event of predefined events such as death, disability, retirement or termination of an employment or mandate agreement.
		Article 33
Agreements with Members of the Board of Directors and of the Executive Committee	1	The Company or companies controlled by it may enter into agreements with members of the Board of Directors relating to their compensation for a fixed term of one year. The Company or companies controlled by it may enter into contracts of employment with members of the Executive Committee for a fixed term not exceeding one year or for an indefinite period of time with a notice period not exceeding 12 months.
	2	Contracts of employment with members of the Executive Committee may contain a prohibition of competition for the time after the end of employment for a duration of up to one year. The annual consideration for such prohibition shall not exceed the total annual compensation (i.e. base salary and annual incentive) last paid to such member of the Executive Committee.

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		Article 34
Mandates outside of the Novartis Group	1	No member of the Board of Directors may hold more than 10 additional mandates in other companies, of which no more than 4 additional mandates shall be in other listed companies. Chairmanships of the board of directors of other listed companies count as two mandates. Each of these mandates shall be subject to approval by the Board of Directors.
	2	No member of the Executive Committee may hold more than 6 additional mandates in other companies, of which no more than 2 additional mandates shall be in other listed companies. Each of these mandates shall be subject to approval by the Board of Directors. Members of the Executive Committee are not allowed to hold chairmanship of the board of directors of other listed companies.
	3	The following mandates are not subject to these limitations:
		a)Mandates in companies which are controlled by the Company;
		b)Mandates which a member of the Board of Directors or of the Executive Committee holds at the request of the Company or companies controlled by it. No member of the Board of Directors or of the Executive Committee shall hold more than 5 such mandates; and
		c)Mandates in associations, charitable organizations, foundations, trusts and employee welfare foundations. No member of the Board of Directors or of the Executive Committee shall hold more than 10 such mandates.
	4	Mandates shall mean mandates in the supreme governing body of a legal entity which is required to be registered in the commercial register or a comparable foreign register. Mandates in different legal entities which are under joint control are deemed one mandate.
	5	The Board of Directors may issue regulations that may determine additional restrictions, taking into account the position of the respective member.
		Article 35
Loans		No loans or credits shall be granted to the members of the Board of Directors or the Executive Committee.

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Section 5		Annual Financial Statements, Consolidated Financial Statements and Profit Allocation
		Article 36
Financial year		The Board of Directors shall prepare for each financial year as of 31 December an annual report consisting of financial statements with a management report if required and the consolidated financial statements.
		Article 37
Allocation of profit shown on the balance sheet, Reserves	1	The allocation of the profit shown on the balance sheet shall be determined by the General Meeting of Shareholders subject to the legal provisions. The Board of Directors shall submit to the General Meeting of Shareholders its proposals.
	2	In addition to statutory reserves additional reserves may be accrued.
	3	Dividends which have not been claimed within five years after the due date fall back to the Company and shall be allocated to the general reserves.
Section 6		Publications and Place of Jurisdiction
		Article 38
Publications		Shareholder communications of the Company shall be made in the Swiss Official Gazette of Commerce. The Board of Directors may designate additional publication organs.
		Article 39
Place of jurisdiction		The place of jurisdiction for any disputes arising from or in connection with the shareholdership in the Company shall be at the registered office of the Company.

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EX-1.2

Exhibit 1.2

Regulations of the Board of Directors, its Committees and the Executive Committee of Novartis AG

(Organisationsreglement)

Novartis AG

4002 Basel, Switzerland

© November 1, 2015, Novartis AG

	Table of Contents
	Regulations of the Board of Directors, its Committees and the Executive Committee of Novartis AG	2
Section 1	General Provisions	3
Section 2	Board of Directors	6
Section 3	Committees of the Board	9
Section 4	Chairman, Vice Chairmen and Chief Executive Officer	10
Section 5	Executive Committee	11
Section 6	Internal Audit	13
Section 7	Effectiveness, Amendments	13
Charter	The Compensation Committee of Novartis AG	14
Charter	The Audit and Compliance Committee of Novartis AG	18
Charter	The Governance, Nomination and Corporate Responsibilities Committee of Novartis AG	24
Charter	The Risk Committee of Novartis AG	28
Charter	The Research & Development Committee of Novartis AG	30
Appendix	Independence Criteria for the Board of Directors and its Committees	32

1

Regulations of the Board of Directors, its Committees and the Executive Committee of Novartis AG

Based on Article 26 of the articles of incorporation of Novartis AG (the “Articles of Incorporation”), the board of directors (the “Board”) promulgates the following regulations (the “Regulations”).

These Regulations govern the internal organization as well as the duties, powers and responsibilities of the following executive bodies and persons of Novartis AG (the “Company”):

·  Board

·  Committees of the Board

·  Chairman of the Board (the “Chairman”)

·  Vice Chairmen

·  Chief Executive Officer (the “CEO”)

·  Executive Committee (including its sub-committees) and

·  Internal Audit

All references to functions in these Regulations shall apply to both male and female persons.

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Section 1	General Provisions
	Article 1
Duty of Care and Loyalty	Each member of the Board, or the Executive Committee is under the duty to safeguard and further the interests of the Company and its shareholders.
	Article 2
Conflict of Interests	No member of the Board, the committees of the Board, or the Executive Committee shall participate in the deliberations and resolutions on matters which affect, or reasonably might affect, the interests of that member or of a person close to that member.
	Article 3
Confidentiality	Each member of the Board, the committees of the Board, or the Executive Committee shall at all times keep strictly confidential all information — except information which is already in the public domain — relating to the Company and its affiliated companies (the “Group”) which the member has learned during the exercise of his duties. This obligation and duty shall continue even after the term of office of the member has expired.
	Business documents of the Company and the Group shall be returned by members of the Board, the committees of the Board, or the Executive Committee at the latest on expiry of their term of office.
	Article 4
No Representation of Members	A member of the Board, the committees of the Board, or the Executive Committee who is not able to participate in a meeting of the executive body may not be represented by another member of the body or any other person.
	Article 5
Quorum, Majority Requirements	Unless stated otherwise in these Regulations, the presence in person or by telephone or video conference of a majority of the members is required for any meeting of the Board, the committees of the Board or the Executive Committee. If the chair person does not participate, the members shall nominate a chair person ad hoc who shall be the deputy chair person.
	Resolutions of the Board, the committees of the Board, or the Executive Committee require the affirmative majority of the votes cast.

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	In the event of a tie on any issue, (i) in a committee of the Board, the full Board shall decide the issue, and (ii) in the Executive Committee, the CEO shall decide the issue.
	No quorum is required for meetings at which the sole order of business is to deliberate and approve resolutions providing for the confirmation of capital increases or the amendment of the Articles of Incorporation in connection with an increase in the share capital.
	The adoption of resolutions on items not on the agenda requires the affirmative vote of at least two thirds of the members of the Board, the committees of the Board, or the Executive Committee present at a meeting.
	Article 6
Meetings and Resolutions	Meetings of the Board, the committees of the Board and the Executive Committee may be held in any location determined by the chairperson of the respective body.
	Resolutions may be passed in writing (including by electronic communication or facsimile). A proposal for a circular resolution must be communicated to all members, giving a deadline for responding, and is only deemed to have passed if: (i) more than two-thirds of all members cast a vote or give written notice that they abstain; (ii) an absolute majority of all members casting a vote approve the proposed resolution; and (iii) no member requests a Board meeting in relation to the subject matter of the proposed resolution within one full business day of receiving notice of the proposal. A circular resolution is binding and must be recorded under a separate heading in the minutes of the following meeting.
	Article 7
Secretary, Minutes	The Board, the committees of the Board and the Executive Committee shall each appoint a secretary, who need not be a member of the body.
	The secretary of each body shall keep the minutes of meetings, which shall contain all resolutions adopted at the meeting.
	Article 8
Participation of Non-Members	Persons who are not members of the Board, the committees of the Board, or the Executive Committee may participate in meetings of such bodies if their expertise is required and if they

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	have been invited by the chairperson of the body. Such persons shall not vote in any resolutions.
	Article 9
Application of General Provisions to other Management Committees	Articles 1–8 shall apply analogously to all other management committees of the Company and their members.
	Article 10
Business and Legal Separateness	The Company is a holding company which directly or indirectly owns a global group of subsidiaries that conduct business operations (the “Business”). To ensure proper functioning of the Business in the interests of the Company and its shareholders and to comply with various requirements imposed by relevant laws and regulatory authorities, the Board shall supervise and, where necessary and appropriate, coordinate the Business by providing overall guidance and support.
	Each company in the Group (“Group Company”) shall be legally separate from all other Group Companies and shall manage its business independently. No Group Company shall operate the business of another Group Company nor shall any Group Company act as agent of any other Group Company.
	Article 11
Divisions	The Business shall have operating divisions.
	Each division shall be headed by a division head that shall be responsible for:
	a)The management of the division and its business units, if any.
	b)The implementation within the division and its business units, if any, of corporate policies and strategies approved by the Board, the committees of the Board or the Executive Committee.
	c)Proposals for new strategies and policies and organizational changes for the attention of the Executive Committee.
	d)The proper reporting by the division and its business units, if any, to the Executive Committee, including the implementation under the supervision of the CEO and Chief Financial Officer of appropriate disclosure controls and procedures and internal controls.

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Section 2	Board of Directors
	Article 12
Duties of the Board	The Board is the ultimate executive body of the Company. It shall resolve all Business matters which are not reserved to the authority of the general meeting of shareholders or to other executive bodies of the Company by law, the Articles of Incorporation, or these Regulations.
	In particular, the Board shall have the following duties:
	a)The ultimate direction of the Business, including, without limitation, the taking of resolutions and the giving of necessary instructions or overall guidance and support regarding the following matters:
	·The strategy upon recommendation of the Executive Committee
	·Entry into new areas of activity and withdrawal from existing areas of the Business; acquisitions and divestments of companies, participations in companies or businesses, or incorporations or liquidations of companies or businesses, if such matters are of fundamental significance to the Business
	·The opening and closing down of sites of fundamental significance to the Business
	·The initiation and settlement of legal proceedings of fundamental significance to the Business
	·The setting of financial targets and financial means to reach such targets
	·The promulgation of corporate policies, in particular on financial matters, investments, personnel matters, leadership, compensation, compliance with laws, corporate citizenship, communication and safety and environmental protection and supervising management’s compliance therewith
	·The adoption from time to time of further regulations and instructions regarding the organization of the Business and the duties and responsibilities of the executive bodies
	b)The determination of the organization of the Company and the Group.
	c)The manner of governance of the Company, including the adoption from time to time of principles of corporate governance that are in the best interests of the Company and its shareholders.

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d)The structuring of the accounting system, financial controls and financial planning.

e)The preparation of the annual report of the Company and of the Group, and of the compensation report.

f)The appointment, removal, determination of duties and responsibilities, and succession plans of the following persons:

·The members of the committees of the Board

·The CEO

·The members of the Executive Committee and

·Such other persons as the Board may determine, from time to time, as having significant impact on the Business

g)The designation of those persons who shall have signatory power for the Company and the manner in which such persons may sign on behalf of the Company.

h)The ultimate supervision of the persons entrusted with the management of the Business, specifically in view of their compliance with laws, the Articles of Incorporation, these Regulations and other applicable regulations, directives and instructions.

i)The preparations for the General Meeting of Shareholders and carrying out the resolutions of the General Meeting, including the preparation of the proposals to the General Meeting related to the compensation of the Board of Directors and of the Executive Committee and to the Compensation Report, as per the Articles of Incorporation.

j)Notification of the court if liabilities exceed assets.

k)The adoption of resolutions concerning an increase of the share capital to the extent that such power is vested in the Board (Article 651 paragraph 4 of the Swiss Code of Obligations), as well as resolutions concerning confirmation of capital increases and related amendments to the Articles of Incorporation.

l)The determination of (i) the compensation strategy and of the principles, policies, structure and design of compensation plans for the Executive Committee, (ii) the long-term incentive/equity plans, (iii) the compensation of the members of the Board and of the CEO, and of the terms of employment of the CEO, (iv) the group and divisional financial, strategic and operational targets and the evaluation of target achievement, and the approval of the Compensation Report.

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	m)The determination of the maximum aggregate amount or maximum partial amounts of compensation, in the event the General Meeting of Shareholders has not approved a proposal of the Board of Directors, as per the Articles of Incorporation.
	n)The determination of (i) whether or not a Board member is independent, based on a proposal by the Governance, Nomination and Public Responsibilities Committee, and (ii) whether or not the members of the Audit and Compliance Committee meet the financial literacy and expertise standards, both as stipulated by applicable law, regulation and listing requirements.
	o)The examination of the expert qualifications of specially qualified auditors.
	p)The approval of other business, if such business exceeds the authority delegated from time to time by the Board to the committees of the Board or to the Executive Committee.
	Article 13
Delegation of Management	Where not stipulated as a Board responsibility in law, the Articles of Incorporation or these Regulations, the Board delegates to the Executive Committee the management of the Business pursuant and subject to these Regulations.
	Article 14
Meetings, Agenda	The Board shall meet at the invitation of the Chairman as often as may be required.
	Invitations for meetings of the Board shall contain the agenda for the meeting and shall be issued at least five business days in advance, except for urgent matters.
	Also, any member of the Board may request a meeting for a specific purpose or the inclusion of a certain item on the agenda. Such requests must be submitted to the Chairman in writing at least two days prior to the meeting.
	The Chairman shall take the chair at the meetings of the Board.
	The independent members of the Board shall meet regularly in separate sessions.

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	Article 15
Right to Request Information	The members of the Board have full and unrestricted access to management and employees of the Company and the affiliated companies in the execution of their duties. This includes the right to request information and inspection pursuant to Article 715a of the Swiss Code of Obligations.
	Article 16
Authority to Retain Independent Advisors	The Board shall have the authority to retain independent advisors for any matters within the scope of its responsibilities.
	The Board shall obtain appropriate funding, as determined by the Board, for payment of compensation to any outside advisors engaged by the Board.
	Article 17
Authorized Signatories	The Board appoints those of its members who shall be authorized to sign documents on behalf of the Company.
	Article 18
Resignation of Board members	A member of the Board shall inform the Chairman upon a material change of his or her business or professional affiliations or responsibilities and offer his resignation.
	Article 19
Evaluation of Board performance	The Board conducts an annual evaluation of the performance of the Board and of the Chairman.
Section 3	Committees of the Board
	Article 20
Committees of the Board	The Board shall form the following permanent committees:
	·Compensation Committee
	·Audit and Compliance Committee
	·Governance, Nomination and Corporate Responsibilities Committee
	·Risk Committee and
	·Research & Development Committee
	The composition and duties of these committees shall be as set forth in the applicable committee charters in compliance with legal requirements. The committee charters are attached to these Regulations and incorporated herein by reference.

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Section 4	Chairman, Vice Chairman and CEO
	Article 21
Chairman	In addition to other duties described in these Regulations and the Articles of Incorporation, the Chairman, elected by the General Meeting, has the following duties:
	a)Provides leadership to the Board in its governance role, coordinating the tasks within the Board and, in particular, calls Board meetings and sets their agenda;
	b)Coordinates, together with the Chairpersons of the Committees, the work of all Committees. He may attend the Committee meetings in consultation with the relevant Committee Chairperson;
	c)Establishes and keeps a close working relationship with the CEO, providing advice and support while respecting the fact that the day-to-day management responsibility is delegated to the Executive Committee led by the CEO;
	d)Promotes effective relationships and communication between the Board and the CEO and the Executive Committee;
	e)Takes the lead in crisis situations;
	f)Together with the CEO, ensures effective communication with shareholders, other stakeholders and the general public. The Chairman is the primary representative of the Board and, together with the CEO, represents Novartis to the media. Other Board members may only discuss Novartis matters with the media with the prior approval of the Chairman; and
	g)Works closely with the CEO in evaluating members of the Executive Committee and in establishing succession plans for key management positions.
	Article 22
Vice Chairmen	In case and as long as the Chairman is incapacitated, one of the vice chairmen shall be tasked by the Board to lead the Board.
	If and as long as the Chairman is not independent, one of the vice chairmen shall be tasked by the Board with the following duties:
	a)Chairs the sessions of the independent members of the Board; and

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	b)Leads the independent members of the Board in case of a crisis or matter requiring their separate consideration or decision. Every independent Board member may request separate meetings of the independent members if the need arises.
	Article 23
CEO	In addition to other duties that may be assigned by the Board, the CEO, supported by the Executive Committee, has the following duties;
	a)Has overall responsibility for the management and performance of the business.
	b)Leads the Executive Committee.
	c)Builds and maintains an effective executive team and proposes adequate succession planning.
	d)Appoints and promotes senior management subject to such standards as shall be adopted by the Board from time to time.
	e)Represents Novartis, in coordination with the Chairman, with major customers, financial analysts, investors and the media.
Section 5	Executive Committee
	Article 24
Members of Executive Committee	The Executive Committee is headed by the CEO. It shall consist of such members as may be appointed or removed by the Board from time to time.
	Article 25
Duties of Executive Committee	The Executive Committee is responsible for the management of the Business and functions as a coordination committee independent of any legal entity of the Group.
	In particular, and without limitation, the Executive Committee shall have the following duties:
	a)Prepare corporate policies, strategies and strategic plans for the attention of and approval by the Board or its committees.
	b)Implement the strategies and policies agreed upon by the Board.

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c)Regularly assess the achievement of the targets for the Business.

d)Submit the following to the Board or to one of its committees for approval or advice in accordance with such regulations and standards as are promulgated by the Board from time to time:

·Appointments to and removals of associates with material impact on the Business

·Capital investments, financial measures, and the acquisition or divestiture of companies, participations and businesses of fundamental significance in accordance with such regulations and standards as are promulgated by the Board from time to time

·Significant agreements with third parties and engagement in new business activities

·The revenue, financial, and investment budgets of the Business and its divisions, business units and supporting functions, including any addenda thereto

e)Implement the matters approved by the Board.

f)Prepare and submit quarterly and annual reports for the attention of and approval by the Board or its committees, and to keep the Board informed of all matters of fundamental significance to the Business.

g)Implement modifications to the organization of the Business to ensure efficient operation of the Business and achievement of optimized consolidated results.

h)Promote an active internal and external communications policy.

i)Ensure that management capacity, financial and other resources are provided and used efficiently.

j)Promulgate guidelines, including guidelines for planning, controlling, reporting, finance, personnel, information and other technologies.

k)Deal with such other matters as are delegated by the Board to the Executive Committee from time to time.

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	Article 26
Sub-committees of the Executive Committee	The Executive Committee may delegate duties as stipulated in Article 25 above in writing to other executives and committees. The CEO shall ensure proper reporting to the Executive Committee or the Board as the case may be.
Section 6	Internal Audit
	Article 27
Duties of Internal Audit	The Group’s internal audit shall:
	a)Carry out operational and system audits, assisting the organizational units in the accomplishment of objectives by providing an independent approach to the evaluation, improvement, and effectiveness of their risk management and internal control framework. All organizational units of the Group are subject to audit.
	b)Prepare reports regarding the audits it has performed, and report to the Audit and Compliance Committee and to the CEO material irregularities, whether actual or suspected, without delay.
	c)Perform such other functions and audits as assigned to it by the Board, the Audit and Compliance Committee or the CEO from time to time.
Section 7	Effectiveness, Amendments
	Article 28
Effectiveness, Amendments	These Regulations shall come into effect on March 1, 2015.
	These Regulations may only be amended or replaced by the Board.
	Dr. Jörg Reinhardt	Dr. Charlotte Pamer-Wieser
	Chairman	Corporate Secretary

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Charter

The Compensation Committee of Novartis AG

Mission Statement The Compensation Committee (the “Compensation Committee”) assists the Board concerning, but not limited to, the compensation strategy, the design of the compensation plans, the compensation of the members of the Board and of the Chief Executive Officer (“CEO”), and the Compensation Report, and determines the compensation of the other members of the Executive Committee. Pay for performance is one of the guiding principles of the compensation strategy of Novartis AG and its affiliates (the “Group”). The Group aims to reward those associates who achieve competitive business results and exemplify the Group values and behaviors. The compensation strategy strives to strengthen the performance-oriented culture and to reinforce entrepreneurial behavior resulting in contributions that motivated and dedicated associates make to sustain superior business results whilst holding executives accountable for behavior that displays innovation, quality, performance, collaboration, courage and integrity. Organization The Compensation Committee shall consist of a minimum of three and a maximum of five members of the Board. The Board shall elect a Chairman of the Compensation Committee. The members of the Compensation Committee shall be elected individually by the General Meeting of Shareholders for a term of office until completion of the next Ordinary General Meeting of Shareholders. Members of the Compensation Committee whose term of office has expired shall be immediately eligible for re-election. If there are vacancies on the Compensation Committee, the Board shall appoint substitutes from amongst its members for the remaining term of office. The members of the Compensation Committee shall be independent in accordance with the independence criteria set forth in the Appendix. The Compensation Committee will meet no less than four times a year. Special meetings may be convened as required. The Compensation Committee shall report regularly to the Board on its decisions, determinations, approvals, findings and other matters the Compensation Committee deems appropriate or the Board requests.

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The Compensation Committee may invite to its meetings other Board members, members of the management and such other persons the Compensation Committee deems appropriate in order to carry out its responsibilities. The Compensation Committee shall exclude from its decisions anyone with a personal interest in the matters to be discussed.

The Compensation Committee shall have the authority to retain an independent compensation consultant and to approve the consultant’s fees and other retention terms. The Compensation Committee shall also have authority to obtain advice and assistance from internal or external legal, accounting or other advisors.

The Compensation Committee shall obtain appropriate funding, as determined by the Compensation Committee, to support the Committee’s activities, including for payment of the independent compensation consultant and advisors.

Roles and Responsibilities

The Compensation Committee shall have the following responsibilities:

1.Develop a compensation strategy in line with the principles described in the Articles of Incorporation and submit to the Board for approval.

2.Develop the principles and design of compensation plans for the Executive Committee as well as long-term incentive/equity plans and submit to the Board for approval.

3.Support the Board of Directors in preparing the proposals to the General Meeting of Shareholders regarding the compensation of the members of the Board of Directors and the Executive Committee.

4.Prepare the Compensation Report and submit to the Board for approval.

5.Propose to the Board the contractual terms (if any) and compensation of the members of the Board (incl. the Chairman of the Board) and the CEO.

6.Determine, upon proposal by the CEO, the terms of employment, promotion or termination of the other members of the Executive Committee (except for the CEO).

7.Develop the terms of, and administer, the Group’s long-term incentive/equity compensation plans, including the weightings,

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payout leverage and caps for the chosen performance measures.

8.Determine the critical performance measures (financial, strategic and operational) that inform how well the Group and its divisions are performing in relation to the business strategy for incorporation into the incentive plans.

9.At the start of each performance period, review, after Board approval, the Group and divisional financial, strategic, operational and individual targets for Executive Committee members and direct reports to the Chairman of the Board. Incorporate these targets into the short-term and long-term incentive/equity compensation plans.

10.Periodically review and propose to the Board for approval a peer group(s) of companies for executive compensation comparisons.

11.At the start of each performance period, approve the target total direct compensation levels and the mix of compensation (fixed/variable, short/long-term, individual/Group/Division, and cash/equity) for Executive Committee members and direct reports to the Chairman of the Board.

12.At the end of each performance period, taking into consideration the Board’s evaluation of Group and divisional performance against targets established at the beginning of the performance cycle, approve performance results under the incentive plans, evaluate individual performance, approve the amount of compensation earned by Executive Committee members and recommend the amount of compensation earned by the CEO to the Board for approval.

13.Incorporate the recommendations of the Board’s Research and Development Committee for the establishment of innovation targets under incentive compensation plans at the start of each performance cycle and measurement of achievement thereof at the end.

14.Periodically assess the effectiveness of the executive short-term and long-term incentive plans in relation to the Group’s strategic objectives, values and pay-for-performance principles.

15.In conjunction with the Risk Committee of the Board, periodically review, the compensation plans and practices as they

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apply to Executive Committee members to assess whether such plans and practices could lead to inappropriate risk taking.

16.Annually assess the level of Board compensation against the peer group and other relevant companies and submit to the Board its recommendations for the compensation of Board members and the compensation and terms of employment of the Chairman of the Board.

17.Establish executive and director stock ownership guidelines and stock trading policies, and monitor compliance with such policies.

18.Inform the Board about policies, programs and key decisions as well as statistical comparisons and benchmarking of compensation levels against key competitors and regularly report to the Board on the decisions and deliberations of the Compensation Committee.

19.As directed by the Chairman of the Board, oversee communications and engagement on executive compensation matters with shareholders and their advisors, including shareholder voting on Board and Executive Committee compensation, and assess the voting results on executive compensation matters of the most recent General Meeting of Shareholders.

20.Annually assess the engagement and performance of compensation consultants or other outside advisors engaged by the Compensation Committee and their independence in relation to any potential conflicts of interest.

21.Establish an annual calendar of activities for the upcoming year, including special projects to be undertaken by the Compensation Committee.

22.Review and reassess the adequacy of this charter annually and submit proposed changes to the Board for approval.

23.Conduct an annual self-evaluation of the Compensation Committee’s performance.

24.Assume other responsibilities assigned to it by law, the Articles of Incorporation and by the Board.

Effective: November 1, 2015

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Charter

The Audit and Compliance Committee of Novartis AG

Mission Statement The audit and compliance committee (the “ACC”) will assist the board of directors of Novartis AG (the “Board”) in monitoring (1) the integrity of the financial statements of Novartis AG (the “Company”) and its affiliated companies (the “Group”), (2) the external auditor’s qualifications and independence, (3) the performance of the Group’s internal audit function and external auditors, and (4) the compliance by the Group with legal and regulatory requirements. Organization The ACC shall consist of a minimum of three members of the Board. The Board will designate one member of the ACC as its chairperson. The members of the ACC shall be independent in accordance with the independence criteria set forth in the Appendix. Each member of the ACC must be financially literate, as such qualification is interpreted by the Board in its business judgment. At least one member shall be an “audit committee financial expert.” Such member has (1) an understanding of generally accepted accounting principles and financial statements, (2) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves, (3) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Group’s financial statements, or experience actively supervising one or more persons engaged in such activities, (4) an understanding of internal control over financial reporting, and (5) an understanding of audit committee functions. The ACC shall meet no less than four times a year. The ACC shall meet periodically in separate executive sessions with management, the internal auditors and, but not less frequently than quarterly, the external auditor, and have such other direct and independent interaction with such persons from time to time as the members of the ACC deem appropriate. The ACC may invite to its meetings Company management, internal auditors, external auditors, and such other persons as the

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ACC deems appropriate in order to carry out its responsibilities. The ACC shall exclude from its meetings anyone with a personal interest in the matters to be discussed.

The ACC shall regularly report to the Board on decisions and deliberations of the ACC.

The Chairman of the ACC shall coordinate the work of his committee with the Chairman of the Risk Committee to the extent appropriate, in particular to ensure that there are as few as possible overlaps between the work of the two committees, and that the Risk Committee also deals with the risks related to the mission of the ACC as set out above. The ACC shall have the authority to retain independent counsel and other advisors, and to conduct or authorize investigations into any matters within the scope of its responsibilities.

The Company shall provide for appropriate funding, as determined by the ACC, for payment of compensation to the external auditors and any outside advisors engaged by the ACC.

Responsibilities

The ACC has the following roles and responsibilities:

Regarding External Auditors

1.Evaluate the qualifications, performance and independence of the external auditors, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, taking into account the opinions of management and internal auditors.

2.Ensure rotation of the audit partners of the external auditors at least every five years. Consider whether, in order to ensure continuing auditor independence, it is appropriate to adopt a policy of rotating the external auditing firm on a regular basis. Set policies for the Company’s hiring of employees or former employees of the external auditors.

3.On behalf of the Board, which has fully delegated this task to the ACC, (1) select and nominate the external auditors for election by the meeting of the shareholders (pursuant to mandatory Swiss company law), and (2) be directly responsible for the supervision and compensation of the external auditors (including the resolution of any disagreement

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between management and the external auditors regarding financial reporting). The external auditors shall report directly to the ACC.

4.On behalf of the Board, which has fully delegated this task to the ACC, pre-approve all auditing services, internal control- related services and non-audit services permitted under applicable statutory law, regulations and listing requirements to be performed for the Group by its external auditor. The ACC shall establish and maintain the necessary approval procedures.

5.Obtain and review a report from the external auditors at least annually regarding (1) the external auditors’ internal quality- control procedures, (2) any material issues raised by the most recent quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (3) any steps taken to deal with any such issues, and (4) all relationships between the external auditors and the Group.

6.Discuss with the external auditors the results of their audits, any unusual items or disclosures contained in the audits and the matters required by the US Statement on Auditing Standards No. 61, as revised, including the following:

·The initial selection of and changes in significant accounting policies

·The methods used to account for significant or unusual transactions and the effects of significant accounting policies in controversial or emerging areas

·The process utilized by management to formulate significant accounting estimates and the basis for the auditors’ conclusions regarding the reasonableness of these estimates

·Audit findings and recommendations, including audit adjustments that either individually or in the aggregate have a significant effect on the audit

·The auditors’ responsibility for other information presented with the audit results, such as a management report on financial status

·Any disagreements with management, whether or not satisfactorily resolved, concerning matters that individually or in the aggregate may be significant to the Company’s or the Group’s financial status or the auditors’ report

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·Significant matters that were the subject of consultations with other accountants

·Significant issues discussed with management with regard to the initial or recurring retention of the auditor and

·Any serious difficulties encountered in dealing with management during the performance of the audit

Regarding Internal Auditors

7.Review periodically, together with the CEO, the adequacy of the organizational structure, budget and appointment and replacement of the senior internal auditing executives.

8.Review the significant reports to management prepared by the internal audit department and management’s responses.

9.Discuss with the external auditor and management the internal audit department’s responsibilities, staffing and any recommended changes in the planned scope of the internal audit.

Regarding Financial Reporting

10.Review and discuss with management and the external auditors the Company’s and Group’s quarterly and annual financial statements (including the sections on Operating and Financial Review and Prospects) to consider significant financial reporting issues and judgments made in connection with the preparation of the Company’s and Group’s financial statements, including any significant changes in the Company’s or Group’s selection or application of accounting principles.

11.On behalf of the Board, which has fully delegated this task to the ACC, review and approve the Company’s and Group’s quarterly financial statements for the first three quarters of each calendar year and the corresponding financial results releases. The Board remains responsible for the approval of the annual financial statements of the Company and the Group and of the corresponding financial results releases.

Regarding Compliance with Laws

12.Review major issues regarding the status of the Company’s compliance with laws and regulations, as well as major legislative and regulatory developments that may have significant impact on the Company.

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13.Review the processes and procedures for management’s monitoring of compliance with local laws. To this end, the ACC will obtain and review reports submitted at least annually by those persons the ACC has designated as responsible for compliance with laws.

Regarding Compliance with Policies

14.Review compliance by management of the Company with those Company policies designated by the Board from time to time, including policies on ethical business standards. To this end, the ACC will obtain and review reports submitted at least annually by each of those persons the ACC has designated as responsible for implementation of and compliance with such policies and give guidance and direction on how the policies are to be administered.

Other

15.Review the financial literacy of each ACC member to determine whether he or she meets the applicable legal standards and propose to the Board the appropriate determination and its disclosure.

16.Establish procedures for (a) the receipt, retention and treatment of complaints received by the Group regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by employees of the Group of concerns regarding questionable accounting or auditing matters.

17.Review disclosures made by the CEO and chief financial officer regarding compliance with their certification obligations, including the Company’s disclosure controls and procedures and internal controls for financial reporting and evaluations thereof.

18.Review such other matters in relation to the Group’s accounting, auditing, financial reporting and compliance with law and policies as the ACC may, in its own discretion, deem desirable in connection with the review functions described above.

19.Annually review and reassess the adequacy of this charter and submit proposed changes to the Board for approval.

20.Conduct an annual self-evaluation of the ACC’s performance.

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Limitation of ACC’s Role

While the ACC has the responsibilities and powers set forth in this charter, it is not the duty of the ACC to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the external auditor.

Effective: January 1, 2014

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Charter

The Governance, Nomination and Corporate Responsibilities Committee of Novartis AG

Mission Statement The Governance, Nomination and Corporate Responsibilities Committee (“GNCRC”) will assist the board of directors of Novartis (the “Board”) of Novartis AG (the “Company”) in fulfilling its responsibilities with respect to (i) the governance of the Company, (ii) the identification of individuals who are qualified to become (or be re-elected as) Board members and (iii) the public responsibilities of the Company. Organization The GNCRC shall consist of a minimum of three members of the Board. These members shall be independent in accordance with the independence criteria set forth in the Appendix. The Board will designate one member of the GNCRC as its chairperson. The GNCRC will meet no less than two times a year. Special meetings may be convened as required. The GNCRC shall regularly report to the Board on decisions and deliberations of the GNCRC. The GNCRC may invite to its meetings other Board members, Company management and such other persons as the GNCRC deems appropriate in order to carry out its responsibilities. The GNCRC shall exclude from its meetings anyone with a personal interest in the matters to be discussed. The GNCRC shall have sole authority to retain and terminate any search firm to be used to identify candidates for election to the Board, and shall have sole authority to approve the search firm’s fees and other retention terms. The GNCRC shall also have authority to obtain advice and assistance from internal and external legal, accounting or other advisors. Roles and Responsibilities The GNCRC has the following roles and responsibilities: In General 1.Review periodically the articles of incorporation of the Company (the “Articles of Incorporation”) and the regulations of the board of directors, its committees and the executive

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committee (the “Regulations) and recommend to the Board changes thereto in respect of good corporate governance and fostering shareholders’ rights.

2.Consult with the chairman of the Board (the “Chairman”) in carrying out the duties of the GNCRC.

3.Recommend such other actions not set out below regarding the governance of the Company that are in the best interests of the Company and its shareholders, as the GNCRC shall deem appropriate.

Board Composition

4.Review the composition and size of the Board in order to ensure the Board has the proper expertise and consists of persons with sufficiently diverse backgrounds.

5.Determine the criteria for selection of the Chairman, Board members and Board committee members. The GNCRC considers factors such as (i) personality, skills and knowledge, (ii) diversity of viewpoints, professional backgrounds and expertise, (iii) business and other experience relevant to the business of the Company, (iv) the ability and willingness to commit adequate time and effort to Board and committee responsibilities, (v) the extent to which personality, background, expertise, knowledge and experience will interact with other Board members to build an effective and complementary Board, and (vi) whether existing board memberships or other positions held by a candidate could lead to a conflict of interest.

6.With the participation of the Chairman, actively seek, interview and screen individuals qualified to become Board members for recommendation to the Board.

7.Assess and recommend to the Board as to whether members of the Board should stand for re-election. For its assessment, the GNCRC considers, among other things, age limit and ability and willingness to commit adequate time to the Board and committee matters.

8.In case a Board member tenders his resignation in accordance with article 18 of the Board Regulations, review the appropriateness of continued service on the Board of such member.

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9.Prepare and annually review succession plans for the CEO in case of resignation, retirement, or death.

10.With the Chairman and the corporate secretary, develop and periodically review an orientation program for new Board members and an ongoing education program for existing Board members.

Board Committees

11.With the Chairman, periodically review the Regulations and the charters of the Board committees and make recommendations to the Board for the creation of additional Board committees or a change in mandate or dissolution of Board committees.

12.With the Chairman, periodically review the composition of the Board committees. When doing so, the GNCRC takes into account whether a member of a Board committee is suitable for the tasks of his respective Board committee.

13.With the Chairman, periodically review the chairmanships of the respective Board committee.

14.Ensure that each committee conducts the required number of meetings and makes sufficient reports to the Board on its activities and findings.

Conflicts, Other Directorships and Board member independence

15.Review directorships and consulting agreements of Board members for conflicts of interest.

16.Instruct a Board member having an actual or potential conflict of interest on how to conduct himself/herself in matters before the Board which may pertain to such a conflict. The Chairman reviews actual and potential conflicts of interest a Board member may have and proposes to the Board how the conflict should be handled. The secretary to the Board reports to the GNCRC regularly on such decisions taken by the Board.

17.Annually submit to the Board a proposal concerning the determination of the independent status of the Board members and the corresponding disclosure.

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Corporate responsibilities of the Company

18.Oversee the Company’s strategy and governance on corporate responsibility.

19.Oversee key issues related to corporate responsibility that may affect the Company’s business and reputation.

20.Oversee the Company’s participation in the UN Global Compact.

21.Review and discuss emerging trends with regard to corporate responsibility.

22.Advise the Board and provide counsel to the management on corporate responsibility.

Evaluation of Performance

23.Conduct an annual self-evaluation of the GNCRC’s performance.

Effective: January 1, 2014

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Charter The Risk Committee of Novartis AG Mission Statement The Risk Committee (RC) will assist the board of directors of Novartis AG (the “Board”) in ensuring that risks are properly assessed and professionally managed by (1) overseeing the Novartis risk management system and processes, (2) reviewing the Novartis risk portfolio and related actions implemented by management. Organization The RC shall consist of a minimum of three members of the board of directors (the “Board”). The Board will designate one member of the RC as the chairperson of the RC. The RC shall meet no less than four times a year and have direct and independent interaction with such persons from time to time as the members of the RC deem appropriate. The RC may invite to its meetings members of the management (including the Chief Financial Officer, the Group General Counsel, the Head of the Group Risk Office, and the Head of Internal Audit), external auditors and such other persons as the RC deems appropriate in order to carry out its responsibilities. The RC shall exclude from its meetings anyone with a personal interest in the matters to be discussed. The RC shall regularly report to the Board on decisions and -deliberations of the RC. The Chairman of the RC shall coordinate the work of his committee with the Chairman of the Audit and Compliance Committee to the extent appropriate, in particular, to ensure that there are as few as possible overlaps between the work of the two committees. The RC shall have the authority to retain independent advisors for any matters within the scope of its responsibilities. The RC shall obtain appropriate funding, as determined by the RC, for payment of compensation to any outside advisors engaged by the RC.

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Responsibilities

The RC has the following role and responsibilities:

1.Ensure that Novartis has implemented an appropriate and effective risk management system and process.

2.Ensure that all necessary steps are taken to foster a culture of risk-adjusted decision-making without constraining reasonable risk taking and innovation.

3.Approve guidelines and review policies and processes.

4.Review with management, internal auditors and external-auditors the identification, prioritization and management of the risks, the accountabilities and roles of the functions involved with risk management, the risk portfolio and the related actions implemented by management.

5.Inform the ECN and the Board on a periodic basis on the risk management system and on the most significant risks and how these are managed.

6.Review such other matters in relation to Novartis’ risk management as the RC may, in its own discretion, deem desirable in connection with its responsibilities described above.

7.Keep itself up to date on risk management best practices. The Head of the Group Risk Office is expected to update the RC at least once a year on developments in this area.

8.Annually review and reassess the adequacy of this charter and submit proposed changes to the Board for approval.

9.Conduct an annual self-evaluation of the RC’s performance.

Limitation of RC’s Role

While the RC has the responsibilities and powers set forth in this charter, the design of the risk management system and the risk management process (including the identification, prioritization and management of the risks) is the responsibility of the management.

Effective: January 1, 2014

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Charter The Research & Development Committee of Novartis AG Mission Statement The Research & Development Committee (“R&DC”) (i) oversees the research and development strategy, (ii) evaluates and challenges the effectiveness and competitiveness of the research and development function, (iii) reviews and discusses emerging scientific trends and activities critical to the success of research and development and (iv) reviews the pipeline. Organization The R&DC shall consist of a minimum of three members of the board of directors of Novartis AG (the “Board”). The Board will designate one member of the R&DC as the chairperson. The R&DC shall meet no less than two times a year and have direct and independent interaction with such persons from time to time as the members of the R&DC deem appropriate. The R&DC may invite to its meetings members of the management and such other persons as the R&DC deems appropriate in order to carry out its responsibilities. The R&DC shall exclude from its meetings anyone with a personal interest in the matters to be discussed. The R&DC shall regularly report to the Board on the activities of the R&DC. The R&DC shall have the authority to retain independent advisors for any matters within the scope of its responsibilities. The R&DC shall obtain appropriate funding, as determined by the R&DC for payment of compensation to any outside advisors engaged by the R&DC.

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Responsibilities

The R&DC has the following role and responsibilities:

1.Monitor research and development and bring recommendations to the Board.

2.Assist the Board in the oversight, evaluation and decision making related to research and development.

3.Inform the Board on a periodic basis on the research and development strategy, the effectiveness and competitiveness of the research and development function, on emerging scientific trends and activities, critical to success of research and development and on the pipeline.

4.Advise the Board on scientific, technological and research and development matters.

5.Provide counsel and know how to management in the area of research and development.

6.Review such other matters in relation to Novartis’ research and development as the R&DC may, in its own discretion, deem desirable in connection with its responsibilities described above.

7.Annually review and reassess the adequacy of this charter and submit proposed changes to the Board for approval.

8.Conduct an annual self-evaluation of the R&DC’s performance.

Effective: January 1, 2014

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Appendix Independence Criteria for the Board of Directors and its Committees Independence of the members of the Board of Directors The Governance, Nomination and Corporate Responsibilities Committee (“GNCRC”) annually submits to the full board of directors of Novartis AG (the “Board”) a proposal concerning the determination of the independent status of the Board members (“Director”). For purposes of such assessment, the GNCRC considers all relevant facts and circumstances of which it is aware. The majority of Directors and any member of the Audit and Compliance Committee (“ACC Director”) shall meet the independence criteria set forth below. In order to be considered independent, a Director shall not have any material relationship with Novartis AG and any of its subsidiaries (“Novartis”) other than his/her service as a director. I.Material Relationships 1.A Director will not be considered independent if ·The Director or his/her immediate family member (“Family Member”)(1) owns more than 10% of the stock of Novartis AG ·The Director has received direct compensation (other than for former service as an interim Chairman or CEO or other executive officer) of more than USD 120 000 p.a. (other than dividends or Board/Board Committee fees and retirement or deferred pay for prior service, provided such compensation is not contingent in any way on continued service) from Novartis within the last three years ·A Family Member has received direct compensation of more than USD 120 000 p.a. (other than compensation received for service as an employee other than an executive officer) from Novartis within the last three years ·The Director is, or has been within the last three years, an employee of Novartis ·A Family Member is, or has been within the last three years, an executive officer of Novartis ·The Director is a current partner or employee of the auditor of Novartis (“Auditor”)

(1)Family Member includes a person’s spouse, parents, children, stepchildren, siblings, mother-, father-, brothers-, sisters-, sons- and daughters-in-law and anyone (other than domestic employees) who shares such person’s home.

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·A Family Member is a partner of the Auditor or is an employee of the Auditor and works on Novartis’ audit

·The Director or a Family Member is a former partner or employee of the Auditor who personally worked on Novartis’ audit during the last three years

·The Director or a Family Member is, or has been within the last three years, employed as an executive officer of an enterprise while any of Novartis’ present executive officers serves or has served on that enterprise’s compensation committee

·An enterprise has made payments to or received payments from Novartis for goods, property or services in an amount that exceeds, in any of the last three fiscal years, the greater of USD 1 million or 2% of the enterprise’s consolidated gross revenues, and

·The Director is a board member or employee of that enterprise or holds more than 10% of the shares in that enterprise or

·A Family Member is a board member or executive officer or holds more than 10% of the shares in that enterprise

2.In addition to the independence criteria set above, an ACC Director shall not be considered independent if

·The ACC Director or his/her spouse, minor child, minor step-child or child or stepchild sharing the ACC Directors’ home accepts any salary or consulting, advisory or other compensatory fee (other than Board/Board Committee compensation) from Novartis

·The ACC Director is a partner, a member, an officer such as a managing director, executive officer or occupies a similar position in an enterprise that provides advisory services such as accounting, legal, investment banking or financial advisory services to Novartis

If an ACC Director simultaneously serves on the audit committees of more than two public companies other than Novartis, then the GNCRC must determine that such simultaneous service would not impair the ability of such Director to effectively serve on the ACC.

II.Immaterial Relationships

Unless the GNCRC concludes in its assessment to the contrary, a relationship is presumed not to impair the independence of a Director if

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·The Director or a Family Member received from Novartis, during the last fiscal year, personal benefits (other than the coverage of travel expenses incurred by a Family Member in connection with meetings of the Board of Directors) having an aggregate value of less than USD 5 000

·A Family Member is an employee but not an executive officer of Novartis, unless the Family Member is an ACC Director’s spouse, minor child, minor stepchild or child or stepchild sharing the ACC Director’s home

·The Director or a Family Member holds less than 10% interest in any legal entity that has a relationship with Novartis

·The Director or a Family Member is a board member of a legal entity and that legal entity has made payments to or received payments from Novartis for goods, property or services in an amount that did not exceed, in any of the last three fiscal years, the greater of USD 1 million or 2% of the legal entity’s consolidated gross revenues

·The Director or a Family Member is a board member or executive officer of a non-profit organization and Novartis’ contributions to such organization did not exceed, in any of the last three fiscal years, the greater of USD 1 million or 2% of the organization’s consolidated gross revenues

·A legal entity in which the Director or a Family Member is director, executive officer or employee has been indebted to Novartis in connection with a transaction in the ordinary course of business or in an amount that did not exceed USD 100 000 during the last fiscal year

·The Director or a Family Member serves on the board of another enterprise at which an executive officer or another board member of Novartis also serves as board member

The enumeration of relationships mentioned in this Section II is merely exemplary. The fact that a particular relationship is not listed does not mean that the relationship affects the independence of a Director.

Effective: March 1, 2015

34

EX-4.2

Exhibit 4.2

Confidential portions of this exhibit have

been omitted and filed separately with the

Securities and Exchange Commission

EXECUTION VERSION

1 March 2015

NOVARTIS AG

and

GLAXOSMITHKLINE PLC

and

GLAXOSMITHKLINE CONSUMER
HEALTHCARE HOLDINGS LIMITED

DEED OF AMENDMENT AND RESTATEMENT

relating to the

CONTRIBUTION AGREEMENT
relating to the Consumer Healthcare Joint Venture,
dated 22 April 2014 (as amended)

This Deed (the “Deed”) is made on 1 March 2015 between:

(1)NOVARTIS AG, a corporation (Aktiengesellschaft) incorporated in Switzerland whose registered office is at Lichtstrasse 35, 4056 Basel, Switzerland (“Novartis”);

(2)GLAXOSMITHKLINE PLC, a public limited company incorporated in England and Wales whose registered office is at 980 Great West Road, Brentford, Middlesex, TW8 9GS, United Kingdom (“GSK”); and

(3)GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED (formerly LEO CONSTELLATION LIMITED), a private limited company incorporated in England and Wales whose registered office is at 980 Great West Road, Brentford, Middlesex, TW8 9GS, United Kingdom (the “Purchaser”),

each a “party” and together the “parties”.

Whereas:

(A)The parties entered into the Contribution Agreement relating to the Consumer Healthcare Joint Venture on 22 April 2014 (the “CA”).

(B)The CA was subsequently amended and restated on 29 May 2014 (the “Original Agreement”).

(C)The parties now wish to further amend and restate the Original Agreement, in the form of the Amended Agreement (as defined below).

It is agreed as follows:

1.DEFINITIONS AND INTERPRETATION

In this Deed, unless the context otherwise requires, the provisions of this clause 1 apply.

1.1Incorporation of defined terms

Unless otherwise stated, terms defined in the Original Agreement shall have the same meaning in this Deed.

1.2Definitions

“Amended Agreement” means the Original Agreement, as amended and restated in the form set out in the Schedule to this Deed; and

“Signing Date” means 22 April 2014.

2

1.3Interpretation clauses

(A)The principles of interpretation set out in Clause 1 of the Original Agreement shall have effect as if set out in this Deed, save that references to “this Agreement” shall be construed as references to “this Deed”.

(B)References to this Deed include the Schedule.

2.AMENDMENT

2.1In accordance with Clauses 15.5.3 and 15.6.1 of the Original Agreement, the parties agree that the Original Agreement shall be amended and restated as set out in the Schedule to this Deed.

2.2The amendment and restatement of the Original Agreement pursuant to clause 2.1 shall take effect from the Signing Date, as if the Amended Agreement had been entered into on the Signing Date.

2.3Upon this Deed being entered into, the Amended Agreement shall supersede the Original Agreement in its entirety.

3.MISCELLANEOUS

3.1Each party represents and warrants that it has full power and authority to enter into this Deed and to perform its obligations under it.

3.2The provisions of Clauses 12, 15.3 to 15.6 and 15.14 to 15.18 of the Amended Agreement shall apply to this Deed as if set out in full in this Deed and as if references in those Clauses to “this Agreement” are references to this Deed and references to “party” or “parties” are references to parties to this Deed.

3

In witness whereof this Deed has been delivered on the date first stated above.

Executed as a DEED by	)
GLAXOSMITHKLINE PLC acting by	)
its duly appointed attorney	)	/s/ Edgar B. Cale
	)	(Signature of attorney)
	)
In the presence of:
Witness’ signature:		/s/ Claire Jackson
Name (print):		Claire Jackson
Occupation:		Solicitor
Address:		One Bunhill Row, London

4

In witness whereof this Deed has been delivered on the date first stated above.

Executed as a DEED by	)
	)
Jing Zhao as Attorney                 and	)	/s/ Jing Zhao
	)
Jonathan Emery As Attorney	)
	)	/s/ Jonathan Emery
on behalf of NOVARTIS AG	)

5

In witness whereof this Deed has been delivered on the date first stated above.

Executed as a DEED by	)
GLAXOSMITHKLINE CONSUMER	)
HEALTHCARE HOLDINGS LIMITED	)	/s/ Edgar B. Cale
acting by its duly appointed attorney	)	(Signature of attorney)
	)
In the presence of:
Witness’ signature:		/s/ Claire Jackson
Name (print):		Claire Jackson
Occupation:		Solicitor
Address:		One Bunhill Row, London

6

SCHEDULE

Amended Agreement

7

Dated 22 April 2014
as amended and restated on 29 May 2014, and further amended and restated on 1 March  2015

GLAXOSMITHKLINE PLC

and

NOVARTIS AG

and

GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED

CONTRIBUTION AGREEMENT
relating to the Consumer Healthcare Joint Venture

CONTENTS

		Page
1.	Interpretation	2
2.	Sale and Purchase of the Target Groups	48
3.	Consideration	56
4.	Conditions	59
5.	Pre-Closing	66
6.	Closing	70
7.	Post-Closing Adjustments	77
8.	Post-Closing Obligations	79
9.	Warranties	93
10.	Limitation of Liability	94
11.	Claims	98
12.	Confidentiality	100
13.	Insurance	102
14.	France Business and the Netherlands Business	104
15.	Other Provisions	106
Schedule 1 Details of the Share Sellers, Shares etc.		118
Schedule 2 The Properties		126
Schedule 3 Excluded Assets		147
Schedule 4 Product Approvals etc.		149
Schedule 5 Certificate		158
Schedule 6 Shared Business Contracts, Transferred Contracts and Certain Other Businesses		160
Schedule 7 Employees		176

Schedule 8 Employee Benefits	204
Schedule 9 Products	221
Schedule 10 VAT	222
Schedule 11 Closing Obligations	225
Schedule 12 Post Closing Adjustments	229
Schedule 13 Warranties given under Clause 9.1	236
Schedule 14 Warranties given by the Purchaser under Clause 9.3	254
Schedule 15 Pre-Closing Obligations	256
Schedule 16 Key Personnel	261
Schedule 17 Reorganisations	262
Schedule 18 Statement of Net Assets	266
Schedule 19 Novartis International Assignees	272
Schedule 20 Clearances, Approvals etc.	273
Schedule 21 Seller Marks	274
Schedule 22 Delayed Businesses	275
Schedule 23 Ukraine Business	305
Schedule 24 Local Payments	307
Schedule 25 Global TDSA Jurisdictions	308
Schedule 26 Novartis Excluded Employees	309
Schedule 27 Anti-bribery and corruption	310

TABLE OF SCHEDULES

(The following schedules and exhibits to the agreement identified below have been omitted in reliance upon Rule 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish such schedules and exhibits to the Commission supplementally upon request.)

Schedule No.	Schedule Name
Schedule 2, Part 1	GlaxoSmithKline Properties
Schedule 2, Part 2	Novartis Properties
Schedule 9, Part 1	GlaxoSmithKline Products

Schedule 9, Part 2	Novartis Products
Schedule 9, Part 3	Novartis Pipeline Products
Schedule 12, Part 3	Illustrative Closing Statement
Schedule 12, Part 4	Illustrative Working Capital Statement
Schedule 16	Key Personnel
Schedule 18, Part 3	GlaxoSmithKline Statement of Net Assets
Schedule 18, Part 4	Novartis Statement of Net Assets
Schedule 19	Novartis International Assignees
Schedule 21	Seller Marks
Schedule 24	Local Payments
Schedule 25	Global TDSA Jurisdictions
Schedule 26	Novartis Excluded Employees
Schedule 27	Anti-bribery and corruption
Attachments 1 and 2	Management Presentations

Contribution Agreement

This Agreement is made on 22 April 2014, amended and restated on 29 May 2014, and as further amended and restated on 1 March 2015

between:

(1)Novartis AG, a corporation (Aktiengesellschaft) registered in the Commercial Register of the Canton of Basel-Stadt, Switzerland under number CHE-103.867.266 and whose registered office is at Basel Switzerland and whose address is Lichtstrasse 35, 4056 Basel (“Novartis”);

(2)GlaxoSmithKline Plc, a company registered in England under number 03888792 and whose registered office is at 980 Great West Road, Brentford, Middlesex TW8 9GS (“GlaxoSmithKline”, with each of Novartis and GlaxoSmithKline being, a “Seller” and together, the “Sellers”); and

(3)GlaxoSmithKline Consumer Healthcare Holdings Limited, a company registered in England under number 08998608 whose registered office is at 980 Great West Road, Brentford, Middlesex TW8 9GS (the “Purchaser”),

each a “party” and together the “parties”.

Whereas:

(A)Each Seller and certain of its Affiliates (as defined below), including that Seller’s Target Group Companies (as defined below), are engaged in that Seller’s Contributed Business (as defined below).

(B)As of the date of this Agreement, each Seller and certain of its Affiliates directly or indirectly own shares or other equity interests in that Seller’s Target Group Companies.

(C)Each Seller has agreed to sell (or procure the sale of) its Target Group (as defined below) and to assume the obligations imposed on it as a Seller under this Agreement, in each case, on the terms and subject to the conditions of this Agreement.

(D)The Purchaser has agreed to purchase (or procure the purchase of) the Target Groups and to assume the obligations imposed on the Purchaser under this Agreement, in each case, on the terms and subject to the conditions of this Agreement.

(E)In connection with the transactions contemplated by this Agreement, the Purchaser and GlaxoSmithKline and/or Novartis, and/or certain of their respective Affiliates, have entered into or will enter into the Ancillary Agreements (as defined below).

It is agreed as follows:

1.INTERPRETATION

In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:

1.1Definitions

“2012 Accounts” means, for each Target Group Company, the audited financial statements of that Target Group Company, prepared in accordance with legislation as in force and applicable to that Target Group Company for the accounting reference period ended on the 2012 Accounts Date, comprising the balance sheet, the profit and loss account and the notes to the accounts;

“2012 Accounts Date” means 31 December 2012;

“2013 Operating Income” means the operating income for 2013 annexed to the Disclosure Letter at Annex B.

“A Shares” means the A ordinary shares in the capital of the Purchaser, having the rights and restrictions set out in the articles of association of the Purchaser as at Closing, and which, immediately following Closing, will represent 63.5 per cent. of the ordinary share capital of the Purchaser;

“Action” means the taking of any steps by any Governmental Entity to seek a Judgment which would have the effect of preventing the consummation of the transactions contemplated by this Agreement by the Purchaser;

“Additional 2015 Products” means

(i)products reported in the Allergy and Dermatology Business Unit in China, being Flixonase, Avamys, Beconase, Valtrex, Drapolene, Cutivate, Physiogel and Spectraban;

(ii)Flonase / Flixonase Prescription Products in Denmark, Sweden, Finland, Singapore, Malaysia;

(iii)Stieprox in BMA, Azerbaijan, Georgia, Ukraine, Russia, Brazil, Korea, Hong Kong, Malaysia, Singapore and Philippines;

(iv)Darrier in Mexico; and

(v)any Consumer Healthcare Products in Israel.

“Affiliate” means:

(i)with respect to the parties, any other person that is Controlled by such person; or

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(ii)with respect to any other person, any other person that Controls, is Controlled by or is under common Control with such person, and “Affiliates” shall be interpreted accordingly,

provided that any Delayed Target Group Company shall not constitute an “Affiliate” of the Purchaser unless, and until, the relevant Delayed Closing Date in respect of such Delayed Target Group Company;

“Affiliate Contract” means:

(i)in respect of GlaxoSmithKline, any Contract between or among any member of GlaxoSmithKline’s Group (other than its Target Group Company) on the one hand, and its Target Group Company on the other hand, to the extent that it relates to any services that will be and, as at Closing are, provided under the Ancillary Agreements, but excluding, for the avoidance of doubt: (i) any Ancillary Agreement; and (ii) any Contract comprising or related to any Intra-Group Trading Payables or Intra-Group Trading Receivables; or

(ii)in respect of Novartis, any Contract between or among any member of Novartis’s Group (other than its Target Group Company) on the one hand, and its Target Group Company on the other hand, but excluding:

(a)any Ancillary Agreement;

(b)any Contract comprising or related to any Intra-Group Trading Payables or Intra-Group Trading Receivables;

(c)any Novartis Services Contract;

(d)any Novartis Distribution and Sales Products Contract;

(e)the Algerian Distribution Contracts; and

(f)the Saudi Distribution Contracts.

“Agreed Terms” means, in relation to a document, such document in the terms agreed between GlaxoSmithKline and Novartis and initialled for identification purposes by GlaxoSmithKline’s Lawyers and Novartis’s Lawyers, with such alterations as may be agreed in writing between the parties from time to time;

“Agreed UK Restructuring Arrangement” means the pension augmentation (or cash in lieu of augmentation) policy applying on redundancy to UK employees of the GlaxoSmithKline Group who joined service prior to 1 April 2005 as disclosed to Novartis prior to the date of this Agreement via a document which was signed on 22 April 2014 by Eleanor Hart of Slaughter and May and Andrew Murphy of Freshfields Bruckhaus Deringer LLP for identification purposes;

“Agreement” means this contribution agreement as it may have been amended or restated from time to time;

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“Algerian Distribution Contracts” means any contracts entered into between Novartis Consumer Health SA and Sandoz SPA and any other contracts entered into by any Novartis Target Group Company in relation to the Novartis OTC Business in Algeria as Novartis and the Purchaser may agree from time to time;

“Alliance Market Businesses” means the GlaxoSmithKline Alliance Market Businesses and the Novartis Alliance Market Businesses;

“Alliance Market Distribution Agreement” has the meaning given in the Shareholders’ Agreement;

“Alliance Market Local Transfer Agreements” means the local transfer agreements listed in Appendix 1;

“Alliance Market Territories” means Austria, Chile, Dominican Republic, Ecuador, Egypt, El Salvador, Guatemala, Honduras, Israel, Jamaica, Morocco, Peru, Trinidad and Tobago, Uruguay and Venezuela;

“Ancillary Agreement Liabilities” means, in respect of a Seller, the Liabilities of any member of that Seller’s Group to any member of the Purchaser’s Group and the Liabilities of any member of the Purchaser’s Group to any member of that Seller’s Group, in each case arising under any Ancillary Agreement;

“Ancillary Agreements” means the Implementation Agreement, the Local Transfer Documents, the Disclosure Letters, the Tax Indemnity, the France Offer Letters, the France SAPAs, the Netherlands Offer Letter, the Netherlands SAPA, the Transitional Services Agreement, the Manufacturing and Supply Agreements, the Transitional Distribution Services Agreements, the Purchaser Trademark Licence Agreements, the Purchaser Patent and Know-How Licence Agreements, the Intellectual Property Assignment Agreements, the Pharmacovigilance Agreement, the Support Services Agreement, the Shareholders’ Agreement and the Claims Management Agreement;

“Animal Health Term Sheet” has the meaning given to it in Clause 5.2.3(i);

“Anti-Bribery Law” means any Applicable Law that relates to bribery or corruption, including the US Foreign Corrupt Practices Act of 1977 and the UK Bribery Act 2010, in each case, as amended, re-enacted or replaced from time to time;

“Applicable Law” means any supra-national, federal, national, state, municipal or local statute, law, ordinance, regulation, rule, code, order (whether executive, legislative, judicial or otherwise), judgment, injunction, notice, decree or other requirement or rule of law or legal process (including common law), or any other order of, or agreement issued, promulgated or entered into by, any Governmental Entity or any rule or requirement of any national securities exchange, including all Healthcare Laws, and GCP, GLP, and GMP, each as may be amended, re-enacted or replaced from time to time;

“Appointment Notice” has the meaning given to it in paragraph 1.4 of Schedule 12;

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“Articles of Association” means the articles of association of the Purchaser in the Agreed Terms, as amended from time to time in accordance with the provisions of the Shareholders’ Agreement;

“Associated Person” means, in relation to a Seller’s Group, a person (including any director, officer, employee, agent or other intermediary) who performs services for or on behalf of any member of that Seller’s Group or who holds shares of capital stock, partnership interests, limited liability company membership interests or units, shares, interests or other participations in any member of that Seller’s Group (in each case, when performing such services or acting in such capacity);

“Assumed Liabilities” means all Liabilities relating to the Target Group Businesses (including, for the avoidance of doubt, any Delayed Target Group Businesses and any Alliance Market Businesses) other than: (i) the Excluded Liabilities; (ii) any Assumed Pension and Employment Liabilities; (iii) any Liabilities in respect of Tax (other than Tax which has been provided for or reflected in the Closing Statement and Tax which has been assumed by a member of the Purchaser’s Group under an express provision of this Agreement); and (iv) any Ancillary Agreement Liabilities;

“Assumed Pension and Employment Liabilities” means (i) any Liabilities assumed by the Purchaser or a member of the Purchaser’s Group as contemplated by Schedule 7; and (ii) any Transferred Employee Benefit Liabilities (as defined in Schedule 8) which the Purchaser agrees to assume in accordance with Schedule 8;

“B Shares” means the B ordinary shares in the capital of the Purchaser, having the rights and restrictions set out in the articles of association of the Purchaser as at Closing, and which, immediately following Closing, will represent 36.5 per cent. of the ordinary share capital of the Purchaser;

“Base Working Capital Range” means, in respect of a Seller, the range between its Minimum Working Capital Amount and its Maximum Working Capital Amount;

“Baxter” means Baxter Healthcare Corporation;

“Baxter Excluded Contract” means the supply and distribution agreement entered into between Novartis Consumer Health Inc. and Baxter dated 1 January 2003;

“Benefit Plans” means the US Benefit Plans and the Non-US Benefit Plans;

“Brand” means the primary name of a Product;

“Business Day” means a day which is not a Saturday, a Sunday or a public holiday in the canton of Basel-Stadt (Switzerland) or London (United Kingdom);

“Business Information” means, in respect of a Seller: (i) Commercial Information; (ii) Medical Information; and (iii) any other information Predominantly Related to its Contributed Business;

5

“Business Sellers” means, in respect of a Seller, the members of that Seller’s Group (other than its Target Group Companies) that own assets of or otherwise conduct any of its Target Group Businesses;

“Call for New Tender” means, in respect of a Seller, any calls for a tender (including any tender for a basket of products), whether a new tender or the renewal of an existing tender, which includes its Products and which is published after Closing of which that Seller and/or any of its Affiliates become aware and which relates in whole or in part to the sale of its Products;

“Cash Balances” means cash in hand or credited to any account with a financial institution and securities which are readily convertible into cash;

“Cash Pooling Arrangements” means, in respect of a Seller, the cash pooling arrangements of that Seller’s Group in which any of its Target Group Companies participate;

“Cash Portion” means, in respect of GlaxoSmithKline, £190,500,000 and, in respect of Novartis, £109,500,000;

“Certificate” means, in the case of a Seller, a certificate signed by a director, officer or an authorised signatory of that Seller in the form set out in Schedule 5 to be provided to the Purchaser immediately prior to Closing;

“CFIUS” means the Committee on Foreign Investment in the United States;

“CFIUS Approval” means written notice from CFIUS that any review or investigation of the Transaction under Section 721 of the Defense Production Act of 1950 of the United States, as amended (50 U.S.C. App. Section 2170), has been concluded and there are no unresolved national security concerns with respect to the Transaction or the President shall have determined not to take action with respect to the Transaction;

“CFIUS Filing” has the meaning given to it in Clause 4.2.3(ii);

“Chinese JV Contracts” means the joint venture contract between Tianjin Pharmaceutical Corporation and SmithKline Beckman Corporation dated April 1984, as amended from time to time, and any other ancillary agreements thereto;

“Chinese JV Interests” means all of the shares or other equity interests held by SmithKline Beckman Corporation in The Sino-American Tianjin Smith Kline & French Laboratories, Ltd, a joint venture company governed by the Chinese JV Contracts;

“Claims Management Agreement” means the agreement between each of the Sellers and the Purchaser, to be negotiated in good faith between the parties and entered into at Closing, in respect of the management of claims or investigations by or against third parties (including by any Governmental Agency), including those which constitute or may constitute an Assumed Liability or Excluded Liability;

6

“Clinical Trials/Data Liability” means any Liability arising out of, relating to or resulting from any breach of Applicable Law in connection with the conduct of, or reporting or data in relation to, clinical studies or trials (including post-approval studies) sponsored or supported by or in relation to a Target Group or otherwise recommended by a Governmental Entity;

“Closing” means the completion of the sale of (i) the Shares and (ii) the Target Group Businesses in respect of each of GlaxoSmithKline and Novartis, in each case, pursuant to this Agreement and any Ancillary Agreement, and Closing shall be deemed to have taken place even if some of the Shares in relation to the Joint Venture Entities only or other elements of the Contributed Businesses have not transferred to the Purchaser pursuant to Schedule 6, Schedule 22 (Delayed Businesses) and Clause 2.6 (Alliance Market Businesses) to which the provisions of Schedule 6, Schedule 22 and Clause 2.6 respectively shall then apply;

“Closing Date” means the date on which Closing takes place in accordance with Clause 6.1;

“Closing Statement” means, in respect of a Seller, the statement setting out the Working Capital, the Working Capital Adjustment, the Target Group Companies’ Cash Balances, the Intra-Group Non-Trade Receivables, the Third Party Indebtedness, the Intra-Group Non-Trade Payables and the Tax Adjustment, to be prepared by that Seller and agreed or determined in accordance with Clause 7 and Schedule 12;

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985 of the United States, as amended, section 4980B of the Code, Title I Part 6 of ERISA and any similar US state group health plan continuation law, together with its implementing regulations;

“Code” means the U.S. Internal Revenue Code of 1986, as amended, together with its implementing regulations;

“Commercial Information” means, in respect of a Seller, information that is, as of the Closing Date, or, in respect of any Delayed Business, the Delayed Closing Date, as applicable, owned by that Seller and/or its Affiliates and Predominantly Related to that Seller’s Contributed Business;

“Commercial Practices Liability” means any Liability arising out of, relating to or resulting from any breach of Applicable Law in connection with Commercialisation;

“Commercialise” means to promote, market, distribute, sell and/or otherwise commercialise a product and “Commercialising” and “Commercialisation” shall be construed accordingly;

“Company Lease” has the meaning given to it in paragraph 1.1 of Part 3 of Schedule 2;

“Company Leased Properties” has the meaning given to it in paragraph 1.1 of Part 3 of Schedule 2;

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“Company Owned Properties” has the meaning given to it in paragraph 1.1 of Part 3 of Schedule 2;

“Company Properties” means the Company Owned Properties and the Company Leased Properties, and “Company Property” means any one of them;

“Consumer Healthcare Product” means, in respect of any jurisdiction, any oral care, nutritional care, skin care or other cosmetic or healthcare product or device of any kind, in each case, for the treatment of, or use by, human beings which is available without, or both with and without, a prescription, but excluding any such product or device that is subject to the same regulatory classification and/or regulatory treatment (including in relation to advertising) as a product or device that is available only with a prescription;

“Contract” means any binding contract, agreement, instrument, lease, licence or commitment, excluding: (i) any lease or other related or similar agreements, undertakings and arrangements with respect to the leasing or ownership of the Properties (to which the provisions set out in Schedule 2 shall apply); and (ii) any contract with any Employee;

“Contracts Liabilities” means Liabilities relating to: (i) the Transferred Contracts; (ii) the Transferred Intellectual Property Contracts; and (iii) all other contracts (or any part thereof) transferred, assigned, novated or assumed by the Purchaser pursuant to this Agreement or to which a Target Group Company is or was a party or under which a Target Group Company has any Liability, and “Contracts Liability” shall be construed accordingly;

“Contributed Business” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Consumer Business and, in respect of Novartis, the Novartis OTC Business;

“Control” means the power to direct the management and policies of a person (directly or indirectly), whether through ownership of voting securities, by Contract or otherwise (and the term “Controlled” shall be interpreted accordingly);

“Controlled Business Instruction” has the meaning given in Schedule 22 (Delayed Businesses);

“Controlled Delayed Business” has the meaning given in Schedule 22 (Delayed Businesses);

“Co-Owned Target Group Intellectual Property Rights” means any Target Group Intellectual Property Right that is owned in part by a third party;

“Copyright” means any works of authorship, copyrights, database rights, mask work rights and registrations and applications thereof;

“December Presentation” means, in the case of GlaxoSmithKline, the GlaxoSmithKline December 2013 Presentation and, in the case of Novartis, the Novartis December 2013 Presentation;

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“Decision” means the issuing of any decision by a competition, antitrust, foreign investment, national, local, supranational or supervisory or other government, governmental, quasi-governmental, trade, or regulatory body, agency, branch, subdivision, department, commission, official or authority, including any Tax Authority and any governmental department and any court or other tribunal, that would have the effect of prohibiting the acquisition of the Target Groups by the Purchaser;

“Deferred Employee” means, in respect of GlaxoSmithKline, any GlaxoSmithKline Deferred Employee and, in respect of Novartis, any Novartis Deferred Employee;

“Delayed Assets” has the meaning given in Schedule 22 (Delayed Businesses);

“Delayed Businesses” has the meaning given in Schedule 22 (Delayed Businesses);

“Delayed Business Employees” has the meaning given in Schedule 7 (Employees);

“Delayed Business Representatives” has the meaning given in Schedule 22 (Delayed Businesses);

“Delayed Closing” has the meaning given in Schedule 22 (Delayed Businesses);

“Delayed Closing Date” has the meaning given in Schedule 22 (Delayed Businesses);

“Delayed Company Employees” has the meaning given in Schedule 7 (Employees);

“Delayed Employees” has the meaning given in Schedule 7 (Employees);

“Delayed Local Payment Amount” has the meaning given to it in Clause 6.5.3;

“Delayed Payment Date” has the meaning given to it in Clause 6.5.4;

“Delayed Target Group Business” has the meaning given in Schedule 22 (Delayed Businesses);

“Delayed Target Group Company” has the meaning given in Schedule 22 (Delayed Businesses);

“Disclosure Letter” means, in respect of GlaxoSmithKline, the letter dated on the same date as this Agreement from GlaxoSmithKline to the Purchaser and, in respect of Novartis, the letter dated on the same date as this Agreement from Novartis to the Purchaser;

“Distribution Contract” has the meaning given in paragraph 4.6.2 of Schedule 6;

“Distribution Transfer Date” has the meaning given to it in the Transitional Distribution Services Agreement;

“Draft Closing Statement” has the meaning given to it in Clause 7.1.1;

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“Effective Time” means 11.59 p.m. (local time in the relevant location) on the Closing Date or, if the Closing Date is not the last day of a month but the first Business Day of a month, 11.59 p.m. on the last day of the immediately preceding month;

“Election Date” has the meaning given to it in Clause 4.2.3(ii);

“Employee Benefit Indemnification Amount” has the meaning given to it in Schedule 8;

“Employee Benefits” has the meaning given to it in Schedule 8;

“Employees” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Employees and, in respect of Novartis, the Novartis Employees;

“Encumbrance” means any claim, charge, mortgage, lien, option, equitable right, power of sale, pledge, hypothecation, usufruct, retention of title, right of pre-emption, right of first refusal or other security interest of any kind or an agreement, arrangement or obligation to create any of the foregoing, and for the avoidance of doubt, shall exclude any licences of, or claims of infringement in relation to, Intellectual Property Rights;

“Endo” means Endo Pharmaceuticals Inc.;

“Endo Excluded Contract” means the license and supply agreement between Novartis, Novartis Consumer Health, Inc. and Endo dated 4 March 2008, in relation to, among other things, a license to Commercialise Voltaren Gel as a Prescription Product;

“Environmental Laws” means any and all Applicable Law regulating or imposing Liability or standards of conduct concerning pollution or protection of the environment (including surface water, groundwater or soil);

“Environmental Liabilities” means any Liability arising out of, relating to or resulting from any Environmental Law or environmental, health or safety matter or condition, including natural resources, but excluding any Product Liability;

“Environmental Permit” means any permit, licence, consent or authorisation required by Environmental Laws issued by any relevant competent authority and used in relation to the operation or conduct of Manufacturing at any Property;

“ERISA” means the Employee Retirement Income Security Act of 1974 of the United States, as amended, together with its implementing regulations;

“Estimated Employee Benefit Adjustment” means, in respect of a Seller, that Seller’s reasonable estimate (in so far as practicable), made in good faith after consulting with the other Seller, of 95 per cent of the anticipated aggregate of its Employee Benefit Indemnification Amounts, to be notified by that Seller to the Purchaser pursuant to Clause 6.4. However, GlaxoSmithKline and Novartis may agree in writing to apply a different mechanism to determine and calculate the Estimated Employee Benefit Adjustment of each Seller;

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“Estimated Intra-Group Non-Trade Payables” means, in respect of a Seller, that Seller’s reasonable estimate of its Intra-Group Non-Trade Payables, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Intra-Group Non-Trade Receivables” means, in respect of a Seller, that Seller’s reasonable estimate of its Intra-Group Non-Trade Receivables, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Intra-Group Trade Balances” means, in respect of a Seller, that Seller’s reasonable estimate of its Intra-Group Trade Balances, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Intra-Group Trade Payables” means, in respect of a Seller, that Seller’s reasonable estimate of its Intra-Group Trade Payables, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Intra-Group Trade Receivables” means, in respect of a Seller, that Seller’s reasonable estimate of its Intra-Group Trade Receivables, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Target Group Companies’ Cash Balances” means, in respect of a Seller, that Seller’s reasonable estimate of its Target Group Companies’ Cash Balances, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Tax Adjustment” means, in respect of a Seller, that Seller’s reasonable estimate of its Tax Adjustment, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Third Party Indebtedness” means, in respect of a Seller, that Seller’s reasonable estimate of its Third Party Indebtedness, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Transferred Accounts Payables” means, in respect of a Seller, that Seller’s reasonable estimate of its Transferred Accounts Payables, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Transferred Accounts Receivables” means, in respect of a Seller, that Seller’s reasonable estimate of its Transferred Accounts Receivables, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Working Capital” means, in respect of a Seller, that Seller’s reasonable estimate of its Working Capital, to be notified by that Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Working Capital Adjustment” means, in respect of a Seller:

(i)if its Estimated Working Capital is no less than its Minimum Working Capital Amount and no greater than its Maximum Working Capital Amount, zero;

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(ii)if its Estimated Working Capital is less than its Minimum Working Capital Amount, the amount by which its Estimated Working Capital is less than its Minimum Working Capital Amount, such amount being treated as a negative amount; or

(iii)if its Estimated Working Capital is greater than its Maximum Working Capital Amount, the amount by which its Estimated Working Capital exceeds its Maximum Working Capital Amount, such amount being treated as a positive amount;

“Excluded Assets” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Excluded Assets and, in respect of Novartis, the Novartis Excluded Assets;

“Excluded Contracts” means, in respect of a Seller, each Contract that is not Exclusively Related to that Seller’s Contributed Business;

“Excluded Employees” means, in respect of GlaxoSmithKline, GlaxoSmithKline Excluded Employees and, in respect of Novartis, the Novartis Excluded Employees;

“Excluded Liabilities” means, in respect of a Seller:

(i)            all Liabilities:

(a)relating to that Seller’s Target Group Businesses (including, for the avoidance of doubt, any Delayed Target Group Businesses and any Alliance Market Businesses); and

(b)of that Seller’s Target Group Companies (other than Liabilities in respect of Tax),

in either case, to the extent that they have arisen or arise (whether before or after the applicable Liability Cut-off Time for that Liability) as a result of, or otherwise relate to, any act, omission, fact, matter, circumstance or event undertaken, occurring, in existence or arising before the applicable Liability Cut-off Time for that Liability, and in either case, other than:

(a) any Assumed Pension and Employment Liabilities,

(b) any Liabilities to the extent taken into account, provided for or reflected in the Closing Statement (including in respect of Tax),

(c) any Intra-Group Trade Payables,

(d) Transferred Accounts Payables between any member of that Seller’s Group (other than a Target Group Company) and a Business Seller of that Seller’s Group; and

(e) any Ancillary Agreement Liability; and

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(ii)           all Liabilities relating to its Seller’s Retained Business;

“Exclusively Related to” means, in respect of a Seller’s Contributed Businesses, exclusively related to, or used or held for use exclusively in connection with, that Contributed Business;

“FCA” means the Financial Conduct Authority;

“FDA” means the United States Food and Drug Administration (or its successor);

“Final Payment Date” means five Business Days after the date on which the process described in Part 1 of Schedule 12 for the preparation of its Closing Statement is complete;

“France Assumed Liabilities” means, in respect of a Seller, the Assumed Liabilities to the extent they relate to that Seller’s France Business;

“France Business” means, in respect of Novartis, that part of its Contributed Business that is conducted in France, including Novartis Santé Familiale S.A.S, its France Assumed Liabilities and its France Employees and, in respect of GlaxoSmithKline, that part of its Contributed Business that is conducted in France, its France Assumed Liabilities and its France Employees;

“France Closing” has, in respect of a Seller, the meaning given to it in that Seller’s France SAPA;

“France Employees” means, in respect of Novartis, the Employees employed by Novartis Santé Familiale S.A.S. and, in respect of GlaxoSmithKline, those of the GlaxoSmithKline Employees who are employed in France;

“France Offer Letter” means, in respect of a Seller, the letter from the Purchaser to that Seller in respect of the binding offer from the Purchaser to acquire that Seller’s France Business dated on the date hereof;

“France Put Option Exercise” means, in respect of a Seller, the meaning given to it in that Seller’s France Offer Letter;

“France SAPA” means, in respect of a Seller, the meaning given to it in that Seller’s France Offer Letter;

“FSMA” means the Financial Services and Markets Act 2000;

“Full Disclosure” means disclosure by the relevant Seller to the Purchaser of the material terms, including financial terms, of a Relevant Part of a Shared Business Contract;

“Full Title Guarantee” means, in respect of a Seller on the basis that the covenants implied under Part 1 of the Law of Property (Miscellaneous Provisions) Act 1994 where

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a disposition is expressed to be made with full title guarantee are deemed to be given by that Seller (on behalf of its relevant Share Seller or Business Seller) on Closing;

“GlaxoSmithKline Alliance Market Businesses” means the GlaxoSmithKline Consumer Group Businesses in the Alliance Market Territories;

“GlaxoSmithKline’s Articles of Association” means the articles of association of GlaxoSmithKline in force and effect from time to time;

“GlaxoSmithKline Bangladesh” means GlaxoSmithKline Bangladesh Limited, a company incorporated in Bangladesh and listed on the Dhakar Stock Exchange;

“GlaxoSmithKline Bangladesh Business” means that part of the GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline Bangladesh or any person Controlled by GlaxoSmithKline Bangladesh from time to time;

“GlaxoSmithKline Business Employees” means the employees of any member of GlaxoSmithKline’s Group who work wholly or substantially in the GlaxoSmithKline Consumer Business from time to time including, for the avoidance of any doubt, the GlaxoSmithKline International Assignees other than the GlaxoSmithKline Company Employees and the GlaxoSmithKline Excluded Employees and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at the date of this Agreement”, and “GlaxoSmithKline Business Employee” means any one of them;

[***];

“GlaxoSmithKline Company Employees” means the employees from time to time of any of the GlaxoSmithKline Consumer Group Companies other than the GlaxoSmithKline Excluded Employees, and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at the date of this Agreement”, and “GlaxoSmithKline Company Employee” means any one of them;

“GlaxoSmithKline Consumer Business” means:

(i)the business of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising the GlaxoSmithKline Products in the GlaxoSmithKline Territories;

(ii)the business of researching and developing the GlaxoSmithKline Pipeline Products;

(iii)all rights, title and interest in relation to researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising GlaxoSmithKline’s In-Scope Switch Product, in any jurisdiction, as a Consumer Healthcare Product only;

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(iv)the business of manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising the Prescription Products which are managed by and reported for financial purposes in the GlaxoSmithKline Consumer Healthcare Division for, or since, the year ended December 2013 and, in respect of any such Prescription Product, in the territories in which sales are reported for such Prescription Product for financial purposes in the GlaxoSmithKline Consumer Healthcare Division for, or since, the year ended December 2013; and

(v)any royalty streams in respect of any products received by and reported for financial purposes in the GlaxoSmithKline Consumer Healthcare Division for, or since, the year ended 31 December 2013,

in each case, conducted by GlaxoSmithKline’s Group, but excluding the GlaxoSmithKline Excluded Assets;

“GlaxoSmithKline Consumer Group” means the GlaxoSmithKline Consumer Group Companies and the GlaxoSmithKline Consumer Group Businesses;

“GlaxoSmithKline Consumer Group Businesses” means the businesses of the GlaxoSmithKline Consumer Business (but excluding the businesses carried on by the GlaxoSmithKline Consumer Group Companies) as set out in Clause 2.3.1, but subject always to Clause 2.3.2, and “GlaxoSmithKline Consumer Group Business” means any of them;

“GlaxoSmithKline Consumer Group Companies” means:

(i)those members of GlaxoSmithKline’s Group whose operations, assets and/or businesses are Exclusively Related to the GlaxoSmithKline Consumer Business, an indicative list of which are set out in the table in Part A of Part 1 of Schedule 1, including any Intermediate Holdco as defined in Schedule 17 (Reorganisations), but excluding any such members whose operations, assets and/or businesses form any part of the GlaxoSmithKline Excluded Assets; and

(ii)any member of GlaxoSmithKline’s Group whose operations, assets and/or businesses are not Exclusively Related to the GlaxoSmithKline Consumer Business only by virtue of owning an Rx Spin-out Business,

and “GlaxoSmithKline Consumer Group Company” shall mean any one of them;

“GlaxoSmithKline December 2013 Presentation” means the management presentation entitled Project Constellation Consumer Healthcare and dated 3 December 2013 and attached to this Agreement as Attachment 1;

“GlaxoSmithKline Deferred Employee” means any person to whom GlaxoSmithKline, any GlaxoSmithKline Consumer Group Company or any other member of GlaxoSmithKline’s Group has made an offer of employment for a role in the GlaxoSmithKline Consumer Business in compliance with Clause 5 and who has accepted such offer in writing and whose employment in the GlaxoSmithKline

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Consumer Business will take effect on a date following the Closing Date, save that no person shall become a GlaxoSmithKline Deferred Employee unless and until GlaxoSmithKline has provided to Novartis a copy of the offer letter setting out the agreed principal terms of employment and/or employment agreement (if executed) applicable to such person;

“GlaxoSmithKline Employees” means the GlaxoSmithKline Business Employees and the GlaxoSmithKline Company Employees, and “GlaxoSmithKline Employee” means any one of them;

“GlaxoSmithKline Excluded Assets” means the property, rights, businesses and assets referred to in Clause 2.3.2 in respect of the GlaxoSmithKline Consumer Group Businesses and the assets and businesses set out in Part 1 of Schedule 3;

“GlaxoSmithKline Excluded Businesses” means:

(i)the business(es) (from time to time) of or reported for financial purposes in the business(es) of GlaxoSmithKline Consumer Healthcare Limited, an Indian listed company, and its successors and assigns and any person Controlled by GlaxoSmithKline Consumer Healthcare Limited from time to time;

(ii)the business(es) (from time to time) of or reported for financial purposes in the business(es) of GlaxoSmithKline Consumer Nigeria plc, a Nigerian listed company, and its successor and assigns and any person Controlled by GlaxoSmithKline Consumer Nigeria plc from time to time;

(iii)the business(es) (from time to time) of the GlaxoSmithKline Pharmaceutical Division, including the business of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising any Consumer Healthcare Products which are managed by and reported for financial purposes in the GlaxoSmithKline Pharmaceutical Division on or prior to the date of this Agreement (including any development of such products);

(iv)any business(es) (from time to time) of or reported for financial purposes in the business(es) of: (i) Asia Private Limited, a private limited company incorporated in India; and/or (ii) its successors and assigns and any person Controlled by Asia Private Limited from time to time, in each case, to the extent that such business(es) are part of the business(es) conducted by the business(es) referred to in paragraph (i) of this definition; and

(v)any assets or liabilities that are deemed to constitute GlaxoSmithKline Excluded Assets pursuant to paragraph 11 of Schedule 6,

but shall not include the business(es) (from time to time) of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising the Additional 2015 Products;

“GlaxoSmithKline Excluded Employees” means the employees of any member of GlaxoSmithKline’s Group (including the GlaxoSmithKline Consumer Group Companies)

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as identified as GlaxoSmithKline Excluded Employees in the GlaxoSmithKline Excluded Employee list provided to the Purchaser on 26 February 2015, subject to such further changes as GlaxoSmithKline and the Purchaser may agree. It being agreed that inclusion in such list of any specific employee or category of employee does not denote agreement by the parties that such employee or category of employee would otherwise have been considered to be working wholly or substantially in the GlaxoSmithKline Consumer Business;

“GlaxoSmithKline’s Group” means GlaxoSmithKline and its Affiliates from time to time, provided that, for the purposes of this Agreement, the Purchaser and any person Controlled by the Purchaser (whether directly or indirectly) from time to time shall not be included in GlaxoSmithKline’s Group;

“GlaxoSmithKline International Assignees” means the employees of any member of GlaxoSmithKline’s Group (including the GlaxoSmithKline Consumer Group Companies) as may be identified as International Assignees in the International Assignee List provided to the Purchaser on 26 February 2015, subject to such further changes as GlaxoSmithKline and the Purchaser may agree;

“GlaxoSmithKline Joint Venture Entities” means all entities in which GlaxoSmithKline’s Group holds equity interests of less than 100 per cent. but whose operations, assets and/or businesses are Exclusively Related to the GlaxoSmithKline Consumer Business, an indicative list of which are set out in the relevant part of the table in Part B of Part 1 of Schedule 1, excluding any such entity whose operations, assets and/or businesses form part of the GlaxoSmithKline Excluded Assets;

“GlaxoSmithKline JV Funding Loan” means all outstanding loans or other financing liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends declared or payable but not paid) owed by JV Treasury Co to GSK Finance plc as at the Effective Time;

“GlaxoSmithKline Key Personnel” means the GlaxoSmithKline Employees listed in Part 1 of Schedule 16;

“GlaxoSmithKline’s Lawyers” means Slaughter and May of One Bunhill Row, London EC1Y 8YY;

“GlaxoSmithKline Material Employee Jurisdictions” means Brazil, China, Germany, the United Kingdom and the United States of America;

“GlaxoSmithKline Pakistan” means GlaxoSmithKline Pakistan Limited, a company incorporated in Pakistan as a limited liability company and listed on the Karachi and Lahore Stock Exchanges;

“GlaxoSmithKline Pakistan Business” means that part of the GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline Pakistan or any person Controlled by GlaxoSmithKline Pakistan from time to time;

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“GlaxoSmithKline Pakistan Consent” has the meaning given in paragraph 9.1 of Schedule 6;

“GlaxoSmithKline Pipeline Products” means each product that the GlaxoSmithKline Consumer Healthcare Division is researching and developing;

“GlaxoSmithKline Products” means, in respect of any territory, any Consumer Healthcare Products which are managed by and reported for financial purposes in the GlaxoSmithKline Consumer Healthcare Division in that territory for the year ended 31 December 2013 or since, an indicative list of which is set out in Part 1 of Schedule 9, and including the Additional 2015 Products;

“GlaxoSmithKline Shareholder Meeting” has the meaning given to it in Clause 4.1.6;

“GlaxoSmithKline Shareholder Resolution” has the meaning given to it in Clause 4.1.6;

“GlaxoSmithKline Shareholders” means the holders of ordinary shares in the capital of GlaxoSmithKline from time to time;

“GlaxoSmithKline Shares” means the shares and other ownership interests in the capital of: (i) the GlaxoSmithKline Consumer Group Companies; and (ii) the GlaxoSmithKline Joint Venture Entities that are owned by any member of GlaxoSmithKline’s Group;

“GlaxoSmithKline Statement of Net Assets” has the meaning given to it in Part 1 of Schedule 18;

“GlaxoSmithKline Territories” means, in respect of any GlaxoSmithKline Product, each of the territories in which sales are reported for such GlaxoSmithKline Product for financial purposes in the GlaxoSmithKline Consumer Healthcare Division for the year ended 31 December 2013 or since;

“Good Clinical Practices” or “GCP” means the then-current standards, practices and procedures promulgated or endorsed by: (i) the ICH Harmonised Tripartite Guidelines for Good Clinical Practice (CPMP/ICH/135/95) and any other guidelines for good clinical practices for trials on medicinal products in the European Union; (ii) the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” including related regulatory requirements imposed by the FDA; and (iii) the equivalent Applicable Law in any relevant country;

“Good Laboratory Practices” or “GLP” means the then-current standards, practices and procedures promulgated or endorsed by: (i) the European Commission Directive 2004/10/EC relating to the application of the principles of good laboratory practices as well as “The rules governing medicinal products in the European Union,” Volume 3, Scientific guidelines for medicinal products for human use (ex - OECD principles of GLP); (ii) the then-current standards, practices and procedures promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58; and (iii) the equivalent Applicable Law in any relevant country;

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“Good Manufacturing Practices” or “GMP” means the then-current standards, practices and procedures promulgated or endorsed by: (i) the European Commission Directive 91/356/EEC, as amended by Directives 2003/94/EC and 91/412/EEC respectively, as well as “The rules governing medicinal products in the European Union,” Volume 4, Guidelines for good manufacturing practices for medicinal products for human and veterinary use; (ii) the FDA and the provisions of 21 C.F.R. Parts 210 and 211; (iii) the principles detailed in the ICH Q7A guidelines; and (iv) all Applicable Law with respect to each of (i) through (iii);

“Governmental Entity” means any supra-national, federal, national, state, county, local, municipal or other governmental, regulatory or administrative authority, agency, commission or other instrumentality, any court, tribunal or arbitral body with competent jurisdiction, or any national securities exchange or automated quotation service, including any governmental regulatory authority or agency responsible for the grant, approval, clearance, qualification, licensing or permitting of any aspect of the research, development, manufacture, marketing, distribution, promotion, sale or other commercialisation of the relevant Products including the FDA, the European Medicines Agency, or any successor agency thereto;

“Governmental Liability” means any Liability arising out of, relating to or resulting from any claim, demand, action, suit, proceedings or investigation by a Governmental Entity (other than a Tax Authority) brought or undertaken in connection with products sold or developed by, or operations or practices of, the relevant Target Group prior to Closing;

“Gross Negligence” has the meaning given in paragraph 2.16 of Schedule 22;

“GSK Finance Cash Balances” means the amounts held on deposit by GSK Finance plc on behalf of any GlaxoSmithKline Target Group Companies as part of GlaxoSmithKline’s Cash Pooling Arrangement to the extent that such amounts are immediately accessible on demand and constitute Readily Available Cash for the purposes of the Shareholders’ Agreement;

“Hazardous Substance” means any gasoline or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, hazardous wastes, toxic substances, asbestos, pollutants, or contaminants defined as such in or regulated under any applicable Environmental Law;

“Healthcare Laws” means the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)); the Anti-Inducement Law (42 U.S.C. § 1320a-7a (a)(5)); the civil False Claims Act (31 U.S.C. §§ 3729 et seq.); the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)); the Exclusion Laws (42 U.S.C. § 1320a-7); the Medicare statute (Title XVIII of the Social Security Act), including Social Security Act §§ 1860D-1 to 1860D-43 (relating to Medicare Part D and the Medicare Part D Coverage Gap Program); the Medicaid statute (Title XIX of the Social Security Act); the Physician Payment Sunshine Act (42 U.S.C. § 1320a-7h) and any analogous state laws; the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and any other similar law, including the price reporting requirements and the requirements relating to the processing of any applicable rebate, chargeback or adjustment, under applicable

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rules and regulations relating to the Medicaid Drug Rebate Program (42 U.S.C. § 1396r-8), any state supplemental rebate program, Medicare average sales price reporting (42 U.S.C. § 1395w-3a); the Public Health Service Act (42 U.S.C. § 256b); the Veterans Health Care Act (38 U.S.C. § 8126), regulatory requirements applicable to sales on the Federal Supply Schedule or under any state pharmaceutical assistance program or United States Department of Veterans Affairs agreement, all legal requirements relating to the billing or submission of claims, collection of accounts receivable, underwriting the cost of, or provision of management or administrative services in connection with, any and all of the foregoing, by the relevant Seller’s Group and any successor government programmes, and all foreign equivalents of the foregoing;

“HSR Act” means the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, together with its implementing regulations;

“IFRS” means International Financial Reporting Standards, comprising the accounting standards and interpretations issued, adopted and/or approved by the International Accounting Standards Board;

“Implementation Agreement” means the implementation agreement dated the date of this Agreement between Novartis and GlaxoSmithKline relating to, amongst other things, the implementation of the Transaction;

“In-Market Inventory” means, in respect of a Seller, all inventory of the Products for Commercialisation that, at any particular time: (i) is beneficially owned by a member of that Seller’s Group; (ii) is in finished packed form and released for Commercialisation; and (iii) is located: (a) in (or in transit to) the relevant market; or (b) in (or in transit to) a multi-market warehouse owned or operated by a member of that Seller’s Group or by a third party; or (c) at a Property pending despatch following release by the relevant qualified person to the relevant market or multi-market warehouse;

“In-Scope Switch Product” means, in respect of GlaxoSmithKline, Flonase /Flixonase and, in respect of Novartis, Voltaren, but, in each case, only to the extent relating to the rights to research and develop, manufacture, distribute, market, sell, promote and/or otherwise Commercialise the same as a Consumer Healthcare Product, and “GlaxoSmithKline’s In-Scope Switch Product” and “Novartis’s In-Scope Switch Product” shall be construed accordingly;

“Indebtedness” means all loans and other financing liabilities and obligations in the nature of borrowed moneys and overdrafts, but excluding trade debt and liabilities arising in the ordinary course of business;

“Information Technology” means computer hardware, software and network;

“Intellectual Property Assignment Agreements” means the assignments between a Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates on terms consistent with the Agreed Terms, to be entered into at Closing, in respect of the transfer of certain Intellectual Property Rights in each of the relevant jurisdictions;

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“Intellectual Property Rights” means all (i) Patents; (ii) Know-How; (iii) Trademarks; (iv) internet domain names; (v) Copyrights; (vi) rights in designs; (vii) database rights; and (viii) all rights or forms of protection, anywhere in the world, having equivalent or similar effect to the rights referred to in paragraphs (i) to (vii) above, in each case, whether registered or unregistered and including applications for registration of any such thing;

“International Assignees” means, in respect of GlaxoSmithKline, the GlaxoSmithKline International Assignees and, in respect of Novartis, the Novartis International Assignees;

“Intra-Group Non-Trade Payables” means, in respect of a Seller, all outstanding loans or other financing liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends declared or payable but not paid) owed by its Target Group Company to a member of that Seller’s Group (other than its Target Group Company) as at the Effective Time as derived from the Closing Statement and the GlaxoSmithKline JV Funding Loan, but excluding: (i) Intra-Group Trade Payables and Intra-Group Trade Receivables; (ii) any item which falls to be included in calculating the Target Group Companies’ Cash Balances or the Third Party Indebtedness; and (iii) the Novartis Transferred Intra-Group Non-Trade Payables;

“Intra-Group Non-Trade Receivables” means, in respect of a Seller, all outstanding loans or other financing liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends declared or payable but not paid) owed by a member of that Seller’s Group (other than its Target Group Company) to its Target Group Company as at the Effective Time as derived from the Closing Statement, but excluding: (i) Intra-Group Trade Payables and Intra-Group Trade Receivables; (ii) any item which falls to be included in calculating the Target Group Companies’ Cash Balances (including, for the avoidance of doubt, the GSK Finance Cash Balances) or the Third Party Indebtedness; and (iii) the Novartis Transferred Intra-Group Non-Trade Receivables;

“Intra-Group Trade Payables” means, in respect of a Seller, all trade accounts and notes payable to any member of any Seller’s Group (excluding a Target Group Company) on the one hand, by any Target Group Company, on the other hand, in each case, to the extent related to its Target Group, arising in the ordinary course, together with any unpaid financing charges accrued thereon;

“Intra-Group Trade Receivables” means, in respect of a Seller, all trade accounts and notes receivable from any member of any Seller’s Group (excluding a Target Group Company) on the one hand, to any Target Group Company, on the other hand, in each case, to the extent related to its Target Group, arising in the ordinary course, together with any unpaid financing charges accrued thereon;

“Intra-Group Trading Balances” means, in respect of a Seller, the aggregate of its Intra-Group Trade Payables and its Transferred Accounts Payables payable to any member of that Seller’s Group (other than a Target Group Company) by a Business Seller of that Seller’s Group less the aggregate of its Intra-Group Trade Receivables and its Transferred Accounts Receivables payable by any member of that Seller’s Group (other than a Target Group Company) to a Business Seller of that Seller’s Group;

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“IP Liability” means any Liability arising out of, relating to or resulting from any actual or alleged infringement, misappropriation or other violation of Intellectual Property Rights of third parties;

“Joint Venture Entities” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Joint Venture Entities and, in respect of Novartis, the Novartis Joint Venture Entities;

“Judgment” means any order, writ, judgment, injunction, decree, decision, stipulation, determination or award entered by or with any Governmental Entity of competent jurisdiction;

“JV Treasury Co” means GlaxoSmithKline Consumer Healthcare (UK) Finance Limited;

“Key Personnel” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Key Personnel and, in respect of Novartis, the Novartis Key Personnel;

“Know-How” means all existing and available technical information, know-how and data, including inventions (whether patentable or not), discoveries, trade secrets, specifications, instructions, processes and formulae, including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data;

“Lease” has the meaning given to it in paragraph 1.1 of Part 4 of Schedule 2;

“Liabilities” means all liabilities, claims, damages, proceedings, demands, orders, suits, costs, losses and expenses, in each case, of every description, whether deriving from contract, common law, statute or otherwise, whether present or future, actual or contingent, ascertained or unascertained or disputed and whether owed or incurred severally or jointly or as principal or surety;

“Liability Cut-off Time” means (i) Closing in respect of any Liability that is a Clinical Trials/Data Liability, Commercial Practices Liability, Environmental Liability, Governmental Liability, IP Liability, Manufacturing Liability or Product Liability; (ii) Delayed Closing in respect of any Liability that relates to a Non-Controlled Delayed Business and is a Clinical Trials/Data Liability, Commercial Practices Liability, Environmental Liability, Governmental Liability, IP Liability, Manufacturing Liability or Product Liability (but, in respect of any such Environmental Liability, IP Liability or Product Liability that arises as a result of, or otherwise relates to, any act, omission, fact, matter or circumstance or event undertaken, occurring, in existence or arising between Closing and Delayed Closing, only to the extent that such Liability arises due to the wilful default or Gross Negligence of the relevant Seller or any of its Associated Persons); or (iii) the Effective Time in respect of any other Liability;

“LIBOR” means the London interbank offered rate, being the interest rate offered in the London inter-bank market for three month US dollar deposits as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen at 11 a.m. (London) on the second Business Day prior to the Closing Date;

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“Licensed Intellectual Property Contract” means any Target Group Intellectual Property Contract constituting or containing a licence of Intellectual Property Rights in respect of the Contributed Business or Products;

“Listing Rules” means the listing rules made by the FCA under section 73A of FSMA;

“Local Payment Amount” has the meaning given to it in Clause 6.5.1;

“Local Transfer Document” has the meaning given to it in Clause 2.8.1;

“Long Stop Date” has the meaning given to it in Clause 4.3;

“Losses” means all losses, liabilities, costs (including legal costs and experts’ and consultants’ fees), charges, expenses, actions, proceedings, claims and demands;

“MA Costs” has the meaning given to it in paragraph 4 of Part 2 of Schedule 4;

“MA Documentation” has the meaning given to it in paragraph 1.6 of Part 2 of Schedule 4;

“Manufacture” or “Manufacturing” or “Manufactured” means, as applicable, the planning, purchasing of materials for, production, processing, compounding, storage, filling, packaging, labelling, leafleting, warehousing, quality control testing, waste disposal, quality release, sample retention and stability testing of any products of the relevant Seller’s Contributed Business;

“Manufacturing Inventory” means, in respect of a Seller, any packed inventory of Products for Commercialisation that is: (i) in finished form (save for any secondary packaging undertaken outside of a primary manufacturing site); (ii) beneficially owned by any member of that Seller’s Group; (iii) held at a primary manufacturing site; and (iv) not yet released by the qualified person at a primary manufacturing site, and excluding in each case, for the avoidance of doubt, any In-Market Inventory and Manufacturing Stocks;

“Manufacturing Liability” means any Liability arising out of, relating to or resulting from any breach of Applicable Law in connection with the Manufacturing of products of the relevant Seller’s Contributed Business;

“Manufacturing Licences” means any certificates, permits, licences, consents and approvals issued by any Governmental Entity, used in the operation or conduct of Manufacturing at each relevant Property, and “Manufacturing Licence” shall be construed accordingly;

“Manufacturing Stocks” means, in respect of a Seller, all stocks of raw materials, active pharmaceutical ingredients, ingredients, adjuvants, drug substances, intermediates, packaging materials, components, devices and other production and pre-production consumables and work-in-progress that are beneficially owned by any member of that Seller’s Group for use in the Manufacture of Products or Pipeline Products, respectively, and held at a primary manufacturing Property;

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“Manufacturing and Supply Agreement” means, in respect of a Seller, each manufacturing and supply agreement expected to be entered into between that Seller (or its Affiliate) and the Purchaser (or its Affiliate) at Closing on terms consistent with the Agreed Terms;

“Marketing Authorisation Data” means, in respect of a Seller, the existing and available dossiers containing the relevant Know-How used by that Seller and/or its Affiliates to obtain and maintain the Marketing Authorisations;

“Marketing Authorisation Holder” means the holder of a Marketing Authorisation;

“Marketing Authorisation Re-Registration” has the meaning given to it in paragraph 1.1(ii) of Part 2 of Schedule 4;

“Marketing Authorisation Re-Registration Date” means the date on which the Governmental Entity approves, or is deemed to approve, the Marketing Authorisation Re-Registration;

“Marketing Authorisation Transfer” has the meaning given to it in paragraph 1.1(i) of Part 2 of Schedule 4;

“Marketing Authorisation Transfer Date” means the date on which the Governmental Entity approves, or is deemed to approve, the Marketing Authorisation Transfer;

“Marketing Authorisation Transferee” means the member of the Purchaser’s Group or, where no member of the Purchaser’s Group satisfies the requirements under Applicable Law to be transferred the relevant Marketing Authorisation, such third party as is nominated by the Purchaser, in either case, to whom the relevant Marketing Authorisation is to be transferred;

“Marketing Authorisations” means, in respect of a Seller, the marketing authorisations issued or applications for marketing authorisations with respect to its Products, and all supplements, amendments and revisions thereto;

“Markets” means, in respect of a Seller, the markets in which its Products are marketed and sold under the relevant Marketing Authorisation and “Market” shall be construed accordingly;

“Material Adverse Effect” means, in respect of a Seller, any matter, change, event or circumstance arising or discovered on or after the date of this Agreement and prior to Closing (including a breach of that Seller’s obligations under Clause 5 or Clause 9.1) (a “Relevant Matter”) that, individually or in aggregate with other Relevant Matters, if known to the Purchaser prior to the date of this Agreement, could reasonably have been expected to have resulted in the Purchaser reducing the number of A Shares or B Shares (as the case may be) to be issued by 30 per cent. or more, and, in determining such reduction regard shall be had to the actual basis on which the number of A Shares to be issued or the number of B Shares to be issued (as the case may be) was calculated.  A Relevant Matter shall not

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constitute or count towards a “Material Adverse Effect” to the extent resulting or arising from:

(i)any change that is generally applicable to, or generally affects, the industries or markets in which the relevant Seller’s Target Group operates (including changes arising as a result of usual seasonal variations) or arises from or relates to changes in Applicable Law or accounting rules or changes in any authoritative interpretation of any Applicable Law by any Governmental Entity;

(ii)any change in financial, securities or currency markets or general economic or political conditions or changes in prevailing interest rates or exchange rates;

(iii)the execution of this Agreement, the public announcement thereof or the pendency or consummation of the transactions contemplated hereby (including any cancellations of or delays in customer orders or other decreases in customer demand, any reduction in revenues and any disruption in supplier, distributor, customer or similar relationships); or

(iv)the taking of any action expressly required by this Agreement or by any Ancillary Agreement or otherwise taken with the advance written consent of the Purchaser,

except, in relation to either paragraph (i) or paragraph (ii) above, if that change adversely affects that Seller’s Target Group in a disproportionate manner relative to other comparable businesses operating in the same industry and geographic markets as that Seller’s Target Group (in which case it may constitute or count towards a “Material Adverse Effect”);

“Material Employee Jurisdictions” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Material Employee Jurisdictions and, in respect of Novartis, the Novartis Material Employee Jurisdictions;

“Maximum Working Capital Amount” means, in respect of GlaxoSmithKline, £600,000,000 and, in respect of Novartis, US$600,000,000;

“Medical Information” means, in respect of each Seller, information Predominantly Related to its Contributed Business which is available to or used by it and/or its Affiliates as of the Closing Date, or, in respect of any Delayed Business, the Delayed Closing Date, as applicable, relating to clinical and technical matters, such as therapeutic uses for the approved indications, drug-disease information, and other product characteristics;

“Minimum Working Capital Amount” means, in respect of GlaxoSmithKline, £500,000,000 and, in respect of Novartis, US$500,000,000;

“Minority Notification” has the meaning given in clause 4.2.10;

“Netherlands Assumed Liabilities” means the Assumed Liabilities to the extent that they relate to the Netherlands Business;

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“Netherlands Business” means that part of GlaxoSmithKline’s Contributed Business that is conducted in the Netherlands, the Netherlands Assumed Liabilities and the Netherlands Employees;

“Netherlands Closing” has the meaning given to it in the Netherlands SAPA;

“Netherlands Employees” means those of the GlaxoSmithKline Employees who are employed in the Netherlands;

“Netherlands Offer Letter” means the letter from the Purchaser to the Seller in respect of the binding offer from the Purchaser to acquire the Netherlands Business dated on or around the date hereof;

“Netherlands Put Option Exercise” has the meaning given to it in the Netherlands Offer Letter;

“Netherlands SAPA” has the meaning given in the Netherlands Offer Letter;

“Non-Controlled Delayed Business” has the meaning given in Schedule 22 (Delayed Businesses)

“Non-US Benefit Plans” has the meaning given to it in paragraph 17.3.1 of Schedule 13;

“Notice” has the meaning given to it in Clause 15.14.1;

“Notifier” has the meaning given in paragraph 1.1 of Schedule 17;

“Novartis Alliance Market Businesses” means the Novartis OTC Group Businesses in the Alliance Market Territories;

“Novartis Animal Health Business” means the business conducted by any member of Novartis’s Group of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising the Novartis Animal Health Products;

“Novartis Animal Health Products” means any products which are managed by the Novartis Animal Health Division and reported in the Animal Health reporting segment of Novartis’s Consumer Health Division;

“Novartis Business Employees” means the employees of any member of Novartis’s Group who work wholly or substantially in the Novartis OTC Business from time to time including, for the avoidance of any doubt, the Novartis International Assignees other than the Novartis Company Employees and the Novartis Excluded Employees and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at the date of this Agreement”, and “Novartis Business Employee” means any one of them;

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“Novartis Company Employees” means the employees from time to time of any of the Novartis OTC Group Companies other than the Novartis Excluded Employees, and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at the date of this Agreement”, and “Novartis Company Employee” means any one of them;

“Novartis December 2013 Presentation” mean the management presentation entitled “Gazelle Management Presentation: NOTC” and dated December 2013 and attached to this Agreement as Attachment 2;

“Novartis Deferred Employee” means any person to whom Novartis, any Novartis OTC Group Company or any other member of Novartis’s Group has made an offer of employment for a role within the Novartis OTC Business in compliance with clause 5 and who has accepted such offer in writing and whose employment within the Novartis OTC Business will take effect on a date following the Closing Date, save that no person shall become an Novartis Deferred Employee unless and until Novartis has provided to GlaxoSmithKline a copy of the offer letter setting out the agreed principal terms of employment and/or employment agreement (if executed) applicable to such person;

“Novartis Distribution and Sales Products Contracts” means any contract between a member of Novartis’s Group (other than a Novartis OTC Group Company) on the one hand, and any Novartis OTC Group Company on the other hand, relating to the distribution and sale by the Novartis OTC Business of products owned, managed and reported by the Seller’s Retained Business;

“Novartis Employees” means the Novartis Business Employees and the Novartis Company Employees, and “Novartis Employee” means any one of them;

“Novartis Excluded Assets” means the property, rights, businesses and assets referred to in Clause 2.3.2 in respect of the Novartis OTC Group Businesses and the assets and businesses set out in Part 2 of Schedule 3;

“Novartis Excluded Businesses” means:

(i)            the Novartis Animal Health Business;

(ii)           the Novartis US NRT Business;

(iii)the Novartis Pharmaceutical Division’s business of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising any Consumer Healthcare Products which are managed by and reported for financial purposes in the Novartis Pharmaceutical Division on or prior to the date of this Agreement (including any development of such products);

(iv)the business(es) (as conducted from time to time) owned or managed by, or reported for financial purposes in, Novartis’s:

(a)          Alcon division (including for the avoidance of doubt, Ciba-Giegy); or

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(b)Sandoz division (excluding, for the avoidance of doubt, Sandocal and Calcium Sandoz, which are included within the definition of the Novartis OTC Business); and

(v)any assets or liabilities that are deemed to constitute Novartis Excluded Assets pursuant to paragraph 11 of Schedule 6;

“Novartis Excluded Employees” means the employees of any member of Novartis’s Group (including the Novartis OTC Group Companies) who are referred to in Schedule 26;

“Novartis’s Group” means Novartis and its Affiliates from time to time, provided that, for the purposes of this Agreement, the Purchaser and any person Controlled by the Purchaser (whether directly or indirectly) from time to time shall not be included in Novartis’s Group;

“Novartis IndiaCo” means Novartis India Ltd, an Indian listed company;

“Novartis Indian Business” means that part of the Novartis OTC Business conducted by Novartis IndiaCo or any person Controlled by Novartis IndiaCo from time to time;

“Novartis International Assignees” means the employees of any member of Novartis’s Group (including the Novartis OTC Group Companies) who are referred to in Schedule 19;

“Novartis Joint Venture Entities” means an entity in which Novartis’s Group holds equity interests of less than 100 per cent. but whose operations, assets and/or businesses are Exclusively Related to the Novartis OTC Business, an indicative list of which are set out in Part B of Part 2 of Schedule 1, excluding any such entity whose operations, assets and/or businesses form part of the Novartis Excluded Assets;

“Novartis Key Personnel” means the Novartis Employees listed in Part 2 of Schedule 16;

“Novartis’s Lawyers” means Freshfields Bruckhaus Deringer LLP of 65 Fleet Street, London EC4Y 1HS;

“Novartis Material Employee Jurisdictions” means United States, Switzerland, Russia, China and India;

“Novartis OTC Business” means:

(i)the business of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising the Novartis Products in the Novartis Territories;

(ii)the business of researching and developing any Novartis Pipeline Products;

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(iii)all rights, title and interest in relation to researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising Novartis’s In-Scope Switch Product, in any jurisdiction, as a Consumer Healthcare Product only;

(iv)the business of manufacturing, marketing, distributing, selling, promoting and/or otherwise Commercialising the Prescription Products which are managed by the Novartis OTC Division and which have been reported for financial purposes in the OTC reporting segment of the Novartis Consumer Health Division for, or since, the year ended 31 December 2013 and, in respect of any such Prescription Product, in the territories in which sales are reported for such Prescription Product in the OTC reporting segment of the Novartis Consumer Health Division for the year ended 31 December 2013 or since; and

(v)any royalty streams in respect of any products received by and reported for financial purposes in the OTC reporting segment of the Novartis Consumer Healthcare Division for, or since, the year ended 31 December 2013,

in each case, conducted by Novartis’s Group, but excluding the Novartis Excluded Assets;

“Novartis OTC Group” means the Novartis OTC Group Companies and the Novartis OTC Group Businesses, taken as a whole;

“Novartis OTC Group Businesses” means the businesses of the Novartis OTC Business (but excluding the businesses carried on by the Novartis OTC Group Companies) as set out in Clause 2.3.1, but subject always to Clause 2.3.2, and “Novartis OTC Group Business” means any of them;

“Novartis OTC Group Companies” means the members of Novartis’s Group whose operations, assets and/or businesses are Exclusively Related to the Novartis OTC Business, a non-exhaustive list of which are set out in Part A of Part 2 of Schedule 1, but excluding any such members whose operations, assets and/or businesses form part of the Novartis Excluded Assets, and “Novartis OTC Group Company” means any one of them;

“Novartis Pipeline Product” means each product that the Novartis OTC Division is researching and developing, with the intention of that product becoming a Consumer Healthcare Product (but excluding, in any event, Diovan), an indicative list of which is set out in Schedule 9, Part 3;

“Novartis Products” means, in respect of any territory, any Consumer Healthcare Products which are managed by the Novartis OTC Division and which have been reported for financial purposes in the OTC reporting segment of the Novartis Consumer Health Division in that territory for the year ended 31 December 2013 or since, an indicative list of which is set out in Schedule 9, Part 2;

“Novartis Services Contracts” means any Contract between or among any member of Novartis’s Group (other than its Target Group Company and its Business Seller) on the

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one hand, and its Target Group Company or Business Seller on the other hand which, in addition to the Ancillary Agreements and any other assets to be transferred pursuant to this Agreement, is necessary to enable the Purchaser and/or any other member of the Purchaser’s Group to carry on Novartis’s Contributed Business (or the relevant part thereof) in substantially the same manner as it has been during the twelve months prior to the date of this Agreement;

“Novartis Shares” means the shares and other equity, partnership or similar interests in the capital of: (i) the Novartis OTC Group Companies; and (ii) the Novartis Joint Venture Entities that are owned by any member of Novartis’s Group;

“Novartis Statement of Net Assets” has the meaning given to it in Part 2 of Schedule 18;

“Novartis Territories” means, in respect of any Novartis Product, each of the Territories in which sales are reported for such Novartis Product in the OTC reporting segment of the Novartis Consumer Healthcare Division for the year ended 31 December 2013 or since;

“Novartis Transferred Intra-Group Non-Trade Payables” means the outstanding loans or other financial liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends declared or payable but not paid) owed by any Novartis Target Group Company to Novartis Holding AG as at the Effective Time;

“Novartis Transferred Intra-Group Non-Trade Receivables” means the outstanding loans or other financial liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends declared or payable but not paid) owed by Novartis Holding AG to any Novartis Target Group Company as at the Effective Time;

“Novartis US NRT Business” means the business of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising any nicotine related products of any nature whatsoever in the United States of America, conducted by Novartis’s Group, including those commercialised under the Habitrol brand and any other private label nicotine related products;

“Novartis US RX Business” has the meaning given to it in paragraph 11.2 of Schedule 6;

“Novartis US RX Management” has the meaning given to it in paragraph 11.5 of Schedule 6;

[***];

“Novartis US RX Product Disposal” has the meaning given to it in paragraph 11.14 of Schedule 6;

“Novartis US RX Products” means [***];

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“Novartis US RX Territory” has the meaning given to it in paragraph 11.2 of Schedule 6;

“Novartis US RX Transfer” has the meaning given to it in paragraph 11.6 of Schedule 6;

“Novartis US RX Transfer Date” has the meaning given to it in paragraph 11.6 of Schedule 6;

“Novartis US RX Transition Plan” has the meaning given to it in paragraph 11.9 of Schedule 6;

[***];

[***];

“Oncology Sale and Purchase Agreement” means the sale and purchase agreement dated the date of this agreement between GlaxoSmithKline and Novartis relating to the sale and purchase of certain oncology products;

“Ongoing Clinical Trials” means, in respect of a Seller, the ongoing clinical studies sponsored or supported by that Seller’s Group (including post-approval studies) or otherwise recommended by a Governmental Entity in respect of the relevant Products;

“Owned Information Technology” means, in respect of a Seller, the Information Technology Exclusively Related to its Contributed Business and owned by any of its Target Group Companies;

“Owned Intellectual Property Contracts” means, in respect of a Seller, the Contracts Exclusively Related to its Contributed Business which relate to Intellectual Property Rights and that are held by any of its Target Group Companies;

“Owned Intellectual Property Rights” means, in respect of a Seller, the Intellectual Property Rights Exclusively Related to its Contributed Business and owned by any of its Target Group Companies;

“PA Transfer Date” means, in relation to a Product or Product Application, the date upon which the relevant Governmental Entity approves and notifies such Product Approval or Product Application (as applicable) naming the Purchaser or the relevant Affiliate of the Purchaser (or designee thereof) as the holder of such Product Approval or Product Application in the relevant country or territory covered by that Product Approval or Product Application;

“Patents” means patents, design patents, patent applications, and any reissues, re-examinations, divisionals, continuations, continuations-in-part, provisionals, and extensions thereof or any counterparts to any of the foregoing (including rights resulting from any post-grant proceedings relating to any of the foregoing);

“Payables and Receivables Plan” has the meaning given in Clause 8.6.1;

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“Payment” has the meaning given to it in Clause 1.9;

“Payee” has the meaning given in Clause 15.11.1;

“Payer” has the meaning given in Clause 15.11.1;

“Permit” has the meaning given to it in paragraph 10.2 of Schedule 13;

“Permitted Encumbrance” means, in respect of a Seller:

(i)Encumbrances imposed by Applicable Law;

(ii)Encumbrances imposed in the ordinary course of business which are not yet due and payable or which are being contested in good faith;

(iii)pledges or deposits to secure obligations under Applicable Law relating to workers’ compensation, unemployment insurance or to secure public or statutory obligations; and

(iv)liens, title retention arrangements or deposits to secure the performance of bids, trade contracts (other than for borrowed money), conditional sales contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of its Contributed Business;

“Pharmacovigilance Agreement” means the agreement between each of the Sellers and the Purchaser, to be entered into at Closing, in respect of pharmacovigilance and regulatory matters;

“Pipeline Product Approvals” means, in respect of a Seller, the approvals in relation to its Pipeline Products;

“Pipeline Products” means the GlaxoSmithKline Pipeline Products and the Novartis Pipeline Products;

“Predominantly Related to” means, in respect of a Seller’s Contributed Business, exclusively or predominantly related to, or used or held for use predominantly in connection with, that Seller’s Contributed Business;

“Prescription Product” means, in respect of any jurisdiction, any oral care, nutritional care, skin care or other cosmetic or healthcare product or device of any kind, in each case, for the treatment of, or use by, human beings, which is (i) only available with a prescription, or (ii) available without, or both with and without, a prescription but is subject to the same regulatory classification and/or regulatory treatment (including in relation to advertising) as a product or device that is only available with a prescription;

“Proceedings” means any legal actions, proceedings, suits, litigations, prosecutions, investigations, enquiries, mediations or arbitrations;

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“Product Applications” means, in respect of a Seller, all applications for Product Approval filed with respect to the relevant Products Under Registration, with each individual application being a “Product Application”;

“Product Approvals” means, in respect of a Seller, all permits, licences, certificates, registrations or other authorisations or consents issued by any Governmental Entity to that Seller or one of its Affiliates with respect to its Products or the use, research, development, marketing, distribution or sale thereof, including the Marketing Authorisations;

“Product Filings” means, in respect of any Seller, all filings, written representations, declarations, listings, registrations, reports or submissions with or to any Governmental Entity, including adverse event reports and all submitted data relating to each relevant Product;

“Product Liabilities” means any Liability arising out of, relating to or resulting from actual or alleged harm, injury, damage or death to persons in connection with the use of any product (including in any clinical trial or study);

“Product Partners” means, in respect of a Seller, any third parties which, pursuant to a Contract with that Seller or any of its Affiliates, co-develop, co-promote, co-market, or otherwise have a licence or other right to research, develop, manufacture, promote, distribute, market, or sell any Product, including all manufacturers and suppliers of that Product;

“Products” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Products and, in respect of Novartis, the Novartis Products;

“Products Under Registration” means, in respect of a Seller, the Products of that Seller which are pending Product Approval as of the date hereof;

“Properties” means the Company Properties and the Transferred Properties, and “Property” means any one of them;

“Proprietary Information” means, in respect of a Seller, all confidential and proprietary information of that Seller or its Affiliates that is Predominantly Related to its Contributed Business, including relevant confidential Medical Information, confidential Know-How and confidential Commercial Information;

“Purchase Consideration” has the meaning given to it in Clause 3.1.1;

“Purchaser’s Bank Account” means the account notified by the Purchaser to each of the Sellers no later than two Business Days prior to the Closing Date;

“Purchaser’s Disagreement Notice” has the meaning given to it in paragraph 1.4 of Schedule 12;

“Purchaser’s Group” means the Purchaser and its Affiliates from time to time, excluding any member of GlaxoSmithKline’s Group or Novartis’s Group;

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“Purchaser Patent and Know-How Licence Agreement” means an agreement between a Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates on terms consistent with the Agreed Terms, to be entered into at Closing, in respect of the grant of licence from that Seller to the Purchaser of certain Intellectual Property Rights not licensed under a Purchaser Trademark Licence Agreement;

“Purchaser Trademark Licence Agreement” means an agreement between a Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates on terms consistent with the Agreed Terms, to be entered into at Closing, in respect of the grant of licences from that Seller to the Purchaser of certain Trademarks, internet domain names and rights in designs;

“Recipient” has the meaning given in paragraph 1.1 of Schedule 17;

“Registered Intellectual Property Rights” means all Intellectual Property Rights that are registered, issued, filed, or applied for under the authority of any Governmental Entity;

“Registered Target Group Intellectual Property Rights” means all Target Group Intellectual Property Rights that are Registered Intellectual Property Rights;

“Regulation” has the meaning given to it in Clause 4.1.1;

“Relevant Employees” means, in respect of GlaxoSmithKline, the Relevant GlaxoSmithKline Employees and, in respect of Novartis, the Relevant Novartis Employees;

“Relevant Employers” means, in respect of each Seller, the Business Seller’s and such other members of that Seller’s Group that employ that Seller’s Relevant Employees;

“Relevant GlaxoSmithKline Business Employees” means the GlaxoSmithKline Business Employees immediately prior to the Closing Date, and “Relevant GlaxoSmithKline Business Employee” means any one of them;

“Relevant GlaxoSmithKline Company Employees” means the GlaxoSmithKline Company Employees immediately prior to the Closing Date (excluding any who do not work wholly or substantially in the GlaxoSmithKline Consumer Business), and “Relevant GlaxoSmithKline Company Employee” means any one of them;

“Relevant GlaxoSmithKline Employees” means the Relevant GlaxoSmithKline Business Employees and the Relevant GlaxoSmithKline Company Employees, and “Relevant GlaxoSmithKline Employee” means any one of them;

“Relevant Novartis Business Employees” means the Novartis Business Employees immediately prior to the Closing Date, and “Relevant Novartis Business Employee” means any one of them;

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“Relevant Novartis Company Employees” means the Novartis Company Employees immediately prior to the Closing Date (excluding any who do not work wholly or substantially in the Novartis OTC Business), and “Relevant Novartis Company Employee” means any one of them;

“Relevant Novartis Employees” means the Relevant Novartis Business Employees and the Relevant Novartis Company Employees, and “Relevant Novartis Employee” means any one of them;

“Relevant Part” means, in respect of a Shared Business Contract, the part of it which Exclusively Relates to the relevant Contributed Business (or the part of the relevant Contributed Business that is transferred to the Purchaser at Closing);

“Relevant Period” means the period of two years prior to the date of this Agreement;

“Relevant Persons” has the meaning given to it in Clause 8.2.2(vi);

“Relevant Target Business Employees” means, in respect of GlaxoSmithKline, the Relevant GlaxoSmithKline Business Employees and, in respect of Novartis, the Relevant Novartis Business Employees, and “Relevant Target Business Employee” means any one of them;

“Relevant Target Company Employees” means, in respect of GlaxoSmithKline, the Relevant GlaxoSmithKline Company Employees and, in respect of Novartis, the Relevant Novartis Company Employees, and “Relevant Target Company Employee” means any one of them;

“Relevant Tax Deduction” has the meaning given in Clause 15.11.2;

“Relevant Working Day” means a normal working day in the relevant jurisdiction and excludes a Saturday or Sunday or a public holiday in the relevant jurisdiction;

“Reorganisation” has the meaning given to it in Clause 2.3.5;

“Representatives” means, in relation to any party, any of its and/or any member of the Purchaser’s Group’s or a Seller’s Group’s directors, officers, employees, agents, representatives, bankers, auditors, accountants, financial advisers, legal advisers and any other professional advisers;

“Reporting Accountants” means the London office of Ernst & Young or, if that firm is unable or unwilling to act in any matter referred to them under this Agreement, the London office of Deloitte or, if that firm is also unable or unwilling to act in any matter referred to them under this Agreement, an internationally recognised and independent firm of accountants who does not act as auditor to the relevant Seller or the Purchaser, to be agreed by the Seller and the Purchaser within seven days of a notice by one to the other requiring such agreement or, failing such agreement, to be nominated on the application of either of them by or on behalf of the Institute of Chartered Accountants of England and Wales;

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“Required Notifications” has the meaning given to it in Clause 4.2.1;

“Restricted Target Group Employee” means, in respect of a Seller, any Transferred Employee of that Seller or the other Seller who is at or above grade GG5 or GJFA3 (or in either case the Purchaser’s equivalent from time to time);

“Restricted GSK Employee” means any employee of a member of GlaxoSmithKline’s Group who is grade GG5 or above and who works primarily in the business of the Target Group;

“Retained Inventory” has the meaning given in Clause 2.9.1;

“Rx Spin-out Businesses” means GlaxoSmithKline’s business of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise Commercialising Prescription Products in Kenya, Costa Rica, Malaysia, Panama, China, Sri Lanka and Denmark, but only to the extent that such business constitutes a GlaxoSmithKline Excluded Business;

“Sanctions Law” has the meaning given to it in paragraph 10.5 of Schedule 13;

“Sandoz” means Sandoz Inc., a corporation having a principal place of business at 100 College Road West, Princeton, New Jersey 08540;

“Saudi Distribution Contracts” any contracts entered into between Novartis Consumer Health SA and Saudi Pharmaceutical Distribution Co. Ltd. and any other contracts entered into by any Novartis Target Group Company in relation to the Novartis OTC Business in Saudi Arabia as Novartis and the Purchaser may agree from time to time;

“Select Equity Plans” means the Novartis Restricted Stock Plan of 1 November 2007 (Rest of the World), the Novartis Restricted Stock Plan of 1 November 2007 (Switzerland), the Novartis Restricted Stock Unit Plan of November 2007 (Rest of the World and Switzerland), the Novartis Stock Option Plan of September 2003 (Rest of the World), the Novartis Stock Option Plan of February 2005 (Switzerland) and the Novartis Corporation 2011 Stock Incentive Plan for North American Employees effective 1 January 2011, and a “Select Equity Plan” means any one of them;

“Seller Marks” means:

(i)with respect to GlaxoSmithKline, any Trademark of GlaxoSmithKline containing the mark “GlaxoSmithKline”, and any other mark listed in Part 1 of Schedule 21, or any variants of the foregoing; and

(ii)with respect to Novartis, any Trademark of Novartis containing the mark including the names “Novartis”, “Sandoz”, “Alcon” or “Ciba Vision” or any of the variants of the foregoing;

“Seller Partner” means, in respect of a Seller, any counterparty to a development, contract research, commercialisation, manufacturing, distribution, sales, marketing, supply, consulting or other collaboration contract with that Seller or any of its Affiliates;

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“Seller’s Bank Account” means, in respect of a Seller, the account notified by such Seller to the Purchaser no later than two Business Days prior to the Closing Date;

“Seller’s Disagreement Notice” has the meaning given to it in paragraph 1.5 of Schedule 12;

“Seller’s Group” means, in respect of a Seller, that Seller and its Affiliates from time to time, provided that, for the purposes of this Agreement, the Purchaser and any person Controlled by the Purchaser (whether directly or indirectly) from time to time shall not be included in any Seller’s Group;

“Seller’s Group Insurance Policy” means, in respect of a Seller, all insurance policies (whether under policies maintained with third party insurers or any member of that Seller’s Group), other than the Target Group Insurance Policies, maintained by that Seller or any member of that Seller’s Group in relation to its Contributed Business or under which, immediately prior to Closing, any of that Seller’s Target Group Companies or that Seller or member of that Seller’s Group in relation to its Contributed Business is entitled to any benefit, and “Seller’s Group Insurance Policy” means any one of them;

“Seller’s Knowledge” has the meaning given to it in Clause 9.1.4;

“Seller’s Retained Business” means, in respect of a Seller, all businesses of that Seller’s Group from time to time, including its Excluded Assets, but excluding its Contributed Business;

“Seller’s Warranties” means, in respect of a Seller, the warranties given by that Seller pursuant to Clause 9 and Schedule 13, and “Seller’s Warranty” means any one of them;

“Service Provider” means an Associated Person who is a legal person;

“Share Sellers” means, in respect of a Seller, the members of that Seller’s Group (other than its Target Group Companies and Joint Venture Entities) that own shares or other equity interests in any of that Seller’s Target Group Companies or Joint Venture Entities, an indicative list of which is set out in column (1) of Schedule 1, Part A (in respect of GlaxoSmithKline) or Part B (in respect of Novartis);

“Shared Business Contracts” means, in respect of a Seller, any Contract which relates both:

(i)to its Contributed Business; and

(ii)to any other business of its Group, any part of its Contributed Business which is not transferred to the Purchaser at Closing (until it is so transferred), or any of its Excluded Assets,

and to which a member of the Seller’s Group is a party or in respect of which a member of the Seller’s Group has any right, liability or obligation at Closing, and “Shared Business Contract” shall mean any of them;

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“Shareholders’ Agreement” means the shareholders’ agreement to be entered into by the parties and certain of the Sellers’ Affiliates on Closing in the Agreed Terms;

“Shares” means, together, the GlaxoSmithKline Shares and the Novartis Shares;

“Statement of Net Assets” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Statement of Net Assets and, in respect of Novartis, the Novartis Statement of Net Assets;

“Support Services Agreement” means the support services agreement expected to be entered into between GlaxoSmithKline and the Purchaser (or its Affiliate) at Closing on terms consistent with the Agreed Terms;

“Statement of Net Assets Date” means 31 December 2013;

“Statement of Net Asset Rules” means, for each Seller, the rules in accordance with which its Statement of Net Assets was prepared, as set out in Part 1 (in the case of GlaxoSmithKline) or Part 2 (in respect of Novartis) of Schedule 18;

“Target Asset Agreement” has the meaning given in the Implementation Agreement;

“Target Business Employees” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Business Employees and, in respect of Novartis, the Novartis Business Employees, and “Target Business Employee” means any of them;

“Target Company Employees” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Company Employees and, in respect of Novartis, the Novartis Company Employees, and “Target Company Employee” means any one of them;

“Target Group” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Consumer Group Companies and the GlaxoSmithKline Consumer Group Businesses, and, in respect of Novartis, the Novartis OTC Group Companies and the Novartis OTC Group Businesses, in each case, taken as a whole, and “Target Groups” shall mean both of them;

“Target Group Businesses” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Consumer Group Businesses and, in respect of Novartis, Novartis OTC Group Businesses, and “Target Group Business” means any one of them;

“Target Group Companies” means, in respect of GlaxoSmithKline, the GlaxoSmithKline Consumer Group Companies, and, in respect of Novartis, the Novartis OTC Group Companies, and “Target Group Company” means any one of them;

“Target Group Companies’ Cash Balances” means, in respect of a Seller, an amount equal to the sum of the aggregate amount of Cash Balances (including the GSK Finance Cash Balances) held by or on behalf of the Target Group Companies within that Seller’s Group at the Effective Time, as derived from the Closing Statement, excluding in respect of GlaxoSmithKline any Cash Balances held by a Target Group Company

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(other than GlaxoSmithKline Panama S.A.) for the purposes of satisfying a payment obligation under a Local Transfer Document on Closing;

“Target Group Goodwill” means all goodwill of the Target Group Businesses, but excluding any Trademark goodwill;

“Target Group Information Technology” means the Transferred Information Technology and the Owned Information Technology;

“Target Group Insurance Policies” means all insurance policies held exclusively by and for the benefit of the relevant Target Group Companies, and “Target Group Insurance Policy” means any one of them;

“Target Group Intellectual Property Contracts” means the Transferred Intellectual Property Contracts and the Owned Intellectual Property Contracts;

“Target Group Intellectual Property Rights” means the Transferred Intellectual Property Rights and the Owned Intellectual Property Rights;

“Taxation” or “Tax” has the meaning given to it in the Tax Indemnity;

“Tax Adjustment” means, in respect of a Seller, the amount by which:

(i)the aggregate amount of the income taxes and sales taxes payable by the Target Group Companies, as at the Effective Time, as derived from the Closing Statement;

exceeds or is less than

(ii)the aggregate amount of the current income tax and sales tax receivables of the Target Group Companies, as at the Effective Time, as derived from the Closing Statement,

and any such excess amount shall be treated as a positive number and any shortfall shall be treated as a negative amount;

“Tax Authority” has the meaning given to it in the Tax Indemnity;

“Tax Group” has the meaning given to it in the Tax Indemnity;

“Tax Indemnity” means the deed of covenant against taxation, on terms consistent with the Agreed Terms, to be entered into on the Closing Date between each Seller and the Purchaser;

“Tax Return” has the meaning given to it in the Tax Indemnity;

“Tax Warranties” means, in respect of a Seller, the Seller’s Warranties set out in paragraph 14 of Schedule 13;

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[***];

[***];

“Third Party Claim” has the meaning given to it in Clause 11.4;

“Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from third parties, and “Third Party Consent” means any one of them;

“Third Party Indebtedness” means the aggregate amount as at the Effective Time of all outstanding Indebtedness owed by the Target Group Companies to any third party less any Indebtedness owed by any third party to any Target Group Company as derived from the Closing Statement (but excluding any item included in respect of any Target Group Companies’ Cash Balances or Intra-Group Non-Trade Payables), and, for the purposes of this definition, third party shall exclude any member of either Seller’s Group;

“Time-Limited Excluded Liability” means an Excluded Liability which is:

(i)a Contracts Liability;

(ii)an Environmental Liability;

(iii)a Manufacturing Liability; or

(iv)a Commercial Practices Liability,

but excludes an IP Liability;

“Trademarks” means trademarks, service marks, trade names, certification marks, service names, industrial designs, brand names, brand marks, trade dress rights, identifying symbols, logos, emblems, and signs or insignia and all goodwill of the business in relation to which any of the foregoing are used (but no other or greater goodwill);

“Transaction” has the meaning given to it in Clause 4.1.1;

“Transfer Regulations” means the relevant national measure by which the employment of a Relevant Target Business Employee automatically transfers to the Purchaser or a relevant member of the Purchaser’s Group;

“Transferred Accounts Payables” means, in respect of a Seller, all trade accounts and notes payable of that Seller’s Group (other than its Target Group Companies) to the extent related to its Contributed Business, and outstanding at the Effective Time, arising in the ordinary course, together with any unpaid financing charges accrued thereon;

“Transferred Accounts Receivables” means, in respect of a Seller, all trade accounts and notes receivable of that Seller’s Group (other than its Target Group Companies) to the extent related to its Contributed Business, and outstanding at the Effective Time,

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arising in the ordinary course, together with any unpaid financing charges accrued thereon;

“Transferred Books and Records” means, in respect of a Seller, all books, ledgers, files, reports, plans, records, manuals and other materials (in any form or medium) to the extent of, or maintained predominantly for, that Seller’s Contributed Business by that Seller’s Group (excluding its Target Group Companies) (other than emails), but excluding:

(i)any such items to the extent that: (A) they are related to any Excluded Assets or Excluded Liabilities; (B) they are related to any corporate, Tax, human resources or stockholder matters of that Seller or its Affiliates (other than its Target Group Companies); (C) any Applicable Law prohibits their transfer; (D) any transfer thereof otherwise would subject that Seller or any of its Affiliates to any material liability; or (E) they are retained by the Seller’s Group pursuant to Clause 8.18;

(ii)any laboratory notebooks to the extent containing research and development information unrelated to its Contributed Business; and

(iii)any books and records (including but not limited to the content of any personnel files) kept by the Seller’s Group relating to the employment of the Transferred Employees with the Seller’s Group;

“Transferred Contracts” means: (i) in respect of a Seller, the Contracts, other than its Transferred Intellectual Property Contracts, that are Exclusively Related to that Seller’s Contributed Business between a Business Seller of that Seller’s Group, on the one hand, and any third party, on the other hand (other than this Agreement and any Ancillary Agreement); and (ii) in the case of Novartis, the Novartis Distribution and Sales Products Contracts and the Novartis Services Contracts; and (iii) in the case of GlaxoSmithKline, any Contracts between a member of its Group (other than its Target Group Company and its Business Seller) on the one hand and its Business Seller, on the other hand, that are Exclusively Related to GlaxoSmithKline’s Contributed Business, other than any contracts that relate to any services that will be and, as at Closing are, provided under the Ancillary Agreements;

“Transferred Employees” means, in relation to a Seller: (i) any Target Business Employees of that Seller to whom the Purchaser (or a member of the Purchaser’s Group) offers employment and who accept such employment and become employed by the Purchaser (or a member of the Purchaser’s Group) in accordance with Schedule 7; (ii) any Relevant Target Business Employees of that Seller who transfer to the Purchaser (or a member of the Purchaser’s Group) by operation of the Transfer Regulations and do not object to such transfer (to the extent permitted by the Transfer Regulations) in accordance with Schedule 7; and (iii) the Relevant Target Company Employees of that Seller, and “Transferred Target Business Employees” means the employees in (i) and (ii), “Transferred Target Company Employees” means the employees in (iii), and “Transferred Employee”, “Transferred Target Business Employee” and “Transferred Target Company Employee” respectively means any one of them;

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“Transferred Information Technology” means, in respect of a Seller, all Information Technology of any member of that Seller’s Group (other than its Target Group Company) to the extent Exclusively Related to that Seller’s Contributed Business;

“Transferred Intellectual Property Contracts” means, in respect of a Seller, Contracts Exclusively Related to its Contributed Business which relate to Intellectual Property Rights (but excluding the rights under any such Contracts that are held by its Target Group Companies);

“Transferred Intellectual Property Rights” means, in respect of a Seller, the Intellectual Property Rights of any member of that Seller’s Group (other than a Target Group Company) Exclusively Related to its Contributed Business.  For the avoidance of doubt, whether a Trademark is Exclusively Related to a Contributed Business will be assessed on a Brand basis rather than a country by country basis, so that a Brand (and the Trademarks used or registered for use with a Product to which that Brand is associated) shall be deemed not to be Exclusively Related to a Contributed Business where, as at the date of this Agreement, a Brand is Commercialised by a Seller or its Affiliates in relation to both (i) a Product and (ii) a product of that Seller’s Retained Business, in any part of the world;

“Transferred Inventory” means, in respect of a Seller, all inventories (including its Manufacturing Inventory, Manufacturing Stocks and In-Market Inventory), wherever located, including all raw materials, work in progress, finished GlaxoSmithKline Products or Novartis Products (as the case may be), and packaging and labelling material in respect of the GlaxoSmithKline Products or Novartis Products (as the case may be) and otherwise, in each case, that are, Predominantly Related to its Contributed Business (but excluding any such items held by its Target Group Companies), whether held at any location or facility of a member of that Seller’s Group or in transit to a member of that Seller’s Group, in each case, as of the Effective Time;

“Transferred Leased Properties” has the meaning given to it in paragraph 1.1 of Part 4 of Schedule 2;

“Transferred Owned Properties” has the meaning given to it in paragraph 1.1 of Part 4 of Schedule 2;

“Transferred Plant and Equipment” means, in respect of a Seller:

(i)its Transferred Information Technology; and

(ii)all plant, furniture, furnishings, vehicles, equipment, tools and other tangible personal property (other than its Transferred Inventory or its Transferred Information Technology) of that Seller’s Group that are Predominantly Related to its Contributed Business (but excluding any such items owned by its Target Group Companies);

“Transferred Properties” means, in respect of a Seller:

(i)its Transferred Owned Properties;

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(ii)its Transferred Leased Properties;

(iii)all other freehold, leasehold or other immovable property comprising research and development, production or manufacturing facilities Exclusively Related to its Contributed Business, other than any freehold, leasehold or other immovable property within the definition of “Excluded Assets”; and

(iv)all other freehold, leasehold or other immovable property comprising warehousing, distribution or office facilities Predominantly Related to its Contributed Business, other than any freehold, leasehold or other immovable property within the definition of “Excluded Assets”,

and “Transferred Property” means any one of them;

“Transitional Distribution Services Agreement” means, in respect of a Seller, the transitional distribution services agreement expected to be entered into between it (or its Affiliate) and the Purchaser (or its Affiliate) at Closing (and each local agreement entered pursuant to such transitional distribution services agreement) on terms consistent with the Agreed Terms;

“Transitional Services Agreement” means the transitional services agreement expected to be entered into between Novartis (or its Affiliate) and the Purchaser (or its Affiliate) at Closing (and each local agreement entered pursuant to such transitional services agreement) on terms consistent with the Agreed Terms;

“US Benefit Plans” means all United States “employee benefit plans” (within the meaning of section 3(3) of ERISA), severance, change in control or employment, vacation, incentive, bonus, stock option, stock purchase, or restricted stock plans, programmes, agreements or policies benefiting the relevant Target Business Employees;

“Vaccines Sale and Purchase Agreement” means the sale and purchase agreement dated the date of this agreement between Novartis and GlaxoSmithKline relating to the sale and purchase of Novartis’s vaccines business (excluding Novartis’s Influenza vaccines business);

“VAT” means, within the European Union, such Taxation as may be levied in accordance with (but subject to derogations from) Council Directive 2006/112/EC and, outside the European Union, any Taxation levied by reference to added value or sales;

[***];

[***];

“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988 of the United States;

“Wholly-Owned Subsidiary” means, in respect of GlaxoSmithKline, any body corporate that is a 100 per cent. owned and controlled subsidiary of GlaxoSmithKline

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and, in respect of Novartis, any body corporate that is a 100 per cent. owned and controlled subsidiary of Novartis (where “subsidiary” has the meaning given in section 1159 of the Companies Act 2006);

“Working Capital” means, in respect of a Seller, the aggregate amount of the working capital items of its Target Group falling into the categories set out in Part A of Part 4 of Schedule 12 (in respect of Novartis) or Part B of Part 4 of Schedule 12 (in respect of GlaxoSmithKline) as set out in its Closing Statement (which shall not include any amount in respect of Tax), at the Effective Time, as derived from its Closing Statement;

“Working Capital Adjustment” means, in respect of a Seller:

(i)if its Working Capital is no less than its Minimum Working Capital Amount and no greater than its Maximum Working Capital Amount, zero;

(ii)if its Working Capital is less than its Minimum Working Capital Amount, the amount by which its Working Capital is less than its Minimum Working Capital Amount, such amount being treated as a negative amount; or

(iii)if its Working Capital is greater than its Maximum Working Capital Amount, the amount by which its Working Capital exceeds its Maximum Working Capital Amount, such amount being treated as a positive amount;

“Withholding Seller” has the meaning given in Clause 15.11.2; and

“Workstream Lead” has the meaning given to it in the Implementation Agreement.

1.2Shares

References to shares shall include, where relevant, quotas.

1.3Singular, plural, gender

References to one gender include all genders and references to the singular include the plural and vice versa.

1.4References to persons and companies

References to:

1.4.1a person include any individual, company, partnership or unincorporated association (whether or not having separate legal personality); and

1.4.2a company include any company, corporation or any body corporate, wherever incorporated.

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1.5Schedules etc.

References to this Agreement shall include any Recitals and Schedules to it and references to Clauses and Schedules are to Clauses of, and Schedules to, this Agreement. References to paragraphs and Parts are to paragraphs and Parts of the Schedules.

1.6Reference to documents

References to any document (including this Agreement), or to a provision in a document, shall be construed as a reference to such document or provision as amended, supplemented, modified, restated or novated from time to time.

1.7References to enactments

Except as otherwise expressly provided in this Agreement, any express reference to an enactment (which includes any legislation in any jurisdiction) includes references: (i) to that enactment as amended, consolidated or re-enacted by or under any other enactment before or after the date of this Agreement; (ii) any enactment which that enactment re-enacts (with or without modification); and (iii) any subordinate legislation (including regulations) made before or after the date of this Agreement under that enactment as amended, consolidated or re-enacted as described in paragraph (i) or paragraph (ii) above, except to the extent that any of the matters referred to in paragraph (i) to paragraph (iii) (inclusive) above occurs after the date of this Agreement and increases or alters the liability of a Seller or the Purchaser under this Agreement.

1.8Information

References to books, records or other information mean books, records or other information in any form including paper, electronically stored data, magnetic media, film and microfilm.

1.9References to “indemnify”

Unless specified to the contrary, references to “indemnify” and “indemnifying” any person against any circumstance include indemnifying and holding that person harmless on an after-Tax basis and:

1.9.1references to the Purchaser indemnifying each member of a Seller’s Group shall constitute undertakings by the Purchaser to that Seller for itself and on behalf of each other member of that Seller’s Group;

1.9.2references to the relevant Seller indemnifying each member of the Purchaser’s Group shall constitute undertakings by that Seller to the Purchaser for itself and on behalf of each other member of the Purchaser’s Group;

1.9.3to the extent that the obligation to indemnify relates to any Shares (including any Target Group Companies) or other assets or liabilities

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transferred by a Share Seller or Business Seller (as the case may be) to a member of the Purchaser’s Group pursuant to this Agreement, references to the Seller indemnifying the Purchaser and references to the Seller indemnifying the Purchaser or any member of the Purchaser’s Group shall constitute undertakings by the Seller to indemnify or procure the indemnification of the relevant purchaser of the Shares transferred or to be transferred by that Share Seller or the relevant purchaser of the assets or liabilities transferred or to be transferred by that Business Seller (as the case may be), and references to the Purchaser indemnifying the Seller and references to the Purchaser indemnifying the Seller and each member of the Seller’s Group shall constitute undertakings by the Purchaser to indemnify or procure the indemnification of the relevant member of the Seller’s Group; and

1.9.4where under the terms of this Agreement one party is liable to indemnify or reimburse another party in respect of any costs, charges or expenses, the payment shall include an amount equal to any VAT thereon not otherwise recoverable by the other party or any member of any group or consolidation of which it forms part for VAT purposes, subject to that party using reasonable endeavours to recover or to procure recovery of such amount of VAT as may be practicable.

For the purposes of this Clause 1.9, indemnifying and holding harmless a person on an “after-Tax basis” means that the amount payable pursuant to the indemnity (the “Payment”) shall be calculated in such a manner as will ensure that, after taking into account:

(i)any Tax required to be deducted or withheld from the Payment and any additional amounts required to be paid by the payer of the Payment in consequence of such withholding;

(ii)the amount and timing of any additional Tax which becomes (or would, but for the use of any credit or other relief which would otherwise have been available to reduce the Tax liabilities of any member of a Seller’s Group or of the Purchaser’s Group, as the case may be, have become) payable by the recipient of the Payment (or a member of a Seller’s Group or the Purchaser’s Group, as the case may be) as a result of the Payment’s being subject to Tax in the hands of that person; and

(iii)the amount and timing of any Tax benefit which is obtained by the recipient of the Payment (or a member of a Seller’s Group or the Purchaser’s Group, as the case may be) to the extent that such Tax benefit is attributable to the matter giving rise to the indemnity payment or to the receipt of the Payment,

which amount and timing is to be determined by the auditors of the recipient at the shared expense of both relevant parties and is to be certified as such to the party making the Payment, the recipient of the Payment is in no better and no worse after Tax position as that in which it would have been if the matter giving rise to the indemnity

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payment had not occurred, provided that if any party to this Agreement shall have assigned or novated the benefit of this Agreement in whole or in part or shall, after the date of this Agreement, have changed its Tax residence or the permanent establishment to which the rights under this Agreement are allocated then no Payment to that party shall be increased by reason of the operation of paragraphs (i) to (iii) above to any greater extent than would have been the case had no such assignment, novation or change taken place.

1.10References to wholly or substantially in the Contributed Business

References to any employee employed by a member of a Seller’s Group working “wholly or substantially” in a Contributed Business (whether the GlaxoSmithKline Consumer Business or the Novartis OTC Business, as the case may be) means that such employee spends more than 70 per cent. of their time working in the Contributed Business at the relevant time.

1.11Legal terms

References to any English legal term shall, in respect of any jurisdiction other than England and Wales, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction.

1.12Non-limiting effect of words

The words “including”, “include”, “in particular” and words of similar effect shall not be deemed to limit the general effect of the words that precede them.

1.13Currency conversion

1.13.1Subject to Clause 1.13.2 and Clause 6.5, any amount to be converted from one currency into another currency for the purposes of this Agreement shall be converted into an equivalent amount at the Conversion Rate prevailing at the Relevant Date. For the purposes of this Clause 1.13:

“Conversion Rate” means the spot reference rate for a transaction between the two currencies in question as quoted by the European Central Bank on the Business Day immediately preceding the Relevant Date or, if no such rate is quoted on that date, on the preceding date on which such rates are quoted;

“Relevant Date” means, save as otherwise provided in this Agreement, the date on which a payment or an assessment is to be made, save that, for the following purposes, the date shall mean:

(i)for the purposes of Clause 5, the date of this Agreement;

(ii)for the purposes of Clause 7 and Schedule 12 and Schedule 18, the Closing Date; or

(iii)for the purposes of Clause 10, the date of this Agreement; and

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(iv)for the purposes of the monetary amounts set out in Schedule 13, the date of this Agreement.

1.13.2For the purposes of Schedule 12, the conversion of an amount from one currency into another shall be carried out in accordance with the accounting policies and practices of the Purchaser’s Group in operation from time to time.

2.SALE AND PURCHASE OF THE TARGET GROUPS

2.1Sale and Purchase of the Target Groups

On and subject to the terms of this Agreement and the Local Transfer Documents:

2.1.1GlaxoSmithKline undertakes to Novartis and the Purchaser to procure that its Share Sellers and Business Sellers shall sell the GlaxoSmithKline Target Group;

2.1.2Novartis undertakes to GlaxoSmithKline and the Purchaser to procure that its Share Sellers and Business Sellers shall sell the Novartis Target Group; and

2.1.3the Purchaser undertakes to GlaxoSmithKline and Novartis to purchase (or procure the purchase by a member(s) of the Purchaser’s Group of) each of the Target Groups,

in each case, as a going concern.

2.2Sale of the Shares

2.2.1GlaxoSmithKline shall procure that its Share Sellers shall sell the GlaxoSmithKline Shares, and Novartis shall procure that its Share Sellers shall sell the Novartis Shares, and the Purchaser shall purchase (or procure the purchase of) the Shares, in each case, with Full Title Guarantee free from Encumbrances (other than any rights of first refusal that exist as at the date of this Agreement in relation to any Shares in any Joint Venture Entities) and together with all rights and advantages attaching to them as at Closing (including the right to receive all dividends or distributions declared, made or paid on or after the Effective Time), subject to and in accordance with the provisions of Schedule 6.

2.2.2GlaxoSmithKline shall procure that, on or prior to Closing, any and all rights of pre-emption over the GlaxoSmithKline Shares (other than such rights of pre-emption that exist at the date of this Agreement in respect of its Joint Venture Entities) and Novartis shall procure that, on or prior to Closing, any and all rights of pre-emption over the Novartis Shares (other than in respect of its Joint Venture Entities), in each case, are waived irrevocably by the persons entitled thereto.

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2.3Sale of the Target Group Businesses

2.3.1Each Seller shall sell (or procure the sale of) the assets comprising its Target Group Businesses and the Purchaser shall purchase (or procure the purchase of), each Seller’s Target Group Businesses, in each case, under this Agreement or, where relevant, the Local Transfer Documents.  Each of those assets shall be sold by that Seller or Business Seller (as the case may be) with Full Title Guarantee (save in respect of the Transferred Intellectual Property Rights) and free from Encumbrances other than Permitted Encumbrances (save for the Transferred Properties, which shall be sold free from Encumbrances other than as provided in paragraph 1.9 of Part 4 of Schedule 2) and shall comprise, in respect of each Target Group Business of each Seller (unless otherwise expressly provided below):

(i)the Transferred Properties;

(ii)the Transferred Plant and Equipment;

(iii)the Transferred Inventory;

(iv)the Transferred Accounts Receivables;

(v)the Transferred Books and Records;

(vi)subject to and in accordance with Schedule 6, the Transferred Intellectual Property Rights;

(vii)subject to and in accordance with Schedule 6, the Transferred Intellectual Property Contracts;

(viii)the Transferred Information Technology;

(ix)subject to and in accordance with Schedule 6, its Transferred Contracts and the Relevant Part of the Shared Business Contracts;

(x)subject to and in accordance with Clause 6.2 and Schedule 4, all Product Approvals and all Product Applications and all other permits, licences, certificates, registrations, marketing or other authorisations or consents issued by a Governmental Entity Predominantly Related to that Seller’s Contributed Business and not held by its Target Group Companies;

(xi)subject to and in accordance with Schedule 4, all Marketing Authorisation Data not held by its Target Group Companies;

(xii)all Business Information not held at Closing by its Target Group Companies;

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(xiii)all rights of the Purchaser, its Affiliates and its Target Group Companies as contemplated by Schedule 7 and Schedule 8;

(xiv)the Target Group Goodwill;

(xv)all other property, rights and assets owned or held by that Seller’s Group (other than its Target Group Companies) and Predominantly Related to that Seller’s Contributed Business at Closing (other than any property, rights and assets of that Seller’s Target Group expressly excluded from the sale under this Agreement); and

(xvi)Novartis Holding AG’s rights under the Novartis Transferred Intra-Group Non-Trade Receivables.

2.3.2There shall be excluded from the sale of each Target Group Business by a Seller under this Agreement and the Local Transfer Documents the following:

(i)the Seller’s Retained Business;

(ii)any Intellectual Property Right that is not a Target Group Intellectual Property Right;

(iii)any Information Technology other than the Target Group Information Technology;

(iv)the Seller Marks;

(v)any product and any permits, licences, certificates, registrations, marketing or other authorisations or consents issued by any Governmental Entity in respect of any products, or any applications therefor, other than: (a) products to the extent included in the relevant Seller’s Contributed Business (including the Products), Product Approvals, Products Under Registration and Pipeline Product Approvals; and (b) Permits Predominantly Related to that Seller’s Contributed Business;

(vi)all cash, marketable securities and negotiable instruments, and all other cash equivalents, of that Seller’s Group (other than its Target Group Companies);

(vii)the land and buildings of Novartis’s Group at 4560 Horton Street, Emeryville CA, United States of America, together with all fixtures and improvements erected thereon;

(viii)the land and buildings of the Novartis’s Group at Jaboatão dos Guarapas, State of Pernambuco, Brazil, together with all fixtures and improvements erected thereon and any other assets, rights and Contracts related thereto;

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(ix)all real property and any leases therefor and interests therein other than the Properties;

(x)the company seal, minute books, charter documents, stock or equity record books and such other books and records pertaining to that Seller or its Affiliates (other than the Target Group Companies and the Transferred Books and Records), as well as any other records or material relating to that Seller or its Affiliates (other than its Target Group Companies) generally and not involving or related to that Seller’s Target Group;

(xi)any right of that Seller or its Affiliates to be indemnified in respect of Assumed Liabilities;

(xii)all Tax assets (including Tax refunds and prepayments), other than Tax assets of any Target Group Company;

(xiii)all Tax Returns of that Seller’s Group (other than its Target Group Companies) and all Tax Returns relating to Tax Groups of which persons other than Target Group Companies are members and, in each case, all books and records (including working papers) related thereto;

(xiv)any rights in respect of any insurance policies of that Seller’s Group as provided in and subject to Clause 13;

(xv)all artwork, paintings, drawings, sculptures, prints, photographs, lithographs and other artistic works of that Seller’s Group that are not embodiments of the Target Group Intellectual Property Rights;

(xvi)any rights of that Seller’s Group (other than its Target Group Companies) under any of its Intra-Group Non-Trade Payables or Intra-Group Non-Trade Receivables (excluding its Transferred Accounts Receivables), with the exception of the Novartis Transferred Intra-Group Non-Trade Receivables;

(xvii)any rights of that Seller or its Affiliates (other than its Target Group Companies) contemplated by Schedule 7 and Schedule 8;

(xviii)any equity interest in any person other than a Target Group Company or the Joint Venture Entities;

(xix)the Excluded Contracts, but, subject to paragraph 11.8 of Schedule 6, including the Endo Excluded Contract and the Baxter Excluded Contract;

(xx)all rights of that Seller’s Group under this Agreement and the Ancillary Agreements;

(xxi)the Seller’s Bank Account;

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(xxii)in the case of GlaxoSmithKline only, those items, assets and businesses set out in Part 1 of Schedule 3; and

(xxiii)in the case of Novartis only, those items, assets and businesses set out in Part 2 of Schedule 3.

2.3.3Each Seller agrees to procure the transfer of (to the extent it is able so to do) and the Purchaser agrees to accept or procure the acceptance by another member of the Purchaser’s Group of the transfer of, and to assume, duly and punctually pay, satisfy, discharge, perform or fulfil or procure that another member of the Purchaser’s Group will assume, duly and punctually pay, satisfy, discharge, perform or fulfil, the Assumed Liabilities relating to that Seller’s Contributed Business, with effect from Closing.

2.3.4Clause 2.3.3 shall not apply to, and the Purchaser shall not be obliged to accept (or procure the acceptance by another member of the Purchaser’s Group of), the transfer of or to assume, duly and punctually pay, satisfy, discharge, perform or fulfil (or procure that another member of the Purchaser’s Group will assume, duly and punctually pay, satisfy, discharge, perform or fulfil):

(i)any Excluded Liability; or

(ii)any Liability to the extent it relates to an Excluded Asset.

2.3.5Each Seller shall comply with its obligations in Schedule 17 (Reorganisations) in respect of any reorganisation of that Seller’s Group carried out prior to Closing involving its Target Group (including assigning or otherwise transferring assets, liabilities and (only where in compliance with Clause 5 other than Clause 5.2.5) employees between members of that Seller’s Group and including, without limitation, transferring all or part of its Target Group into or (directly or indirectly) beneath, as the case may be, a single newly incorporated company or holding company, as the case may be, with the intention of that new company being transferred to the Purchaser on Closing) (each a “Reorganisation”).  In the event that a Seller carries out a Reorganisation such that the structure of the Target Group has been altered, the provisions of this Agreement shall apply to such altered structure mutatis mutandis.

2.3.6Promptly after the date of this Agreement:

(i)the project manager of each of GlaxoSmithKline and Novartis shall appoint a Workstream Lead who shall be generally responsible for the implementation of this Agreement; and

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(ii)GlaxoSmithKline, Novartis and each Workstream Lead appointed in accordance with Clause 2.3.6(i) shall use their reasonable endeavours to further identify the assets and liabilities comprising GlaxoSmithKline’s and Novartis’s respective Target Group and make any amendments or updates to Schedule 1, Schedule 2, Schedule 3, Schedule 6, Schedule 9, Schedule 16, Schedule 19 and Schedule 21 as may be necessary to ensure that such Schedules accurately reflect the scope of each of GlaxoSmithKline’s and Novartis’s respective Target Group,

provided that nothing in this Clause 2.3.6 shall be construed as a right or obligation to amend or update the scope of each of GlaxoSmithKline’s and Novartis’s respective Target Group as defined in this Agreement.

2.4Employees and Employee Benefits

2.4.1The provisions of Schedule 7 shall apply in respect of the Employees.

2.4.2The provisions of Schedule 8 shall apply in respect of Employee Benefits.

2.5Properties

The provisions of Schedule 2 shall apply in respect of the Properties.

2.6Alliance Market Businesses

2.6.1The parties agree that the Alliance Market Businesses shall not be transferred by the relevant Seller to the Purchaser on Closing but shall be governed by this Clause 2.6.

2.6.2On and with effect from Closing, the GlaxoSmithKline Alliance Market Businesses shall be retained by the relevant entity in GlaxoSmithKline’s Group or (where applicable) transferred to the relevant entity in the Purchaser’s Group listed opposite the Alliance Market Territory in Appendix 1.

2.6.3At Closing, the Novartis Alliance Market Businesses shall be transferred to the relevant member of GlaxoSmithKline’s Group or the Purchaser’s Group listed opposite the Alliance Market Territory in Appendix 1.

2.6.4At Closing, GlaxoSmithKline shall procure that the relevant entity in GlaxoSmithKline’s Group listed in Appendix 1 shall, GlaxoSmithKline and the Purchaser shall procure that the relevant entity in the Purchasers’ Group listed in Appendix 1 shall and Novartis shall procure that the relevant entity in Novartis’s Group listed Appendix 1 shall, in each case, enter into the relevant Alliance Market Local Transfer Agreements listed therein.

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2.7Rx Spin-out Businesses

2.7.1Notwithstanding Clause 2.3.2, GlaxoSmithKline shall be permitted to transfer its Rx Spin-out Businesses to the Purchaser’s Group (including by virtue of such businesses being owned by a Target Group Company), provided that GlaxoSmithKline shall, and shall procure that members of GlaxoSmithKline’s Group shall, use all reasonable endeavours to procure that each Rx Spin-out Business is transferred from the Purchaser’s Group to an entity in GlaxoSmithKline’s Group as soon as reasonably practicable following Closing (in each case, an “Rx Spin-out”).

2.7.2From Closing until the relevant Rx Spin-out completes, Part 3 of Schedule 22 (Economic Benefit Transfer) shall apply to the Rx Spin-out Businesses, such that the Purchaser’s Group and GlaxoSmithKline’s Group are put in the same net economic position as they would have been in had the relevant Rx Spin-out Business not transferred to the Purchaser’s Group on Closing.

2.7.3The parties acknowledge that the purchaser of any Rx Spin-out Business may wish to enter into transitional supply, service or distribution arrangements with the Purchaser (or its Affiliates). The Purchaser and GlaxoSmithKline shall negotiate in good faith whether, and, if so, the terms on which, such transitional supply, service or distribution arrangements will be entered into, which terms shall be based on the terms of any Ancillary Agreement that would have applied in respect of that Rx Spin-out Business, if it had been a member of GlaxoSmithKline’s Group at Closing.

2.8Local Transfer Documents

2.8.1On Closing or at such other time as agreed between the parties, each Seller shall procure that its Share Sellers and Business Sellers execute, and the Purchaser shall execute (or procure the execution by one or more other members of the Purchaser’s Group of), such agreements, transfers, conveyances and other documents, as may be required pursuant to the relevant local law and otherwise as may be agreed between such Seller and the Purchaser to implement the transfer of (i) the Shares held by such Share Sellers and (ii) the Target Group Businesses held by such Business Sellers, in each case on Closing subject to the provisions of Schedule 6, Schedule 22 (Delayed Businesses) and Clause 2.6 (Alliance Market Businesses) (the “Local Transfer Documents” and each, a “Local Transfer Document”). The parties do not intend this Agreement to transfer title to any of the Shares. Title shall be transferred by the applicable Local Transfer Document.

2.8.2To the extent that the provisions of a Local Transfer Document are inconsistent with or (except to the extent they implement a transfer in accordance with this Agreement) additional to the provisions of this Agreement:

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(i)the provisions of this Agreement shall prevail; and

(ii)so far as permissible under the laws of the relevant jurisdiction, the relevant Seller and the Purchaser shall procure that the provisions of the relevant Local Transfer Document are adjusted, to the extent necessary to give effect to the provisions of this Agreement or, to the extent this is not permissible, that Seller shall indemnify the Purchaser against all Liabilities suffered by the Purchaser or its Affiliates or, as the case may be, the Purchaser shall indemnify that Seller against all Liabilities suffered by that Seller or its Affiliates, in either case, through or arising from the inconsistency between the Local Transfer Document and this Agreement or the additional provisions (except to the extent they implement a transfer in accordance with this Agreement).

2.8.3If there is an adjustment to the Purchase Consideration under Clause 7.3 which relates to a part of the Target Group which is the subject of a Local Transfer Document, then, if required to implement the adjustment and so far as permissible under Applicable Law, the Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group will), and the relevant Seller shall procure that its relevant Affiliate shall, enter into a supplemental agreement reflecting such adjustment and the allocation of such adjustment.

2.8.4Neither Seller shall, and each Seller shall procure that none of its Affiliates shall, bring any claim against the Purchaser or any member of the Purchaser’s Group (including any Target Group Company) in respect of or based upon the Local Transfer Documents save to the extent necessary to implement any transfer of the Shares or Target Group Businesses as contemplated by this Agreement. To the extent that any Seller or a member of that Seller’s Group does bring a claim in breach of this Clause, that Seller shall indemnify the Purchaser and each member of the Purchaser’s Group (including any Target Group Company) against all Liabilities which the Purchaser or that member of the Purchaser’s Group (including any Target Group Company) may suffer through or arising from the bringing of such a claim.

2.8.5The Purchaser shall not, and shall procure that none of its Affiliates shall, bring any claim against any Seller or any member of any Seller’s Group in respect of or based upon the Local Transfer Documents save to the extent necessary to implement any transfer of the Shares or the Target Group Businesses as contemplated by this Agreement. To the extent that the Purchaser or a member of the Purchaser’s Group does bring a claim in breach of this Clause, the Purchaser shall indemnify the relevant Seller and each member of that Seller’s Group against all Liabilities which that Seller or any member of that Seller’s Group may suffer through or arising from the bringing of such a claim.

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2.9Inventory

2.9.1The parties agree that neither this Agreement nor the applicable Local Transfer Agreement shall transfer legal title to any Transferred Inventory held by the relevant Seller’s Target Group Business in the jurisdictions set out in Schedule 25 (Global TDSA Model Jurisdictions) (the “Retained Inventory”) on Closing.

2.9.2Legal title to all In-Market Inventory that is Retained Inventory shall be transferred to the relevant member of the Purchaser’s Group in accordance with Article XVII of the Transitional Distribution Services Agreement.

2.9.3In respect of the relevant Target Group Business in each jurisdiction set out in Schedule 25 the relevant Seller shall, by no later than 5 Business Days after the date on which it or the relevant member of that Seller’s Group receives payment under section 17.01(b) of the Transitional Distribution Services Agreement for In-Market Inventory in respect of the relevant Target Group Business, contribute to the Purchaser (in accordance with Clause 15.7) an amount equal to the value of the Retained Inventory recorded in the Closing Statement in respect of the relevant Target Group Business.

2.9.4If, following Closing, any Manufacturing Inventory or Manufacturing Stock is found to have formed part of the Retained Inventory, the relevant Seller shall procure that such Manufacturing Inventory and/or Manufacturing Stock is transferred from the relevant member of that Seller’s Group to the member of the Purchaser’s Group nominated by the Purchaser as soon as practicable following Closing at no cost to the Purchaser.

2.9.5Clause 3.4 shall apply to payments or other contributions under this Clause 2.9 as if such payments or other contributions were made or procured in respect of an indemnity under this Agreement.

3.CONSIDERATION

3.1Amount

3.1.1The aggregate consideration for the purchase of each of the GlaxoSmithKline Consumer Group and the Novartis OTC Group under this Agreement and the Local Transfer Documents (together with any payment required to be made pursuant to clause 3.1.3, the “Purchase Consideration”) shall be:

(i)in the case of the GlaxoSmithKline Consumer Group, the allotment and issue by the Purchaser to GlaxoSmithKline (and/or such other of its Affiliates as are Wholly-Owned Subsidiaries as GlaxoSmithKline may direct prior to Closing, provided that no more than two members of

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GlaxoSmithKline’s Group shall be issued A Shares at Closing) of the A Shares in accordance with the provisions of this Agreement; and

(ii)in the case of the Novartis OTC Group, the allotment and issue by the Purchaser to Novartis (and/or such other of its Affiliates as are Wholly-Owned Subsidiaries as Novartis may direct prior to Closing, provided that no more than two members of Novartis’s Group shall be issued B Shares at Closing of the B Shares in accordance with the provisions of this Agreement).

3.1.2The Sellers and the Purchaser acknowledge and agree that the Purchase Consideration has been determined on the basis of the Base Working Capital Range, with the intention that for each of the Target Groups, the sum of the amounts set out in Clause 3.1.3(i) to 3.1.3(vii) will equal zero.

3.1.3If, in respect of the GlaxoSmithKline Consumer Group or the Novartis OTC Group, the sum of the following:

(i)the Target Group Companies’ Cash Balances and the Intra-Group Non-Trade Receivables;

minus

(ii)the Third Party Indebtedness

minus

(iii)the Intra-Group Non-Trade Payables;

minus

(iv)any Employee Benefit Indemnification Amount paid in accordance with Schedule 8;

minus

(v)the excess over US$20,000,000, if any, of the Intra-Group Trading Balances;

minus

(vi)the Tax Adjustment; and

plus (if it is zero or a positive amount) or minus (if it is a negative amount)

(vii)the Working Capital Adjustment,

does not equal zero, balancing payments shall be made between GlaxoSmithKline and the Purchaser (in the case of the GlaxoSmithKline

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Consumer Group) or Novartis and the Purchaser (in the case of the Novartis OTC Group) in accordance with Clauses 6.3 and 7.3 to 7.6 (inclusive).

3.1.4For the avoidance of doubt, the amounts set out in Clause 3.1.3 in each case include all such amounts payable in respect of the Delayed Businesses and the Alliance Market Businesses.

3.2Satisfaction of Purchase Consideration

3.2.1The Purchaser shall allot and issue the A Shares and the B Shares credited as fully paid.  The amount payable under Clause 3.1.3 shall be paid in cash to the relevant Seller’s Bank Account(s) or the Purchaser’s Bank Account, as the case may be, pursuant to Clauses 6.3 and 7.6.

3.2.2Any cash payment required to be made by the Purchaser pursuant to Clauses 3.1.3, 3.2.1, 6.3 and/or 7.3 to 7.6 (inclusive), shall be funded through Shareholder Loans (as defined in the Shareholders’ Agreement), made pro rata to each Seller’s Group’s shareholding in the Purchaser (and each Seller shall procure its relevant Affiliates make such Shareholder Loans required by this Clause 3.2.2).

3.2.3Any cash payment required to be made or procured by the Purchaser under Clause 3.3 shall be funded from the cash reserves of the Purchaser’s Group.  For the avoidance of doubt, this Clause 3.2.3 is without prejudice to the rights and obligations of the Company under Clause 12 of the Shareholders’ Agreement.

3.3VAT

3.3.1The provisions of Schedule 10 shall apply in respect of VAT.

3.3.2Each Seller and the Purchaser agree that the consideration given under this Agreement in respect of the sale of the Target Group Businesses and the Shares is exclusive of any VAT.

3.3.3To the extent that VAT is chargeable in respect of that sale or any part thereof, the Purchaser shall, against delivery of a valid VAT invoice (or equivalent, if any), in addition to any other amount expressed in this Agreement to be payable by the Purchaser, pay or procure the payment to the relevant Seller (on behalf of its relevant Business Seller or Share Seller as applicable) any amount of any VAT so chargeable for which that Seller (or the relevant member of that Seller’s Group, as the case may be) is liable to account, in accordance with Schedule 10.

3.4Treatment of Payments

If any payment is made or procured (i) by a Seller or a member of that Seller’s Group to the Purchaser or relevant member of the Purchaser’s Group, or (ii) by a Purchaser or member of the Purchaser’s Group to the Seller or relevant member of a Seller’s Group, in either case, in

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respect of any claim under or for any breach of this Agreement or pursuant to an indemnity (or equivalent covenant to pay) under this Agreement, the payment shall be treated, so far as possible, as an adjustment of the Purchase Consideration paid by the relevant member of the Purchaser’s Group for the particular part of the Target Group to which the payment and/or claim relates under this Agreement and the Purchase Consideration shall be deemed to be increased or reduced (as applicable) by the amount of such payment,

PROVIDED THAT this Clause 3.4 shall not require any amount to be treated as an amount in respect of the Purchase Consideration for the purposes of Clause 15.11 (Grossing-up) if it would not otherwise have been so treated.

4.CONDITIONS

4.1Conditions Precedent

The sale and purchase of each Target Group is conditional upon satisfaction of the following conditions, or their satisfaction subject only to Closing:

4.1.1to the extent that the proposed transaction contemplated under this agreement (the “Transaction”) either constitutes (or is deemed to constitute under Article 4(5) or Article 5(2)) a concentration with a Community dimension within the meaning of Council Regulation (EC) 139/2004 (as amended) (the “Regulation”) or is to be examined by the European Commission as a result of a decision under Article 22(3) of the Regulation:

(i)the European Commission taking a decision (or being deemed to have taken a decision) under Article 6(1)(b) or, if the Commission has initiated proceedings pursuant to Article 6(1)(c), under Article 8(1) or 8(2) of the Regulation declaring the Transaction compatible with the common market; or

(ii)the European Commission taking a decision (or being deemed to have taken a decision) to refer the whole or part of the Transaction to the competent authorities of one or more Member States under Article 4(4) or 9(3) of the Regulation; and

(a)each such authority taking a decision with equivalent effect to Clause 4.1.1(i) with respect to those parts of the Transaction referred to it; and

(b)the European Commission taking any of the decisions under Clause 4.1.1(i) with respect to any part of the Transaction retained by it;

4.1.2any waiting period (and any extension thereof) under the HSR Act applicable to the Transaction having expired;

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4.1.3to the extent required or otherwise agreed between the parties as appropriate to permit the parties to consummate the Transaction in the jurisdictions listed in Schedule 20, any additional clearances, approvals, waivers, no-action letters and consents having been obtained and any additional waiting periods having expired under applicable antitrust, merger control or foreign investment rules set forth in Schedule 20;

4.1.4receipt of CFIUS Approval if CFIUS has initiated a review of the transactions contemplated by this Agreement, whether pursuant to Clause 4.2.3 or otherwise;

4.1.5no Governmental Entity having enacted, issued, promulgated, enforced or entered any Applicable Law or Judgment (whether temporary, preliminary or permanent) that is in effect at the Closing Date and that has the effect of making the transactions contemplated by this Agreement illegal or otherwise restraining or prohibiting the consummation of such transactions;

4.1.6the passing at a duly convened and held general meeting of GlaxoSmithKline’s Shareholders (as defined in the Implementation Agreement) of an ordinary resolution validly approving the sale and purchase under each of the Target Asset Agreements and any sale and purchase under the Put Option Agreement (as defined in the Implementation Agreement) in accordance with GlaxoSmithKline’s Articles of Association, the Listing Rules (as defined in the Implementation Agreement) and all other Applicable Law and regulation (such resolution being the “GlaxoSmithKline Shareholder Resolution” and such meeting being the “GlaxoSmithKline Shareholder Meeting”);

4.1.7Novartis not delivering, in accordance with Clause 3 of the Implementation Agreement, a Novartis Board Certificate (as defined in the Implementation Agreement) prior to the conclusion of the vote on the GlaxoSmithKline Shareholder Resolution at the GlaxoSmithKline Shareholder Meeting; and

4.1.8each of the other Target Asset Agreements having become unconditional in accordance with its terms (save for any condition in those agreements relating to this Agreement or the other of those agreements having become unconditional).

4.2Responsibility for Satisfaction

4.2.1The Sellers shall prepare and file the notifications necessary for the fulfilment of the conditions in Clauses 4.1.1 to 4.1.3 (the “Required Notifications”) as soon as reasonably practicable (with notifications under the HSR Act to be filed by 29 May 2014). Notwithstanding anything to the contrary contained in this Agreement, GlaxoSmithKline shall have primary responsibility for obtaining all consents, approvals or actions of any Governmental Entity which are required in connection with the Required Notifications (with the exception of the Minority Notifications addressed in Clause 4.2.10, for which Novartis shall have such responsibility).

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4.2.2GlaxoSmithKline shall be responsible for payment of all filing and other fees and expenses in connection with the Required Notifications and the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3, (with the exception of the Minority Notifications addressed in Clause 4.2.10, for which Novartis shall have such responsibility).

4.2.3CFIUS:

(i)The Sellers and the Purchaser shall consult, cooperate and keep each other reasonably informed regarding communications with, and requests for additional information from, CFIUS with respect to the Transaction. The Sellers and the Purchaser shall use their respective reasonable best efforts to provide promptly all information that is pursuant to a request by CFIUS.

(ii)Within 30 calendar days after the execution of this Agreement, any party wishing to submit a formal joint voluntary notice to CFIUS pursuant to 31 C.F.R. Section 800.401, et. seq. (“CFIUS Filing”) shall provide the other parties with written notice of its intent to make a CFIUS Filing (“Election Date”). Prior to making its election to submit a CFIUS Filing, the party wishing to make a CFIUS Filing shall consult in good faith with senior executives of the other parties. If neither of the Sellers nor the Purchaser provide notice to submit a formal joint voluntary notice to CFIUS, a CFIUS Filing will not be made unless requested by CFIUS.

(iii)If any one or more of the parties elects to make a CFIUS Filing following the procedures and consultations in Clause 4.2.3(ii) or if CFIUS requires a filing, then:

(a)the Sellers and the Purchaser shall use their respective reasonable best efforts to submit a draft CFIUS Filing no later than 15 Business Days following the Election Date, and a final CFIUS Filing the earlier of (1) five Business Days after submitting the draft CFIUS filing or (2) five calendar days after the receipt of any comments from CFIUS staff regarding the draft CFIUS Filing;

(b)the Sellers and the Purchaser will provide each other with the reasonable opportunity to review and comment on any information provided to CFIUS to the extent permitted by Applicable Law, with the exception of personal identifier information required under Section 800.402(c)(6)(vi)(B) of the CFIUS regulations, 31 C.F.R. competitively sensitive information, or information not related to the transactions contemplated by this Agreement, may be restricted to each party’s external counsel to the extent reasonably considered necessary or advisable by the providing party;

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(c)the Sellers and the Purchaser shall each have an opportunity to approve and mutually agree on the joint contents of the CFIUS Filing and shall be jointly responsible for the accuracy of such contents.  The Sellers and the Purchaser respectively, shall each be responsible for the accuracy of contents of the CFIUS Filing that exclusively relate to itself, its business, and any subsidiaries, parents or other related parties; and

(d)the Sellers and the Purchaser shall use their respective reasonable best efforts to obtain CFIUS Approval as promptly as practicable and shall consult with each other on strategic matters related to obtaining such CFIUS Approval, provided that the Purchaser shall have no obligation to agree to any mitigation or other restrictive provision that could reasonably be considered to have a substantial impact on either of the Contributed Business or the Purchaser.

4.2.4Notwithstanding any other provision of this Agreement to the contrary, GlaxoSmithKline shall and, shall cause its subsidiaries and affiliates to:

(i)propose, negotiate, offer to commit and effect (and if such offer is accepted, commit to and effect), by consent decree, undertaking, hold separate order, or otherwise, the sale, divestiture, licence or disposition of such combination of assets or businesses of: (i) the GlaxoSmithKline Target Group; (ii) GlaxoSmithKline’s other assets, businesses, subsidiaries or affiliates; and (ii) the Novartis Target Group; and/or

(ii)otherwise offer to take or offer to commit to take any action (including any action that limits its freedom of action, ownership or control with respect to, or its ability to retain or hold, any of the businesses, assets, product lines, properties or services of: the GlaxoSmithKline Target Group; GlaxoSmithKline’s other assets, businesses, subsidiaries or affiliates; or the Novartis Target Group) and, if the offer is accepted, take or commit to take such action; and/or

(iii)use its best efforts to defend through litigation on the merits any claim asserted in court by any party in order to avoid entry of, or to have vacated or terminated, any decree, order or Judgment (whether temporary, preliminary or permanent) that would restrain, prevent, or delay the Closing,

in each case, as may be required or desirable in order to procure the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3 as soon as reasonably possible (and, in any event, not later than the Longstop Date) or to avoid the commencement of any Action or the issuing of any Decision to prohibit the Transaction, or if such Action is already commenced, to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any Action so as to enable the Closing to occur as soon as reasonably possible (and, in any event, not later than the Longstop Date).

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4.2.5GlaxoSmithKline, after reasonably and in good faith consulting with Novartis and considering Novartis’s views, shall make all decisions, lead all discussions, negotiations and other proceedings, and coordinate all activities and any requests that may be made by, or any actions, consents, undertakings, approvals, waivers or authorizations that may be sought by or from, any Governmental Entity, including determining the strategy and manner in which to contest or otherwise respond, by litigation or otherwise, to objections to, or proceedings or other actions challenging, the consummation of the Transaction.

4.2.6At GlaxoSmithKline’s request, Novartis shall, and shall cause the Novartis Target Group to take all reasonable actions GlaxoSmithKline deems prudent in order to reasonably assist GlaxoSmithKline in obtaining any actions, consents, undertakings, approvals, waivers or authorizations by or from any Governmental Entity for or in connection with consummating the Transaction including, inter alia:

(i)providing to GlaxoSmithKline such information with respect to the Novartis Target Group as GlaxoSmithKline may reasonably require in connection with satisfaction of its obligations under this Clause;

(ii)effecting the sale, divestiture, licence or disposition of such assets or businesses of the Novartis Target Group or any of its subsidiaries or affiliates as may be reasonably necessary to consummate the Transaction;

(iii)reasonably assisting GlaxoSmithKline in litigating or otherwise contesting any objections to or proceedings or other actions challenging, the consummation of the Transaction; and/or

(iv)assisting to ensure that any proposal or offer made (or intended to be made) by GlaxoSmithKline to a Governmental Entity pursuant to Clause 4.2.4 can also be proposed or offered to a Governmental Entity which examines the transaction pursuant to a Minority Notification.

4.2.7GlaxoSmithKline will, to the extent practicable and subject to Applicable Law: (i) consult with Novartis in advance of participating in any substantive meeting or discussion with any Governmental Entity with respect to any filings, investigation or inquiry concerning the Transaction and, to the extent permitted by such Governmental Entity, give Novartis the opportunity to attend and participate in any such meeting or discussion; (ii) discuss with and permit Novartis to review in advance, and consider in good faith Novartis’s reasonable comments in connection with, any proposed filing or communication to any Governmental Entity concerning the Transaction, or relating to any investigation, inquiry or other proceeding in connection with the Transaction; and (iii) furnish Novartis with copies of all written correspondence and communications between GlaxoSmithKline and its Affiliates and their respective representatives on the one hand, and

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any Governmental Entity or members of their respective staffs on the other hand, with respect to the Transaction.

4.2.8Novartis shall not participate in or permit any of its representatives to participate in any meeting with any Governmental Entity in respect of any filings, investigation, proceeding or other matters relating to the Transaction unless Novartis consults with GlaxoSmithKline in advance and, to the extent permitted by such Governmental Entity, gives GlaxoSmithKline the opportunity to attend and lead the discussions at such meeting.

4.2.9Novartis shall (i) discuss with and permit GlaxoSmithKline to review in advance, and consider in good faith GlaxoSmithKline’s reasonable comments in connection with, any proposed filing or communication to any Governmental Entity concerning the Transaction, or relating to any investigation, inquiry or other proceeding in connection with the Transaction; and (ii) furnish GlaxoSmithKline with copies of all written correspondence and communications between Novartis and its Affiliates and their respective representatives on the one hand, and any Governmental Entity or members of their respective staffs on the other hand, with respect to the Transaction.

4.2.10In respect of any filings or notifications to Governmental Entities that are related solely to Novartis’s non-controlling minority stake in the Purchaser (the “Minority Notifications”), Novartis shall be responsible for all filing fees and other fees and expenses and responsible for obtaining any necessary clearances, approvals, waivers, no action letters, consents or waiting period expirations.

4.2.11Clauses 4.2.5 to 4.2.10 (inclusive) shall not apply in respect of dealings with any Tax Authority in connection with any Tax matter.

4.2.12The party responsible for satisfaction of each condition pursuant to this Clause 4.2 shall give notice to the other parties of the satisfaction of the relevant condition within one Business Day of becoming aware of the same.

4.2.13The Sellers shall cooperate to confirm, within 15 Business Days from signing of this Agreement, any additional merger notification requirements reasonably required or advisable in respect of the Transaction in jurisdictions beyond those listed in Schedule 20, and shall cooperate with each other, in accordance with the other provisions of this Clause 4, in achieving any additional clearances, approvals, waivers, no action letters, consents or waiting period expirations in such jurisdictions.  For the avoidance of doubt, Closing shall not be conditional upon such additional clearances, approvals and consents or waiting period expirations.

4.2.14The Sellers shall cooperate, in accordance with the other provisions of this Clause 4, and use reasonable endeavours to ensure that no Governmental Entity shall enact, issue, promulgate, enforce or enter any Applicable Law

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or Judgment as contemplated under Clause 4.1.5.  In the event that any Governmental Entity enacts, issues, promulgates, enforces or enters any Applicable Law or Judgment as contemplated under Clause 4.1.5, the parties shall cooperate and use reasonable endeavours to put in place arrangements that would allow the Transaction to complete to the greatest possible extent in compliance with the relevant Applicable Law or Judgment.

4.3Non-Satisfaction by the Long Stop Date

If the conditions in Clause 4.1 are not satisfied as of 22 October 2015 (the “Long Stop Date”), any party may, in its sole discretion, terminate this Agreement (other than Clauses 1, 12 and 15.1  to 15.17) and no party shall have any claim against any other under it, save for any claim arising from breach of any obligation contained in such Clauses or Clause 4.2.  Neither of the Sellers nor the Purchaser may terminate this Agreement after satisfaction of the conditions in Clause 4.1, except in accordance with this Agreement.

4.4Termination

4.4.1This Agreement may be terminated at any time prior to Closing:

(i)by written consent of the parties;

(ii)by any of the parties by notice to the other parties in the event that any Judgment restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement shall have become final and non-appealable, provided that the party seeking to terminate this Agreement pursuant to this Clause 4.4 has complied with the terms of the Implementation Agreement and this Agreement in connection with having such Judgment vacated or denied; or

(iii)by the Purchaser by notice to the Sellers if:

(a)a Material Adverse Effect occurs in relation to any Seller prior to Closing (which shall include any breach or breaches of Clause 9.1 which alone or together constitute a Material Adverse Effect); or

(b)any Seller fails to provide a Certificate immediately prior to Closing; or

(iv)in accordance with the terms of the Implementation Agreement.

4.4.2This Agreement shall terminate automatically at any time prior to Closing if:

(i)any other Target Asset Agreement terminates or is terminated in accordance with its terms; or

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(ii)the GSK Break Fee or the Novartis Break Fee (each as defined in the Implementation Agreement) becomes payable in accordance with clause 5.1 or clause 5.8, respectively, of the Implementation Agreement.

4.4.3Save as provided in this Clause 4, no party shall be entitled to terminate or rescind this Agreement, whether before or after Closing. If this Agreement is terminated pursuant to this Clause 4.4, this Agreement shall be of no further force and effect and there shall be no further liability under this Agreement or any of the Ancillary Agreements on the part of any party, except that Clauses 1, 12 and 15.1  to 15.17, in each case, to the extent applicable, shall survive any termination.

4.4.4Nothing in this Clause 4.4 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement prior to termination of this Agreement.

5.PRE-CLOSING

5.1The Sellers’ Obligations in Relation to the Conduct of Business

5.1.1Each Seller undertakes to procure that between the date of this Agreement and Closing, it and the relevant members of that Seller’s Group shall, so far as permitted by Applicable Law, carry on its Contributed Business as a going concern in the ordinary course as carried on immediately prior to the date of this Agreement save in so far as agreed in writing by the other Seller (such consent not to be unreasonably withheld or delayed).

5.1.2Without prejudice to the generality of Clause 5.1.1 and subject to Clause 5.2, each Seller undertakes to procure that, with respect to its Contributed Business, between the date of this Agreement and Closing, no member of that Seller’s Group shall, except as may be required to comply with this Agreement, without the prior written consent of the other Seller (such consent not to be unreasonably withheld or delayed) take any of the actions listed in Part 1 of Schedule 15.

5.1.3Without prejudice to the generality of Clause 5.1.1, each Seller shall, in each case with respect to its Contributed Business only: (i) undertake to procure the satisfaction of its obligations listed in paragraph 1, Part 2 of Schedule 15; and (ii) procure that that Seller’s Group shall, between the date of this Agreement and Closing, comply with the requirements of paragraph 2, Part 2 of Schedule 15.

5.2Exceptions to Sellers’ Obligations in Relation to the Conduct of Business

Clause 5.1 shall not operate so as to prevent or restrict:

5.2.1the disposal or transfer by one or more members of Novartis’s Group of any or all or part of the Novartis US NRT Business in accordance with Schedule 6;

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5.2.2any US RX Product Disposal in accordance with Schedule 6;

5.2.3the entry by Novartis or its Target Group Companies into any arm’s length transitional arrangements, contracts or agreements (including any transitional services agreement, manufacturing and supply agreement, distribution or other similar agreement) in relation to the disposal to a third party purchaser of any of its Seller’s Retained Business (including its Novartis Animal Health Business, and/or any of the Novartis US RX Products) with such a purchaser, any other member of the Seller’s Group that owns, or any successor in title to, any part of the Seller’s Retained Business being disposed of, provided that:

(i)prior to entering into any such transitional arrangements, contracts or agreements, Novartis shall: (a) provide GlaxoSmithKline with a copy of the substantially final draft of the written agreement(s) in relation to the same; (b) give GlaxoSmithKline a reasonable period of time to review the terms of such arrangements, contracts or agreements and provide any comments thereon; and (c) take into account (acting reasonably and in good faith) any reasonable (in the context of, to the extent applicable, the terms of the term sheet agreed between Novartis and the purchaser of the Novartis Animal Health Business upon entry into the sale agreement in respect of the Novartis Animal Health Business (the “Animal Health Term Sheet”) and the services to be provided thereunder) comments of GlaxoSmithKline in relation to such transitional arrangements, contracts or agreements provided within that period of time;

(ii)without prejudice to the above and other than in relation to any manufacturing and supply agreement or any arrangements to which Clause 5.2.3(iii) below applies, any such transitional arrangement, contract or agreement terminates or is terminable by the relevant Target Group Company or the Business Seller (as the case may be) without any costs, losses, liabilities, expenses or penalties being incurred or payable within a period of 12 months following closing of the relevant transaction; and

(iii)the transitional services to be provided to the Novartis Animal Health Business pursuant to the terms of the Animal Health Term Sheet shall not be required to be provided by the relevant Target Group Company or the Business Seller (as the case may be) for any longer term than the relevant service period as set out in the Animal Health Term Sheet and, in any event, not more than 24 months following the closing of the sale and purchase of the Novartis Animal Health Business (subject to any extension that may be agreed by the relevant member of the Purchaser’s Group and the counterparty thereto);

5.2.4the disposal or transfer by a Seller of any Seller’s Retained Business;

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5.2.5any matter undertaken by any member of the relevant Seller’s Group to facilitate or implement a Reorganisation in accordance with Clause 2.3.5;

5.2.6any action to the extent it is required to be undertaken to comply with Applicable Law;

5.2.7any matter reasonably undertaken by any member of the relevant Seller’s Group in an emergency or disaster situation with the intention of minimising any adverse effect of such situation in relation to that Seller’s Group and where any delay arising by virtue of having to give notice to the other Seller and await consent would materially prejudice that Seller’s Group; or

5.2.8Third Party Indebtedness entered into by the relevant member of GlaxoSmithKline’s Group for the purpose of funding the acquisition by the relevant member of Purchaser’s Group of the Contributed Business in Indonesia,

provided that the relevant Seller shall, other than in respect of any action taken or proposed to be taken as described in Clause 5.2.5 (to which the provisions of Clause 2.3.5 and Schedule 17 (Reorganisations) shall apply), notify the other Seller as soon as reasonably practicable of any action taken or proposed to be taken as described in this Clause 5.2, shall provide to the other Seller all such information as the other Seller may reasonably request in respect of any such action and shall use reasonable endeavours to consult with the Purchaser in respect of any such action.

5.3The Sellers’ Obligations in relation to Cash, Intra-Group Payables and Receivables and Third Party Indebtedness

5.3.1Prior to Closing, each Seller shall seek to minimise the amounts which would, but for this Clause 5.3, otherwise fall to be treated as its:

(i)Intra-Group Non-Trade Payables;

(ii)Intra-Group Non-Trade Receivables;

(iii)Target Group Companies Cash Balances; and

(iv)Third Party Indebtedness,

in each case: (i) including any such items which arise in connection with any Reorganisation; and (ii) to the extent reasonably possible, taking into account the consequences of any such reduction for the Seller’s Group.  In addition, each Seller shall use reasonable endeavours to minimise any adjustment payable by it in accordance with Clause 7.3.7.

5.3.2Prior to Closing, GlaxoSmithKline shall use all reasonable endeavours to ensure that all of its existing Intra-Group Non-Trade Payables shall become owed by its Target Group Companies directly to JV Treasury Co (such that they shall not be Intra-Group Non-Trade Payables) and that, in respect of

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GlaxoSmithKline, the only Intra-Group Non-Trade Payable shall be the GSK JV Funding Loan.

5.4Other Sellers’ Obligations Prior to Closing

5.4.1Prior to Closing each Seller shall, and shall procure that its Target Group Companies and that Seller’s Affiliates shall, allow the other Seller and its respective agents, upon reasonable notice, reasonable access to, and to take copies of, the books, records and documents of or relating in whole or in part to its Target Group, provided that the obligations of each Seller under this Clause shall not extend to allowing access to information which is (i) reasonably regarded as confidential to the activities of that Seller and that Seller’s Group otherwise than in relation to its Target Group or (ii) commercially sensitive or other information of its Target Group if such information cannot be shared with the other Seller prior to Closing in compliance with Applicable Law (though the Seller sharing the books, records and/or documents shall seek to share such information with the other Seller to the extent and in such a manner as would comply with Applicable Law).

5.4.2The parties shall comply with their respective obligations under Schedule 6.

5.5Affiliate Contracts

Other than as provided in and without prejudice to the provisions of the Ancillary Agreements, each Seller and the Purchaser shall procure that:

5.5.1the Cash Pooling Arrangements excluding the GSK Finance Cash Balances; and

5.5.2each Affiliate Contract in force immediately prior to Closing,

shall terminate prior to Closing and each counterparty thereto shall, effective as of Closing, settle all outstanding financial obligations arising out of any such Affiliate Contract and unconditionally release and irrevocably discharge each other party thereto from (i) any and all further obligations to perform or any further performance of the various covenants, undertakings, warranties and other obligations contained in such Affiliate Contract and (ii) any and all claims and Liabilities whatsoever arising out of, in any way connected with, as a result of or in respect of such Affiliate Contract.

5.6Tax Groups

5.6.1Each Seller shall take all reasonable steps to procure that any Tax Group existing between any member of that Seller’s Group and any GlaxoSmithKline Consumer Group Company or the Novartis OTC Group Company (as the case may be) is terminated on or before Closing, so far as permitted by Applicable Law, or otherwise on the earliest date on which such termination is permitted under Applicable Law, and that Seller and the

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Purchaser shall take such action as is necessary to procure or effect this, including timely submitting any necessary Tax documents.

5.6.2Pending the taking effect of the action referred to in Clause 5.6.1, and for so long thereafter as may be necessary, the Purchaser shall (subject to the provisions of the Tax Indemnity) procure that such information is provided to each Seller as may reasonably be required to enable any relevant member of that Seller’s Group to make all Tax Returns and other filings required of it in respect of the Tax Group.

5.6.3Each Seller shall take, and shall procure that each member of that Seller’s Group takes, all reasonable procedural or administrative steps (including the making of elections and filings with any relevant Tax Authority) which are reasonably necessary to procure the minimisation of the extent to which Tax liabilities of members of that Seller’s Group (other than the GlaxoSmithKline Consumer Group Companies or Novartis OTC Group Companies (as the case may be)) can be assessed on the Purchaser or members of the Purchaser’s Group or on the relevant Target Group Companies by reason of having been members of a Tax Group.

5.7US tax classification

Between the date of this Agreement and Closing, the Purchaser shall not file any election to be treated as a partnership or disregarded entity for US federal income tax purposes.

5.8Insurance

Without prejudice to the generality of this Clause 5, between the date of this Agreement and Closing or, in the case of Delayed Target Group Companies, Delayed Closing, each Seller shall and shall procure that the relevant member of that Seller’s Group shall maintain in force all its Target Group Insurance Policies and all Seller’s Group Insurance Policies for the benefit of its Target Group.

6.CLOSING

6.1Date and Place

Save where otherwise provided in this Agreement (including in Parts 7 to 14 (inclusive) of Schedule 6 (Shared Business Contracts, Transferred Contracts and Certain Other Businesses), Schedule 22 (Delayed Businesses) and Clause 2.6 (Alliance Market Businesses)), Closing shall take place simultaneously with closing under the other Target Asset Agreements at the offices of Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London, EC4Y 1HS (other than in respect of any Local Transfer Documents agreed between the parties to be executed in another jurisdiction) on the last Business Day of the month in which fulfilment of the condition(s) set out in Clause 4.1 takes place, except that:

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6.1.1where the last day of such month is not a Business Day, the Closing shall instead take place on the first Business Day of the following month; and

6.1.2where less than five Business Days remain between such fulfilment and the last Business Day of the month, Closing shall take place:

(i)on the last Business Day of the following month;

(ii)where the last day of such month is not a Business Day, the Closing shall instead take place on the first Business Day of the month following the month referred to in Clause 6.1.2(i); or

(iii)at such other location, time or date as may be agreed between the Sellers,

provided that:

(a)Closing shall not take place and shall not be effective in any circumstances unless closing also takes place simultaneously under and in accordance with the terms of the other Target Asset Agreements; and

(b)in determining the date on which the last of the conditions set out in Clause 4.1 is fulfilled or waived, the date shall be the date on which the last of the conditions set out in Clauses 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.6, 4.1.7, and 4.1.8 is fulfilled or waived unless the condition set out in Clauses 4.1.5 is not fulfilled or waived on that date, in which case the date shall then be the first following date on which the condition set out in Clauses 4.1.5 is fulfilled or waived.

6.2Closing Events

6.2.1On Closing, the parties shall comply with their respective obligations specified in Schedule 11. GlaxoSmithKline may waive some or all of the obligations of Novartis and/or of the Purchaser insofar as they relate to GlaxoSmithKline or its Affiliates as set out in Schedule 11 and Novartis may waive some or all of the obligations of GlaxoSmithKline and/or the Purchaser insofar as they relate to Novartis or its Affiliates as set out in Schedule 11.

6.2.2The parties acknowledge that the transfer of Product Approvals and Product Applications in respect of Target Group Businesses to the Purchaser or other members of the Purchaser’s Group may be subject to the approval of applicable Governmental Entities, and that, notwithstanding anything in this Agreement to the contrary, each Product Approval and Product Application in respect of a Target Group Business shall continue to be held by the relevant member of the relevant Seller’s Group from the Closing Date until the relevant PA Transfer Date.

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6.2.3The parties shall perform their respective obligations with respect to:

(i)the transfer of the Product Approvals, Product Applications and Pipeline Product Approvals as set out in Schedule 4;

(ii)the transfer of Contracts (other than Product Approvals, Product Applications and Pipeline Product Approvals) and the Transferred Intellectual Property Contracts as set out in Schedule 6;

(iii)to the extent the Purchaser has elected to have the Relevant Part of a Shared Business Contract transferred to it, the separation and treatment of each Shared Business Contract as set out in Schedule 6;

(iv)the Chinese JV Interests and the Chinese JV Contracts, the Novartis US NRT Business as set out in Schedule 6;

(v)Novartis Consumer Health-Gebro GmbH, if Novartis does not hold its Shares in Novartis Consumer Health-Gebro GmbH through a Novartis Group Company at Closing, as set out in Schedule 6;

(vi)Delayed Businesses as set out in Schedule 22 (Delayed Businesses);

(vii)Alliance Market Businesses as set out in 2.6 (Alliance Market Businesses).

6.3Payment on Closing

6.3.1On Closing the Purchaser shall pay (for itself and on behalf of each relevant member of the Purchaser’s Group) to a Seller (if such amount is positive) or that Seller (for itself and on behalf of each other relevant member of that Seller’s Group) shall pay to the Purchaser (if such amount is negative), in each case, in accordance with Clause 15.7, an amount in cleared funds, to that Seller or the Purchaser (as the case may be) to that Seller’s Bank Account or the Purchaser’s Bank Account (as the case may be), which is equal to the sum of the following, in respect of that Seller:

(i)the Estimated Target Group Companies’ Cash Balances and the Estimated Intra-Group Non-Trade Receivables;

minus

(ii)the Estimated Third Party Indebtedness;

minus

(iii)the Estimated Intra-Group Non-Trade Payables;

minus

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(iv)any Estimated Employee Benefit Adjustment;

minus

(v)the Estimated Tax Adjustment; and

plus (if it is zero or a positive amount) or minus (if it is a negative amount)

(vi)the Estimated Working Capital Adjustment.

6.3.2The amounts payable in accordance with Clause 6.3.1 shall, in each case, include all such amounts payable in respect of the Delayed Businesses and the Alliance Market Businesses.

6.3.3On Closing each Seller shall pay to the Purchaser an amount equal to its Cash Portion in cleared funds to the Purchaser’s Bank Account.  In the event that the amount set out in Clause 6.3.1 is a positive amount in respect of any Seller, that Seller and the Purchaser may (but shall not be obliged to) agree to net off any or all of the amount owed by the Purchaser to that Seller under Clause 6.3.1 against any or all of the Cash Portion owned by that Seller to the Purchaser under this Clause 6.3.2. The parties’ current intention is that the Cash Portion will be used to fund the short-term working capital requirements of the Purchaser’s Group.

6.4Notifications to determine payments on Closing

6.4.1Five Business Days prior to Closing, each Seller shall notify the Purchaser of:

(i)the Estimated Target Group Companies’ Cash Balances;

(ii)the Estimated Third Party Indebtedness;

(iii)the Estimated Intra-Group Non-Trade Receivables;

(iv)the Estimated Intra-Group Non-Trade Payables;

(v)any Estimated Employee Benefit Adjustment;

(vi)the Estimated Tax Adjustment;

(vii)the Estimated Working Capital;

(viii)the Estimated Working Capital Adjustment; and

(ix)the Estimated Intra-Group Trading Balances,

and shall at the same time provide to the Purchaser reasonable supporting calculations and information to enable the Purchaser to review the basis on

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which the estimates have been prepared.  Each Seller shall also provide the Purchaser with reasonable details (including the relevant debtor and creditor) in relation to the Intra-Group Trading Balances.

6.4.2Each Seller’s notification pursuant to Clause 6.4.1 shall specify the relevant debtor and creditor for each Estimated Intra-Group Non-Trade Payable, Estimated Intra-Group Non-Trade Receivable, Estimated Intra-Group Trade Payable, Estimated Intra-Group Trade Receivable, and Estimated Transferred Accounts Payable or Estimated Transferred Accounts Receivable included within the Estimated Intra-Group Trading Balances.

6.4.3Immediately following Closing:

(i)the Purchaser shall procure that each Target Group Company repays to the relevant member of each Seller’s Group the amount of any Estimated Intra-Group Non-Trade Payables and shall acknowledge on behalf of each Target Group Company the payment of the Estimated Intra-Group Non-Trade Receivables in accordance with Clause 6.4.3(ii); and

(ii)each Seller shall procure that each relevant member of that Seller’s Group repays to the relevant Target Group Company the amount of any relevant Estimated Intra-Group Non-Trade Receivables and shall acknowledge on behalf of each relevant member of that Seller’s Group the payment of the relevant Estimated Intra-Group Non-Trade Payables in accordance with Clause 6.4.3(i).

6.4.4The repayments made pursuant to Clause 6.4.3 shall be adjusted in accordance with Clauses 7.3 and 7.4 when the Closing Statement becomes final and binding in accordance with Clause 7.2.1.

6.5Local Payments

Local payments to be funded on Closing

6.5.1On or before Closing each Seller shall contribute to the Purchaser the aggregate of the amounts set out against its name in column 4 of the table in Part A of Schedule 24 (each a “Local Payment Amount”) in cleared funds to the Purchaser’s Bank Account in exchange for the allotment and issue to the relevant Seller of A Shares or B Shares, as applicable.

6.5.2The Purchaser shall procure that each member of the Purchaser’s Group (or, in the case of Novartis Alliance Market Businesses, the Purchaser and GlaxoSmithKline shall procure that the relevant member of GlaxoSmithKline’s Group) set out in column 2 of the table in Part A of Schedule 24 shall pay to the relevant member of the relevant Seller’s Group set out in column 3 an amount equal to the relevant Local Payment

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Amount converted into the relevant local currency set out in the relevant Local Transfer Document as at the Closing Date, on:

(i)the date falling 7 days after the Closing Date; or

(ii)if this is not possible, the date falling 14 days after the Closing Date; or

(iii)if this is not possible, the date falling 21 days after the Closing Date, or

(iv)if this is not possible, the date falling 28 days after the Closing Date, or

provided that, in any event, all such payments shall be made by no later than the date falling 28 days (or, in the case of the local payments in respect of South Africa, 42 days) after the Closing Date.

Local payments to be funded post-Closing

6.5.3In respect of each Delayed Business, within 20 Business Days of satisfaction of the relevant Delay Milestone (or on such other date as the Sellers may agree), the relevant Seller shall pay to the Purchaser the amounts set out in column 4 of the table in Part B of Schedule 24 in respect of that Delayed Business (or such alternative amount as may be agreed between the parties) or, where no amount is set out in column 4 of the table in Part B of Schedule 24, such amount as may be agreed between the parties on a basis consistent with the calculation of equivalent amounts (each a “Delayed Local Payment Amount”).

6.5.4The Purchaser shall procure that each member of the Purchaser’s Group set out in column 3 of the table in Part B of Schedule 24 shall pay to the relevant member of the relevant Seller’s Group set out in column 2 an amount equal to the relevant Delayed Local Payment Amount converted into the relevant currency as set out in the relevant Local Transfer Document at the date on which the Seller pays the Purchaser the relevant Delayed Local Payment Amount pursuant to paragraph 6.5.3 above (the “Delayed Payment Date”), as soon as reasonably practicable following the Delayed Payment Date and, in any event, within 10 Business Days following the Delayed Payment Date, in accordance with the terms of the relevant Local Transfer Document.

Australia

6.5.5The Purchaser shall procure that in accordance with the terms of the Local Transfer Document entered into between GlaxoSmithKline Australia Pty Ltd. (the “Australian Seller”) and GSK Cx Healthcare Pty Ltd (the “Australian Purchaser”) (the “Australia LTA”), as soon as reasonably practicable after the date on which the Deferred Sale (as defined in the Australian LTA) completes and, in any event, within 28 days, the Australian Purchaser shall pay the Deferred Transferring Assets Consideration (as

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defined in the Australian LTA) to the Australian Seller (the “Australian Delayed Payment”).

6.5.6As soon as reasonably practicable after receipt by the Australian Seller of the Australian Delayed Payment, the Seller shall pay to the Purchaser an amount equal to the amount of the Australian Delayed Payment, converted into US Dollars calculated on the basis of the Euro foreign exchange reference rate for (i) a transaction between Australian Dollars and Euros; and (ii) between Euros and Pounds Sterling, in each case quoted by the European Central Bank on the date on which the Australian Purchaser pays the Australian Seller the Australian Delayed Payment.

Panama

6.5.1The Purchaser shall procure that in accordance with the terms of the Local Transfer Document entered into between Novartis Pharma (Logistics), Inc. (the “Panama Seller”) and GlaxoSmithKline Panama S.A. (the “Panama Purchaser”) (the “Panama LTA”), as soon as reasonably practicable after Closing and, in any event, within 28 days, the Panama Purchaser shall pay to the Panama Seller [***].

6.5.2As soon as reasonably practicable after receipt by the Panama Seller of the Panama Local Payment, the Seller shall pay to the Purchaser [***].

China

6.5.3As soon as reasonably practicable following Closing, the parties shall (acting reasonably) agree the structure and funding requirements for the local payment in respect of the Delayed Businesses in China, taking into account the Tax implications of such funding, which shall, as far as reasonably practicable, be consistent with the provisions of the rest of this Clause 6.5, including that the Delayed Local Payment Amount shall be converted into local currency on the Delayed Local Payment Date.

6.5.4Clause 3.4 shall apply to payments under this Clause 6.5 as if such payments were made or procured in respect of an indemnity under this Agreement.

JV Treasury Co

6.5.5GlaxoSmithKline warrants to the Purchaser, as at the Closing Date, that JV Treasury Co is a member of the Purchaser’s Group.

6.6Breach of Closing Obligations

Subject to Clause 6.2.1, if any party fails to comply with any material obligation in Clauses 6.2, 6.3 and 6.4, and Schedule 11 in relation to Closing, GlaxoSmithKline, in the case of non-compliance by Novartis, or Novartis, in the case of non-compliance by GlaxoSmithKline or the Purchaser, shall be entitled (in addition to and without prejudice

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to all other rights or remedies available) by written notice to Novartis or GlaxoSmithKline (as the case may be) to fix a new date for Closing (which, except as agreed by the parties, shall be the last day of the month next ending or, if that day is not a Business Day, the first Business Day falling after that day) in which case the provisions of Schedule 11 shall apply to Closing as so deferred, but provided such deferral may only occur once.  In all circumstances Closing shall only occur simultaneously with closing under the other Target Asset Agreements.

7.POST-CLOSING ADJUSTMENTS

7.1Closing Statements

7.1.1Each Seller shall procure that as soon as practicable following Closing there shall be drawn up a draft of its Closing Statement (the “Draft Closing Statement”) in accordance with Schedule 12 in relation to its Target Group, on a combined basis.

7.1.2The Closing Statements shall be drawn up as at the Effective Time and shall in each case include the Delayed Businesses and the Alliance Market Businesses which, for the purposes of this Clause 7 shall be deemed to have transferred to the Purchaser with effect from the Effective Time.

7.2Determination of Closing Statement

7.2.1Any Draft Closing Statement as agreed or determined pursuant to paragraph 1 of Part 1 of Schedule 12:

(i)shall constitute the Closing Statement as between the relevant Seller and the Purchaser for the purposes of this Agreement; and

(ii)shall be final and binding on that Seller and the Purchaser.

7.2.2The Working Capital, the Target Group Companies’ Cash Balances, the Third Party Indebtedness, the Intra-Group Non-Trade Receivables, the Intra-Group Non-Trade Payables, the Employee Benefit Adjustment and the Tax Adjustment in respect of a Seller shall each be derived from its Closing Statement.

7.3Adjustments to Consideration

7.3.1Target Group Companies’ Cash Balances:

(i)in respect of each Seller, if the Target Group Companies’ Cash Balances are less than the Estimated Target Group Companies’ Cash Balances, that Seller shall repay to the Purchaser an amount equal to the deficiency; or

(ii)in respect of each Seller, if the Target Group Companies’ Cash Balances are greater than the Estimated Target Group Companies’

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Cash Balances, the Purchaser shall pay to that Seller an additional amount equal to the excess.

7.3.2Intra-Group Non-Trade Receivables:

(i)in respect of each Seller, if the Intra-Group Non-Trade Receivables are less than the Estimated Intra-Group Non-Trade Receivables, that Seller shall repay to the Purchaser an amount equal to the deficiency; or

(ii)in respect of each Seller, if the Intra-Group Non-Trade Receivables are greater than the Estimated Intra-Group Non-Trade Receivables, the Purchaser shall pay to that Seller an additional amount equal to the excess.

7.3.3Third Party Indebtedness:

(i)in respect of each Seller, if the Third Party Indebtedness is less than the Estimated Third Party Indebtedness, the Purchaser shall repay to that Seller an amount equal to the deficiency; or

(ii)in respect of each Seller, if the Third Party Indebtedness is greater than the Estimated Third Party Indebtedness, that Seller shall pay to the Purchaser an additional amount equal to the excess.

7.3.4Intra-Group Non-Trade Payables:

(i)in respect of each Seller, if the Intra-Group Non-Trade Payables are greater than the Estimated Intra-Group Non-Trade Payables, that Seller shall repay to the Purchaser an amount equal to the excess; or

(ii)in respect of each Seller, if the Intra-Group Non-Trade Payables are less than the Estimated Intra-Group Non-Trade Payables, the Purchaser shall pay to that Seller an additional amount equal to the deficiency.

7.3.5Tax Adjustment

(i)in respect of each Seller, if the Tax Adjustment is greater than the Estimated Tax Adjustment, that Seller shall repay to the Purchaser an amount equal to the difference; or

(ii)in respect of each Seller, if the Tax Adjustment is less than the Estimated Tax Adjustment, the Purchaser shall pay to that Seller an additional amount equal to the difference.

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7.3.6Working Capital:

(i)in respect of each Seller, if the Working Capital Adjustment is less than the Estimated Working Capital Adjustment, that Seller shall repay to the Purchaser an amount equal to the deficiency; or

(ii)in respect of each Seller, if the Working Capital Adjustment exceeds the Estimated Working Capital Adjustment, the Purchaser shall pay to that Seller an additional amount equal to the excess.

7.3.7Intra-Group Trading Balances: in respect of each Seller, if the amount of that Seller’s Intra-Group Trading Balances is greater than US$20,000,000, that Seller shall pay to the Purchaser the amount of the excess.

7.4Adjustments to repayment of Intra-Group Non-Trade Payables and Intra-Group Non-Trade Receivables

Following the determination of any Closing Statement pursuant to Clause 7.2 and paragraph 1 of Part 1 of Schedule 12, if the amount of any Intra-Group Non-Trade Payable and/or any Intra-Group Non-Trade Receivable contained in that Closing Statement is greater or less than the amount of the corresponding Estimated Intra-Group Non-Trade Payable or Estimated Intra-Group Non-Trade Receivable, then the relevant Seller and the Purchaser shall procure that such adjustments to the repayments pursuant to Clause 6.4.3 are made as are necessary to ensure that (taking into account such adjustments) the actual amount of each Intra-Group Non-Trade Payable and each Intra-Group Non-Trade Receivable has been repaid by each Target Group Company to the relevant member of that Seller’s Group or by the relevant member of that Seller’s Group to the relevant Target Group Company, as the case may be.

7.5Interest

Any payment to be made in accordance with Clause 7.3 shall include interest thereon calculated from the Effective Time to the date of payment at a rate per annum of LIBOR.

7.6Payment

7.6.1Any payments pursuant to Clause 7.3 or 7.4, and any interest payable pursuant to Clause 7.5, shall be made on or before the Final Payment Date.

7.6.2Where any payment is required to be made pursuant to Clause 7.3 or Clause 7.5 (in relation to a payment pursuant to Clause 7.3) the payment made pursuant to clause 3.1.3 on account of the Purchase Consideration shall be reduced or increased accordingly.

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8.POST-CLOSING OBLIGATIONS

8.1Indemnities

8.1.1Indemnity by Purchaser against Assumed Liabilities

The Purchaser hereby undertakes to each Seller (for itself and on behalf of each other member of such Seller’s Group (excluding any Delayed Target Group Companies) and their respective directors, officers, employees and agents) that, with effect from Closing, the Purchaser will indemnify on demand and hold harmless each member of that Seller’s Group (excluding any Delayed Target Group Companies) and their respective directors, officers, employees and agents against and in respect of any and all Assumed Liabilities.

8.1.2Indemnity by Sellers

Subject to Clause 8.1.3, each Seller hereby undertakes to the Purchaser (for itself and on behalf of each other member of the Purchaser’s Group (including any Delayed Target Group Companies) and their respective directors, officers, employees and agents) that, with effect from Closing, such Seller will indemnify on demand and hold harmless each member of the Purchaser’s Group (including any Delayed Target Group Companies) and their respective directors, officers, employees and agents against and in respect of any and all:

(i)Excluded Liabilities; and

(ii)Liabilities, including legal fees, to the extent they have arisen or arise (whether before or after Closing) as a result of or otherwise relate to any act, omission, fact, matter, circumstance or event undertaken, occurring or in existence or arising before Closing so far as related to: (a) any anti-bribery warranty set out in this Agreement, including without limitation those set forth in paragraph 10 of Schedule 13, not being true and correct when made; (b) any governmental inquiries or investigations involving that Seller, its Affiliates or its Associated Persons; (c) save to the extent in existence as at the date of this Agreement, any limitation, restriction or other reduction in drug registrations, regulatory licenses, listings or market approvals, governmental pricing or reimbursement rates relating to any products of the relevant Seller’s Contributed Business and affecting their future profits as a result of any such limitation, restriction or reduction; or (d) any other claim, litigation, investigation or proceeding to the extent related to any of the foregoing (a) to (c), including but not limited to costs of investigation and defence and legal fees.

8.1.3Limitations on Indemnities

Subject to Clause 8.1.4, no Seller shall be liable under Clause 8.1.2 in respect of:

(i)any Time-Limited Excluded Liability unless a notice of a claim in respect of the matter giving rise to such Liability is given by the Purchaser to that Seller within ten years of Closing, provided that this Clause 8.1.3(i) shall not apply in respect of any claim by the Purchaser which relates to:

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(a)a Product Liability;

(b)a Governmental Liability;

(c)a Clinical Trials/Data Liability; or

(d)an Excluded Asset;

(ii)any claim if and to the extent that the relevant Liability is included in the Closing Statement; or

(iii)any individual claim (or a series of claims arising from similar or identical facts or circumstances) where the Liability (disregarding the provisions of this Clause 8.1.3(iii)) in respect of any such claim or series of claims does not exceed US$10 million, provided that, for the avoidance of doubt, where the Liability in respect of any such claim or series of claims exceeds US$10 million, the Liability of such Seller shall be for the whole amount of such claim(s) and not just the excess.

8.1.4Disapplication of limitations

(i)None of the limitations contained in Clause 8.1.3 shall apply to any claim to the extent that such claim arises or is increased as the consequence of, or which is delayed as a result of, fraud by any member of the relevant Seller’s Group or any director, officer or employee of any member of the relevant Seller’s Group.

(ii)The limitation contained in Clause 8.1.3(iii) shall not apply to any claim which relates to any Liabilities of GlaxoSmithKline Landholding Company, Inc. in relation to any premises used by the GlaxoSmithKline Pharmaceutical Division, including the sale of any such premises.

8.2Conduct of Claims

8.2.1Assumed Liabilities

(i)If the Seller becomes aware after Closing of any claim by a third party which constitutes or may constitute an Assumed Liability, the Seller shall as soon as reasonably practicable:

(a)give written notice thereof to the Purchaser and the other Seller setting out such information as is available to the Seller as is reasonably necessary to enable the Purchaser and the other Seller to assess the merits of the potential claim;

(b)take all appropriate actions to preserve evidence; and

(c)provide the Purchaser and the other Seller with periodic updates on the status of the claim upon request and shall not

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admit, compromise, settle, discharge or otherwise deal with such claim without the prior written agreement of the Purchaser and the other Seller (such agreement not to be unreasonably withheld or delayed).

(ii)Each Seller shall, and shall procure that each of its Share Sellers and Business Sellers shall, take such action as the Purchaser may reasonably request to avoid, dispute, resist, appeal, compromise, defend or mitigate any claim which constitutes or may constitute an Assumed Liability subject to that Seller and each of its Share Sellers and Business Sellers being indemnified and secured to their reasonable satisfaction by the Purchaser against all Liabilities which may thereby be incurred. In connection therewith, that Seller shall make or procure to be made available to the Purchaser or its duly authorised agents on reasonable notice during normal business hours all relevant books of account, records and correspondence relating to its Target Group Businesses which have been retained by that Seller’s Group (and shall permit the Purchaser to take copies thereof at its expense) for the purposes of enabling the Purchaser to ascertain or extract any information relevant to the claim.

8.2.2Liabilities Indemnified by a Seller

(i)If the Purchaser becomes aware after Closing of any claim by a third party which constitutes or may constitute an a Liability covered by Clause 8.1.2 or relates to a Liability or any investigations related thereto, regardless of whether the Purchaser believes that such claim would be made against a member of the Purchaser’s Group or a member of a Seller’s Group, the Purchaser shall as soon as reasonably practicable:

(a)give written notice thereof to the relevant Seller, setting out such information as is available to the Purchaser as is reasonably necessary to enable that Seller to assess the merits of the potential claim;

(b)take all appropriate actions to preserve evidence; and

(c)provide the relevant Seller with periodic updates on the status upon request and shall not admit, compromise, settle, discharge or otherwise deal with such claim without the prior written agreement of that Seller (such agreement not to be unreasonably withheld or delayed).

(ii)The Purchaser shall take such action as the relevant Seller may reasonably request to avoid, dispute, resist, appeal, compromise, defend or mitigate any claim which constitutes or may constitute a Liability covered by Clause 8.1.2 subject to the Purchaser being indemnified and secured to its reasonable satisfaction by the relevant

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Seller against all Liabilities which may thereby be incurred by it or any member of the Purchaser’s Group (including for this purpose any Delayed Target Group Companies).

(iii)In addition, where any such claim or investigation involves a Governmental Entity, the Purchaser shall, subject to Applicable Law, the requirements of any relevant Governmental Entity and the relevant Seller providing an appropriate confidentiality undertaking in favour of the Purchaser’s Group, provide to that Seller, at least five Business Days in advance (or, where not possible, as soon as reasonably possible), any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals they or their agents make or submit to a Governmental Entity. Without limiting the foregoing, the parties agree, subject to Applicable Law and the requirements of the relevant Governmental Entity and the Seller providing an appropriate confidentiality undertaking in favour of the Purchaser’s Group to:

(a)give that Seller reasonable advance notice of all meetings with any Governmental Entity;

(b)give that Seller an opportunity to participate in each of such meetings;

(c)to the extent practicable, give that Seller reasonable advance notice of all substantive oral communications with any Governmental Entity;

(d)if any Governmental Entity initiates a substantive oral communication, promptly notify that Seller of the substance of such communication;

(e)provide that Seller with a reasonable advance opportunity to review and comment upon all substantive written communications (including any substantive correspondence, analyses, presentations, memoranda, briefs, arguments, opinions and proposals) that the Purchaser or its agents intend to make or submit to a Governmental Entity in connection with such claim;

(f)provide that Seller with copies of all substantive written communications to or from any Governmental Entity; and

(g)not advance arguments with the Governmental Entity without prior agreement of that Seller that would reasonably be likely to have a significant adverse impact on the Seller,

provided however, that the Purchaser shall not be required to comply with paragraph (b) above to the extent that the Governmental Entity objects to the participation of a party, or with paragraph (e) or (f) above

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to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis).

(iv)Other than in respect of any claim to the extent it relates to an IP Liability, a Commercial Practices Liability, or a Governmental Liability (other than in respect of any Liability arising solely by virtue of a breach of Contract with any Governmental Entity which breach does not also constitute a breach of Applicable Law), the relevant Seller shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Purchaser, to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest any such claim (including making counterclaims or other claims against third parties) in the name of and on behalf of the Purchaser or other member of the Purchaser’s Group concerned and to have the conduct of any related proceedings, negotiations or appeals. In taking action on behalf of any member of the Purchaser’s Group as permitted by this Clause 8.2, the relevant Seller shall, in good faith, take into account and have due regard to any reputational matters or issues arising out of the claim for any member of the Purchaser’s Group or any of their respective directors, officers, employees or agents which are brought to its attention by the Purchaser or a member of the Purchaser’s Group.

(v)The Purchaser shall make or procure to be made available to the relevant Seller or its duly authorised agents on reasonable notice during normal business hours full and free access to all relevant books of account, records and correspondence relating to its Target Group which are in the possession or control of the Purchaser or any member of the Purchaser’s Group (and shall permit the relevant Seller to take copies thereof) for the purposes of enabling that Seller to ascertain or extract any information relevant to the claim.

(vi)The Purchaser shall, and shall procure that each other member of the Purchaser’s Group shall, on reasonable notice from the relevant Seller, give such assistance to that Seller as it may reasonably require in relation to the claim including providing the relevant Seller or any member of that Seller’s Group and its representative and advisers with access to and assistance from directors, officers, managers, employees, advisers, agents or consultants of the Purchaser and/or of each other member of the Purchaser’s Group (including, to the extent it has the power to do so, any Delayed Target Group Company) (collectively, the “Relevant Persons”) and the Purchaser will use its reasonable endeavours to procure that such Relevant Persons comply with any reasonable requests from that Seller and generally co-operate with and assist that Seller and other members of that Seller’s Group.

(vii)When seeking assistance under Clauses 8.2.2(v) and 8.2.2(vi), the relevant Seller, or any other relevant member of that Seller’s Group, shall use reasonable endeavours to minimise interference with the Purchaser and the Purchaser’s Group’s conduct of the relevant

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business or the performance by the Relevant Persons of their employment duties.

8.3Release of Guarantees

8.3.1The Purchaser shall use reasonable endeavours to procure as soon as reasonably practicable after Closing, the release of each Seller or any member of that Seller’s Group from any securities, guarantees or indemnities given by or binding upon that Seller or any member of that Seller’s Group in respect of any Assumed Liabilities or in connection with a liability of any of the relevant Target Group Companies (other than an Excluded Liability). Pending such release, the Purchaser shall indemnify that Seller and any member of that Seller’s Group against all amounts paid by any of them (acting reasonably) pursuant to any such securities, guarantees or indemnities in respect of such Assumed Liabilities or such liability of the relevant Target Group Companies (other than an Excluded Liability).

8.3.2Each Seller shall use reasonable endeavours to procure by Closing or, to the extent not done by Closing, as soon as reasonably practicable thereafter, the release of its Target Group Companies from any securities, guarantees or indemnities given by or binding upon those Target Group Companies in respect of any liability of that Seller or any member of that Seller’s Group (other than those Target Group Companies).  Pending such release, that Seller shall pay to the Purchaser an amount equal to the sum that would have been payable to the Target Group Companies had that Seller indemnified the relevant Target Group Companies against all amounts paid by any of them (acting reasonably) pursuant to any such securities, guarantees or indemnities in respect of such liability of that Seller which arises after Closing.

8.4Transferred Accounts Payable

If at any time after Closing, a Seller or any of its Affiliates (but, in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date) pays any monies in respect of any Transferred Accounts Payable, then the Purchaser shall pay or procure payment to that Seller (for the relevant Business Seller), as soon as reasonably practicable the amount paid, plus any Taxation suffered or incurred by that Seller’s Group which would not have arisen but for the payment and receipt of such monies.

8.5Transferred Accounts Receivable

If at any time after Closing, a Business Seller receives any monies in respect of any Transferred Accounts Receivables, then that Business Seller shall pay or procure payment to the Purchaser, as soon as reasonably practicable the amount recovered, less any Taxation suffered or incurred by the relevant Seller’s Group which would not have arisen but for the receipt and payment of such monies.

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8.6Payables and Receivables Plan

8.6.1Without prejudice to the provisions of Clauses 8.4 and 8.5, the parties shall cooperate in good faith to agree, as soon as reasonably practicable after the Closing Date and in any event within one month of the Closing Date, a written plan in respect of each Market detailing: (i) the process for the collection of Transferred Accounts Receivables by each Seller (or its Affiliates) and the process and periodic timing of payment of monies received in respect of Transferred Accounts Receivable to the Purchaser; and (ii) the process for the settlement of Transferred Accounts Payable by each Seller (or its Affiliates) and the payment of monies by the Purchaser to the relevant Seller in respect thereof (together, the “Payables and Receivables Plan”). In agreeing the Payables and Receivables Plan, the parties shall take into account the comments of the parties’ respective accounting and tax teams.

8.6.2If the parties fail to agree the Payables and Receivables Plan by the date specified in Clause 8.6.1, the matter shall be referred to and discussed by the Purchaser’s and relevant Seller’s chief financial officers who shall aim to resolve the matter within 10 Business Days.

8.7Intra-Group Trading Balances

Any Intra-Group Trade Payables, any Intra-Group Trade Receivables and any Transferred Accounts Payables and Transferred Accounts Receivables, in each case, between a member of the Seller’s Group (other than a Target Group Company) and a Business Seller of that Seller’s Group, shall be settled after Closing in the ordinary course of business and, in any event, within 60 days of Closing.

8.8Wrong Pockets Obligations

8.8.1Except as provided in Schedule 2, Schedule 4, Schedule 6, Schedule 7, or Schedule 8 and Schedule 25, if any property, right or asset forming part of a Target Group (other than any property, right or asset expressly excluded from the sale under this Agreement) has not and should have been transferred to the Purchaser, or to another member of the Purchaser’s Group, pursuant to this Agreement, the relevant Seller shall procure that such property, right or asset (and any related liability which is an Assumed Liability) is transferred to the Purchaser (or another member of the Purchaser’s Group as the Purchaser may nominate reasonably acceptable to the Seller) as soon as practicable and at no cost to the Purchaser.

8.8.2If, following Closing (or, in respect of Delayed Businesses, Delayed Closing) any property, right or asset not forming part of a Target Group (other than any property, right or asset expressly included in the sale under this Agreement) is found to have and should not have been transferred to the Purchaser or another member of the Purchaser’s Group pursuant to this Agreement, the Purchaser shall transfer (or procure the transfer of)

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such property, right or asset as soon as practicable to the transferor or another member of the relevant Seller’s Group nominated by the relevant Seller reasonably acceptable to the Purchaser at no cost to the Seller.

8.9Covenant not to sue

8.9.1Each Seller hereby undertakes not to enforce any Intellectual Property Rights against the Purchaser or its Affiliates which qualify to be transferred pursuant to Clause 8.8.1 in relation to the period from Closing to the completion of the transfer under that Clause.

8.9.2The Purchaser hereby undertakes not to enforce any Intellectual Property Rights against a Seller or its Affiliates which qualify to be transferred pursuant to Clause 8.8.2 in relation to the period from Closing to the completion of the transfer under that Clause.

8.10The Purchaser’s Continuing Obligations

8.10.1Except as provided in the GlaxoSmithKline Seller Intellectual Property Trademark Licence, or if the Purchaser is unable to obtain the necessary third party consent to do so in relation to a Joint Venture Entity, the Purchaser shall procure that as soon as practicable after Closing (or, in respect of any Delayed Business, the relevant Delayed Closing Date), each of the Target Group Companies and Joint Venture Entities shall change its name so that it does not contain the Seller Marks or any name which is likely to be confused with the same and shall provide the relevant Seller with appropriate evidence of such change of name.

8.10.2Except as provided in the Ancillary Agreements, the Purchaser shall not, and shall procure that no member of the Purchaser’s Group shall, after Closing (or, in respect of any Delayed Business, the relevant Delayed Closing Date), use the Seller Marks or any confusingly similar name or mark, any extensions thereof or developments thereto in any business which competes with the Seller’s business, or any other business of a Seller or any member of a Seller’s Group in which the Seller Marks are used for a minimum period of five years following Closing and thereafter for so long as any member of a Seller’s Group continues to retain an interest in the relevant Seller Marks.

8.10.3During the 90 calendar days following the Closing Date, the Purchaser shall provide and cause to be provided to each Seller the information reasonably required to enable that Seller to prepare and audit the standard monthly reporting forms of the Seller’s Group, to the extent that such financial reporting relates to the Contributed Business, in respect of the period prior to the Closing and in respect of the calendar month in which the Closing occurs. The Purchaser shall provide such financial reporting in respect of the calendar month in which Closing occurs to each Seller within six Business Days of the last day of the relevant month.

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8.11The Sellers’ Continuing Obligations

Each Seller shall retain and not dispose of or destroy and make or procure to be made available to the Purchaser or their duly authorised agents and/or professional advisers on reasonable notice during normal business hours:

8.11.1in each case for a period of one (1) year from Closing (or from the relevant Delayed Closing Date in respect of e-mails relating to a Delayed Business) all emails relating to that Seller’s Contributed Business (and shall permit the Purchaser to take copies thereof);

8.11.2in each case for a period of 10 years from Closing (and, upon notice from the Purchaser between 9 and 10 years from Closing, for a further period of 5 years), all relevant books, accounts, other records and correspondence (except, in each case, emails) relating to that Seller’s Contributed Business which have not been, or to the extent they have not been, transferred to the Purchaser’s Group under this Agreement (and shall permit the Purchaser to take copies thereof), save as otherwise agreed by the parties in relation to any books and records (including but not limited to the content of any personnel files) relating to the employment of the Transferred Employees;

8.11.3in each case for a period of 10 years from Closing (and, upon notice from the Purchaser between 9 and 10 years from Closing, for a further period of 5 years), reasonable access to employees of the relevant Seller’s Group who have knowledge relating to that Seller’s Contributed Business (including any inventor of the Products) for the purposes of the defence, prosecution or enforcement of any Intellectual Property Rights, or as required by Applicable Law or a Governmental Entity, provided that the Purchaser shall promptly reimburse the relevant Seller in relation to the provision of such access for (i) out of pocket expenses reasonably incurred by that Seller; and (ii) for the time of that employee of that Seller’s Group if it exceeds 25 man hours in aggregate per annum; and

8.11.4in each case for a period of 3 years from Closing, each Seller shall make or procure to be made available to the Purchaser or their duly authorised agents on reasonable notice during normal business hours reasonable access to any employees of the relevant Seller’s Group who have knowledge relating to that Seller’s Contributed Business (including, for the avoidance of doubt and without limitation, any background information relating to the legal position of that Seller’s Contributed Business), to the extent that such employees are retained by the relevant Seller after Closing, to answer any questions other than those covered by clause 8.13.3 that the Purchaser may reasonably ask in relation to that Seller’s Contributed Business, provided that:

(i)the Purchaser shall promptly reimburse the relevant Seller in relation to the provision of such access for the time of that employee of that Seller’s Group if it exceeds 25 man hours in aggregate per annum;

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(ii)a Seller shall have no obligations under this Clause where such access to employees of that Seller’s Group is prohibited under Applicable Law;

(iii)the Purchaser shall have no access rights under this Clause to employees of the relevant Seller’s Group to the extent such access is prohibited by applicable anti-trust rules or any undertakings, contractual arrangements, or guidelines entered into or provided, with the aim of reasonably ensuring compliance with applicable anti-trust rules; and

(iv)without prejudice to any indemnity provided by the relevant Seller to the Purchaser under this Agreement, no member of that Seller’s Group shall have any Liability to any member of the Purchaser’s Group in connection with the provision of any information by employees of that Seller’s Group pursuant to this Clause.

8.12Ancillary Agreements

If any of the Purchaser Trademark Licence Agreements or Purchaser Patent and Know-How Licence Agreements have not been entered into at Closing, the provisions of the licences in the Agreed Terms shall be binding on the relevant Seller (and its Affiliates) and the Purchaser (and its Affiliates) until the earlier of: (i) the date of which the relevant licence is entered into; or, if applicable, (ii) the date on which the relevant licence expires or terminates (if applicable) in accordance with its Agreed Terms.

8.13Transitional Services Agreement

If the Transitional Services Agreement has not been entered into at Closing, the provision of the heads of terms in the Agreed Terms shall be binding on Novartis (and its Affiliates) and the Purchaser (and its Affiliates) until the earlier of: (i) the date on which the Transitional Services Agreement is entered into; or (ii) the date on which that Novartis (or its Affiliates) no longer provides the relevant transitional services to the Purchaser (or its Affiliates) and the Purchaser (or its Affiliates) no longer provides the relevant transitional services to Novartis (or its Affiliates).

8.14Manufacturing and Supply Agreement

In respect of each Seller, if the Manufacturing and Supply Agreement has not been entered into at Closing, the provisions of the heads of terms in the Agreed Terms shall be binding on that Seller (and its Affiliates) and the Purchaser (and its Affiliates) until the earlier of: (i) the date on which the Manufacturing and Supply Agreement is entered into; or (ii) the date on which the Seller (and its Affiliates) or the Purchaser (and its Affiliates) (as applicable) no longer manufactures and supplies Products to the other party to that agreement.

8.15Transitional Distribution Services Agreement

In respect of each Seller, if the relevant Transitional Distribution Services Agreements have not been entered into at Closing, the provision of the heads of terms in the Agreed Terms shall be binding on that Seller (and its Affiliates) and the Purchaser (and its

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Affiliates) until the earlier of: (i) the date on which the relevant Transitional Distribution Services Agreement is entered into; or (ii) the date on which that Seller (and its Affiliates) or the Purchaser (and its Affiliates) (as applicable) no longer provides such transitional distribution services to the Purchaser.

8.16Support Services Agreement

In respect of GlaxoSmithKline, if the Support Services Agreement has not been entered into at Closing, the provisions of the heads of terms in the Agreed Terms shall be binding on GlaxoSmithKline (and its Affiliates) and the Purchaser (and its Affiliates) until the earlier of: (i) the date on which the Support Services Agreement is entered into; or (ii) the date on which GlaxoSmithKline (and its Affiliates) no longer provides the relevant services to the Purchaser (or its Affiliates).

8.17Transfer of Marketing Authorisations and Tenders

8.17.1The transfer of the Marketing Authorisations following Closing shall take place in accordance with Part 2 of Schedule 4 and the terms of the Transitional Distribution Services Agreements.

8.17.2Between the Closing Date and the Marketing Authorisation Transfer Date, the Seller agrees to assist the Purchaser in accordance with Part 3 of Schedule 4 in respect of any tenders relating to the Products.

8.18Retention of Books and Records

To the extent and for so long as required by, or to the extent and for so long as required in order to perform any obligations under, any Ancillary Agreement or Applicable Law, or where otherwise agreed between the Parties, each Seller shall be entitled to retain the original or a copy of any book, ledger, file, report, plan, record, manual or other material (in any form or medium) which would otherwise transfer to the Purchaser under this Agreement, provided that:

8.18.1any copy or original retained is treated as strictly confidential in accordance with Clause 12.2;

8.18.2in the case of retained originals, a copy of such book, ledger, file, report, plan, record, manual or other material is provided to the Purchaser;

8.18.3upon reasonable notice by the Purchaser, such Seller shall provide access to such retained book, ledger, file, report, plan, record, manual or other material in accordance with Clause 8.11.2; and

8.18.4upon expiry of the relevant obligation under the applicable Ancillary Agreement, such Seller is entitled to retain a copy of any such book, ledger, file, report, plan, record, manual or other material to comply with Applicable Law but shall transfer the original to the Purchaser.

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8.19Sanctions

8.19.1For the purposes of Clauses 8.19.2 to 8.19.7 only, the terms below shall have the following meanings:

“Assignor” means an assignor under any Intellectual Property Assignment Agreement or any relevant member of the Seller’s Group’s (other than a Target Group Company);

“Assignee” means an assignee under any Intellectual Property Assignment Agreement or a Target Group Company; and

“Further Assurance Obligations” means any obligation to be performed by an Assignor under clause 3 (Recordals and Further Assurance) of any Intellectual Property Assignment Agreement or Clause 15.1 of this Agreement in relation to any Target Group Intellectual Property Rights;

8.19.2The parties agree that to the extent that Target Group Intellectual Property Rights which are the subject of a transfer pursuant to the Intellectual Property Assignment Agreement are registered (or are the subject of an application to register) in Iran, Iraq, Democratic People’s Republic of Korea or Syria, the Assignor’s Further Assurance Obligations shall be modified as set out in Clauses 8.19.3 to 8.19.7 below.

8.19.3If an Assignor is prevented from complying with its Further Assurance Obligations, with the effect that the recordal of assignment of legal title from the Assignor to the Assignee under the Intellectual Property Assignment Agreement cannot be completed for any Target Group Intellectual Property Rights by reason of:

(i)Applicable Law;

(ii)other factors beyond the reasonable control of the Assignor; or

(iii)application of the Assignor’s:

(a)internal sanctions and export control policy (or equivalent); or

(b)anti-bribery and corruption policy,

in each case in force from time to time, provided that such policy applies to all Affiliates of the Assignor and the policy is applied in the same way it would apply if the Assignee were an Affiliate of the Assignor,

each such Target Group Intellectual Property Right (being an “Affected Right” and  each of (i) to (iv) being a “Restriction” and in the plural the “Restrictions”), Clauses 8.19.4 to 8.19.7 shall apply.

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8.19.4The relevant Assignor shall notify the Assignee as soon as reasonably practicable after Closing of:

(i)each Affected Right and the country in which it is registered (or is the subject of an application to register); and

(ii)the relevant Restriction.

8.19.5As soon as reasonably practicable and, in any event within three months after the date that Assignor notifies the Assignee of an Affected Right under Clause 8.19.4 above the parties shall discuss in good faith the means by which the Assignee may be able to achieve protection in the relevant country which is equivalent or similar to the protection provided by the Affected Right.  Such means may include, without limitation:

(i)the Assignee filing a new trade mark application and the Assignor providing to the Assignee the consent of the Assignor to the new application to endeavour to overcome any objection raised by the relevant intellectual property registry on relative grounds based on the Affected Right; or

(ii)the Assignor filing a WIPO trade mark application in the name of the Assignor, which shall be assigned by the Assignor to the Assignee on grant of registration or earlier if possible.  The reasonable costs incurred by the Assignor in filing and prosecuting that registration to grant to be met by the Assignee;  or

(iii)the Assignor withdrawing or cancelling any Affected Right subject to the written consent of the Assignee.

The parties will agree such means as are possible in light of the limitations imposed by the Restrictions and both parties will use reasonable efforts to achieve the agreed means.  Neither party shall be obliged to take any action agreed pursuant to this Clause 8.19.5 to the extent that such party is prevented from doing so by a Restriction.

The reasonable costs incurred by either party in fulfilling any such actions shall be met by the Assignee.

8.19.6The relevant Assignor undertakes (at the cost of the Assignee), during the current registration period up to the next renewal date of the Affected Right:

(i)to take any action to comply with its Further Assurance Obligations to the extent it is able to do so given the Restrictions;

(ii)to comply with its Further Assurance Obligations as soon as reasonably practicable if and to the extent that such obligations are no longer prevented by the Restrictions; and

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(iii)not to take any other action in connection with an Affected Right without the consent of the Assignee.

8.19.7The parties acknowledge that in relation to Target Group Intellectual Property Rights that are Trademarks, there is nothing in this Agreement to preclude the Assignee from taking action to revoke or cancel an Affected Right and the Assignor hereby undertakes not to defend any such action.

8.20Anti-bribery and corruption

The provisions of Schedule 27 shall apply in respect of the parties’ compliance with anti-bribery and corruption laws.

8.21[***]

9.WARRANTIES

9.1The Sellers’ Warranties

9.1.1Subject to Clause 9.2, each Seller warrants (on behalf of the relevant Business Sellers or Share Sellers, as applicable) to the Purchaser and each member of the Purchaser’s Group to which shares or assets are transferred pursuant to this Agreement or any Local Transfer Document, that the statements set out in Schedule 13 (save for paragraph 2.4.2 in the case of GlaxoSmithKline and 2.4.1 in the case of Novartis) are true and accurate as of the date of this Agreement.

9.1.2Each of the Seller’s Warranties shall be separate and independent and shall not be limited by reference to any other paragraph of Schedule 13 or by anything in this Agreement or any Local Transfer Document or in the Tax Indemnity.

9.1.3Neither of the Sellers gives or makes any warranty as to the accuracy of the forecasts, estimates, projections, statements of intent or statements of opinion provided to the Purchaser or any of its directors, officers, employees, agents or advisers on or prior to the date of this Agreement.

9.1.4Any Seller’s Warranty qualified by the expression “so far as the Seller is aware” or to the “Seller’s Knowledge” or any similar expression shall, unless otherwise stated, be deemed to refer to the knowledge of:

(i)in the case of GlaxoSmithKline, the following persons: [***]; and

(ii)in the case of Novartis, the following persons: [***],

in each case having made due and reasonable enquiry.

9.1.5Each of the Seller’s Warranties shall be deemed to be repeated immediately before Closing by reference to the facts, circumstances and

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knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date.  Without prejudice to the provisions of Clause 4.4, no Seller shall have any liability for any breach of any Seller’s Warranty given by it where such Seller’s Warranty was true as at the date of this Agreement unless (i) the fact, event or circumstances giving rise to the breach (i) constitutes a Material Adverse Effect and (ii) was not the result of an act or omission expressly permitted by the terms of this Agreement or any other Ancillary Agreement. No Seller shall have any liability under this Clause 9.1.5 if the Purchaser has exercised its termination right in accordance with Clause 4.4.1(iii).

9.2Sellers’ Disclosures

9.2.1Each Seller’s Warranties are subject to all matters which are fairly disclosed in this Agreement or in the Disclosure Letter.

9.2.2References in a Disclosure Letter to paragraph numbers shall be to the paragraphs in Schedule 13 to which the disclosure is most likely to relate. Such references are given for convenience only and, shall not limit the effect of any of the disclosures, all of which are made against the Seller’s Warranties as a whole.

9.3The Purchaser’s Warranties

The Purchaser warrants to each Seller that the statements set out in Schedule 14 are true and accurate as of the date of this Agreement.

10.LIMITATION OF LIABILITY

10.1Application

10.1.1In respect of the Tax Indemnity, the provisions of this Clause 10 shall operate to limit the liability of a Seller only in so far as any provision in this Clause 10 is expressed to be applicable to the Tax Indemnity, and the provisions of the Tax Indemnity shall further operate to limit the liability of the Sellers in respect of any claims thereunder.

10.1.2References to the Seller’s Warranties in Clauses 10.2 to 10.5 (inclusive), 10.7, 10.8 and 10.10 shall not include the Tax Warranties and the provisions of clauses 3 and 9 of the Tax Indemnity shall operate to limit the liability of the Sellers and to govern the claims procedure in respect of any claim under the Tax Warranties in respect of a liability for Tax as if such claim had been a claim in respect of a Tax Liability (as defined in the Tax Indemnity) under the Tax Indemnity.

10.2Time Limitation for Claims

No Seller shall be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty, any Tax Warranty or under the Tax Indemnity in respect

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of any claim unless a notice of the claim is given by the Purchaser to such Seller specifying the matters set out in Clause 11.2:

10.2.1in the case of a claim under any of paragraphs 1, 2.1, 2.2.1, 2.2.3 or 2.5 of Schedule 13, within the applicable statutory limitation period;

10.2.2in respect of claims under the Tax Warranties or the Tax Indemnity, before the date falling six months after the expiry of the period specified by statute during which an assessment of the relevant liability to Tax may be issued by the relevant Tax Authority; and

10.2.3in the case of any other claim, before the date falling two years following Closing.

10.3Minimum Claims

10.3.1No Seller shall be liable under:

(i)this Agreement or any Local Transfer Document for breach of any Seller’s Warranty in respect of any individual claim (or a series of claims arising from similar or identical facts or circumstances) where the liability agreed or determined (disregarding the provisions of this Clause 10.3) in respect of any such claim or series of claims does not exceed, in the case of Novartis, US$10.95 million, or, in the case of GlaxoSmithKline, US$19.05 million; or

(ii)this Agreement for breach of any Tax Warranty or under the Tax Indemnity in respect of any individual claim (or a series of claims arising from similar or identical facts or circumstances) where the liability agreed or determined (disregarding the provisions of this Clause 10.3) in respect of any such claim or series of claims does not exceed US$1 million.

10.3.2Where the liability agreed or determined in respect of any such claim or series of claims exceeds, in the case of claims falling within Clause 10.3.1(i), US$10.95 million (in the case of Novartis) or US$19.05 million (in the case of GlaxoSmithKline) or, in the case of claims falling within Clause 10.3.1(ii), US$1 million, the liability of the relevant Seller shall be for the whole amount of such claim(s) and not just the excess.

10.4Aggregate Minimum Claims

10.4.1No Seller shall be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty in respect of any claim unless the aggregate amount of all claims for which such Seller would otherwise be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty (disregarding the provisions of this Clause 10.4) exceeds, in the case of Novartis, US$109.5 million, or, in the case of GlaxoSmithKline, US$190.5 million, in which case the relevant

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Seller shall be liable for the aggregate amount of all claims as agreed or determined and not just the excess.

10.4.2Where the liability agreed or determined in respect of all claims exceeds US$109.5 million (in the case of Novartis) or US$190.5 million (in the case of GlaxoSmithKline) such Seller shall be liable for the aggregate amount of all claims as agreed or determined and not just the excess.

10.4.3For the avoidance of doubt, the Purchaser may give notice of any single claim in accordance with and for the purposes of Clause 10.2, irrespective of whether, at the time the notice is given, the amount set out in Clause 10.4.2 has been exceeded.

10.5Maximum Liability

The aggregate liability of a Seller in respect of:

10.5.1any breaches of the Seller’s Warranties (other than the Seller’s Warranties contained in paragraphs 1, 2.1, 2.2.1, 2.2.3 or 2.5 of Schedule 13) shall not exceed an amount equal to, in the case of Novartis, US$3.285 billion, or, in the case of GlaxoSmithKline, US$5.715 billion; and

10.5.2any breaches of such Seller’s Warranties contained in paragraphs 1, 2.1, 2.2.1, 2.2.3 or 2.5 of Schedule 13 shall not exceed, in the case of Novartis, US$10.95 billion, or, in the case of GlaxoSmithKline, US$19.05 billion.

10.6Contingent Liabilities

No Seller shall be liable under this Agreement or any Local Transfer Document for breach of any such Seller’s Warranties in respect of which the liability is contingent, unless and until such contingent liability becomes an actual liability and is due and payable (but the Purchaser has the right under Clause 11.1 to give notice of such claim before such time).  For the avoidance of doubt, the fact that the liability may not have become an actual liability by the relevant date provided in Clause 10.2 shall not exonerate such Seller in respect of any claim properly notified before that date.

10.7Provisions

No Seller shall be liable under this Agreement or any Local Transfer Document in either case in respect of any claim for breach of any Seller’s Warranty in respect of any claim if and to the extent that any allowance, provision or reserve has been properly made in the Closing Statement applicable to that Seller for the matter giving rise to the claim and such Seller can demonstrate that the allowance, provision or reserve so made was in respect of such matter.

10.8Matters Arising Subsequent to this Agreement

Subject to Clause 8.1.2, no Seller shall be liable under this Agreement or any Local Transfer Document in either case in respect of any claim for breach of any Seller’s

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Warranty in respect of any matter, act, omission or circumstance (or any combination thereof), to the extent that the same would not have occurred but for:

10.8.1Agreed matters

any matter or thing done or omitted to be done by such Seller or any member of such Seller’s Group before Closing pursuant to and in compliance with this Agreement or any Local Transfer Document or otherwise at the request in writing of the Purchaser; or

10.8.2Changes in legislation

the passing of, or any change in, after the Closing Date, any Applicable Law or administrative practice of any government, governmental department, agency or regulatory body having the force of the law including (without prejudice to the generality of the foregoing) any increase in the rates of Taxation or any imposition of Taxation or any withdrawal of relief from Taxation not in force at the Closing Date.

10.9Insurance

Without prejudice to Clause 13, any Seller’s Liability under this Agreement for breach of any Seller’s Warranty shall be reduced by an amount equal to any loss or damage to which such claim related which has actually been recovered under a policy of insurance held by the Purchaser or a Target Group Company (after deducting any reasonable costs incurred in making such recovery including the amount of any excess or deductible).

10.10Purchaser’s Right to Recover

If any Seller has paid an amount in discharge of any claim under this Agreement for breach of any Seller’s Warranty and subsequently the Purchaser recovers (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, the Purchaser shall pay to such Seller as soon as practicable after receipt an amount equal to (i) the sum recovered from the third party less any costs and expenses incurred in obtaining such recovery and any Tax on any amounts recovered (or Tax that would have been payable on such amounts but for the availability of any Tax relief), or if less (ii) the amount previously paid by such Seller to the Purchaser. Any payment made by the Purchaser to such Seller under this Clause shall be made or procured by way of further adjustment of the Purchase Consideration.

10.11No Double Recovery and no Double Counting

A party shall be entitled to make more than one claim under this Agreement arising out of the same subject matter, fact, event or circumstance but shall not be entitled to recover under this Agreement or any relevant Local Transfer Document or the Tax Indemnity or otherwise more than once in respect of the same Losses suffered or

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amount for which the party is otherwise entitled to claim (or part of such Losses or amount), regardless of whether more than one claim arises in respect of it. No amount (including any relief) (or part of any amount) shall be taken into account, set off or credited more than once under this Agreement or any relevant Local Transfer Document or the Tax Indemnity or otherwise, with the intent that there will be no double counting under this Agreement or any Local Transfer Document or the Tax Indemnity or otherwise.

10.12Fraud

None of the limitations contained in this Clause 10 shall apply to any claim to the extent that such claim arises or is increased as the consequence of, or which is delayed as a result of, fraud by any director or officer of any member of a Seller’s Group.

11.CLAIMS

11.1Notification of Potential Claims

Without prejudice to the obligations of the Purchaser under Clause 11.2, if the Purchaser becomes aware of any fact, matter or circumstance that may give rise to a claim against any Seller under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty other than a Tax Warranty (ignoring for these purposes the application of Clause 11.2 or 11.3), the Purchaser shall as soon as reasonably practicable give a notice in writing to that Seller of such facts, matters or circumstances as are then available regarding the potential claim. Failure to give notice within such period shall not affect the rights of the Purchaser to make a relevant claim under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty, except that the failure shall be taken into account in determining the liability of that Seller for such claim to the extent that Seller establishes that the amount of it is increased, or is not reduced, as a result of such failure.

11.2Notification of Claims under this Agreement

Notices of claims under this Agreement or any relevant Local Transfer Document for breach of any Seller’s Warranty (other than a Tax Warranty) shall be given by the Purchaser to the relevant Seller within the time limits specified in Clause 10.2 and shall specify information (giving reasonable detail) in relation to the basis of the claim and setting out the Purchaser’s estimate of the amount of Losses which are, or are to be, the subject of the claim.

11.3Commencement of Proceedings

Any claim notified pursuant to Clause 11.2 shall (if it has not been previously satisfied, settled or withdrawn) be deemed to be irrevocably withdrawn 9 months after the relevant time limit set out in Clause 10.2 unless, at the relevant time, legal proceedings in respect of the relevant claim have been commenced by being both issued and served except:

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11.3.1where the claim relates to a contingent liability, in which case it shall be deemed to have been withdrawn unless legal proceedings in respect of it have been commenced by being both issued and served with 9 months of it having become an actual liability; or

11.3.2where the claim is a claim for breach of any Seller’s Warranty of which notice is given for the purposes of Clause 11.2 at a time when the amount set out in Clause 10.4.1 has not been exceeded, in which case it shall be deemed to have been withdrawn unless legal proceedings in respect of it have been commenced by being both issued and served within 9 months of the date of any subsequent notification to that Seller pursuant to Clause 11.1 of one or more claims which result(s) in the total amount claimed in all claims notified to that Seller pursuant to Clause 11.2 exceeding the amount set out in Clause 10.4.1 for the first time.

11.4Conduct of Third Party Claims

11.4.1If the matter or circumstance that may give rise to a claim against a Seller under this Agreement or any relevant Local Transfer Document for breach of any Seller’s Warranty (other than a Tax Warranty) is a result of or in connection with a claim by a third party (a “Third Party Claim”) then:

(i)the Purchaser shall as soon as reasonably practicable give written notice thereof to that Seller and thereafter shall provide that Seller with periodic updates upon reasonable request and shall consult with that Seller so far as reasonably practicable in relation to the conduct of the Third Party Claim and shall take reasonable account of the views of that Seller in relation to the Third Party Claim;

(ii)the Third Party Claim shall not be admitted, compromised, disposed of or settled without the written consent of that Seller (such consent not to be unreasonably withheld or delayed); and

(iii)subject to that Seller indemnifying the Purchaser or other member of the Purchaser’s Group (including any Delayed Target Group Company) concerned against all reasonable costs and expenses (including legal and professional costs and expenses) that may be incurred thereby, the Purchaser shall, or the Purchaser shall procure that any other members of the Purchaser’s Group shall, take such action as that Seller may reasonably request to avoid, dispute, deny, defend, resist, appeal, compromise or contest the Third Party Claim, provided that this Clause 11.4.1(iii) shall not apply where the claim by the third party relates to matters or circumstances referred to in paragraph 4 or paragraph 9 of Schedule 13 and the Purchaser shall then have the right to conduct the claim at its discretion (subject to Clauses 11.4.1(i) and 11.4.1(ii)),

provided that failure to give notice in accordance with Clause 11.4.1(i)(i) shall not affect the rights of the Purchaser to make a relevant claim under this Agreement for breach of any Seller’s Warranty, except that the failure shall be taken into account in determining

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the liability of that Seller for such claim to the extent that Seller establishes that the amount of it is increased, or is not reduced, as a result of that failure.

11.4.2Notwithstanding the provisions of Clause 11.4.1, if a Third Party Claim may also give rise to an indemnity claim under Clause 8.1.2, the provisions of Clause 8.2.2 shall apply instead of the provisions of Clause 11.4.1.

12.CONFIDENTIALITY

12.1Announcements

No announcement, communication or circular concerning the existence or the subject matter of this Agreement shall be made or issued by or on behalf of any member of any Seller’s Group or the Purchaser’s Group without the prior written approval of the parties (such consent not to be unreasonably withheld or delayed). This shall not affect any announcement, communication or circular required by law or any governmental or regulatory body or the rules of any stock exchange on which the shares of any party (or its holding company) are listed but the party with an obligation to make an announcement or communication or issue a circular (or whose holding company has such an obligation) shall consult with the other parties (or shall procure that its holding company consults with the other parties) insofar as is reasonably practicable before complying with such an obligation.

12.2Confidentiality

12.2.1Subject to Clause 12.1 and Clause 12.2.2, each of the parties shall treat as strictly confidential and not disclose or use any information received or obtained as a result of entering into this Agreement, any Ancillary Agreement (or any other agreement entered into pursuant to this Agreement, including the Ancillary Agreements) which relates to:

(i)the existence and provisions of this Agreement, the Ancillary Agreements, or any other agreement entered into pursuant to this Agreement, including the Ancillary Agreements;

(ii)the negotiations relating to this Agreement, the Ancillary Agreements, or any other agreement entered into pursuant to this Agreement;

(iii)(in the case of a Seller) any information relating to its Target Group Companies and Target Group Businesses following Closing and any other information relating to the business, financial or other affairs (including future plans and targets) of the Purchaser’s Group; or

(iv)(in the case of the Purchaser) any information relating to the business, financial or other affairs (including future plans and targets) of any Seller’s Group including, prior to Closing, the Target Group Companies and Target Group Businesses, and, for the avoidance of doubt, the Purchaser shall not disclose any such information relating to a Seller Group to the other Seller Group.

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12.2.2Clause 12.2.1 shall not prohibit disclosure or use of any information if and to the extent:

(i)the disclosure or use is required by law, any governmental or regulatory body or any stock exchange on which the shares of any party (or its holding company) are listed;

(ii)the disclosure or use is required to vest the full benefit of this Agreement or the Ancillary Agreements in any party;

(iii)the disclosure or use is required for the purpose of any arbitral or judicial proceedings arising out of this Agreement, the Ancillary Agreements, or any other agreement entered into under or pursuant to this Agreement or to enable a determination to be made by the Reporting Accountants under this Agreement;

(iv)the disclosure is made to a Tax Authority in connection with the Tax affairs of the disclosing party;

(v)the disclosure is made on a confidential basis to a ratings agency in connection with the affairs of the disclosing party;

(vi)the disclosure is made by the Purchaser to any of its Representatives, any member of the  Purchaser’s Groups and/or any of their Representatives, or by a Seller to any of its Representatives, any member of that Seller’s Group and/or any of their Representatives, in each case on a “need-to-know” basis and provided they have a duty (contractual or otherwise) to keep such information confidential;

(vii)the information was lawfully in the possession of that party without any obligation of secrecy prior to its being received or held, in either case as evidenced by written records;

(viii)the information is or becomes publicly available (other than by breach of this Agreement);

(ix)the other party(ies) in respect of whom the information relates has given prior written approval to the disclosure or use; or

(x)the information is independently developed,

provided that prior to disclosure or use of any information pursuant to Clause 12.2.2(i), (ii) or (iii), the party concerned shall, where not prohibited by law, promptly notify the other parties of such requirement with a view to providing the other parties with the opportunity to contest such disclosure or use or otherwise to agree the timing and content of such disclosure or use.

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12.3Non-solicit

12.3.1Neither Seller will, and each Seller undertakes to procure that no member of its Group will, for a period of two years after the Closing Date, solicit or induce any Restricted Target Group Employee to become employed or engaged whether as employee, consultant or otherwise by any member of that Seller’s Group.

12.3.2Novartis will not, and undertakes to procure that no member of Novartis’s Group will, for a period of two years after the Closing Date, solicit or induce any Restricted GSK Employee to become employed or engaged whether as employee, consultant or otherwise by any member of Novartis’s Group.

12.4Exceptions to the non-solicit

12.4.1The restrictions in Clauses 12.3.1 and 12.3.2 may be relaxed or additional exceptions allowed by written approval of the Purchaser’s Head of HR, and shall in any event not apply to the solicitation, inducement or recruitment of any person:

(i)through the placing of advertisements of posts available to the public generally;

(ii)through an employment agency, provided that no member of the relevant Seller’s Group encourages or advises such agency to approach any such person;

(iii)who is no longer employed by the Target Group (or a member of GlaxoSmithKline’s Group in the case of 12.3.2); or

(iv)who is under formal notice of termination from his employer, provided that this exception only applies if the employment or engagement by the member of the relevant Seller’s Group is offered with a start date which is no earlier than the day after the last scheduled date of the person’s employment with the Target or the GlaxoSmithKline Group.

13.INSURANCE

13.1No cover under any Seller’s Group Insurance Policies from Closing

Subject to the provisions of the Support Services Agreement, the Purchaser acknowledges and agrees that following Closing:

13.1.1neither the Purchaser nor any Target Group Company (but, in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date) shall have or be entitled to the benefit of any Seller’s Group Insurance Policy in respect of any event, act or omission that takes place after Closing and it shall be the sole responsibility of the Purchaser to ensure that adequate insurances are put in place for the Target Group

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Companies (but, in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date)  and the Target Group Businesses (but, in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date) with effect from Closing;

13.1.2except in respect of any Delayed Target Group Company or Delayed Target Group Business until the relevant Delayed Closing Date, no Seller nor any member of its Group shall be required to maintain any Seller’s Group Insurance Policy for the benefit of the relevant Target Group; and

13.1.3no Target Group Company shall make or shall be entitled to make or notify a claim under any Seller’s Group Insurance Policy in respect of any event, act or omission that occurred prior to the Closing Date or, in respect of a Delayed Target Group Company, prior to the relevant Delayed Closing Date.

13.2Existing claims under any Seller’s Group Insurance Policies

With respect to any claim made under any Seller’s Group Insurance Policy (i) before the Closing Date by or on behalf of any Target Group Company or in relation to any Target Group Business (ii) before the relevant Delayed Closing Date in respect of any claim made by or on behalf of any Delayed Target Group Company or Delayed Target Group Business, to the extent that:

13.2.1neither the Purchaser nor the Target Group Companies have been indemnified by a Seller prior to the Closing Date in respect of the matter in respect of which the claim was made; or

13.2.2the Liability in respect of which the claim was made has not been properly provided for in the Closing Statement and reduced the Working Capital accordingly,

that Seller shall use reasonable endeavours after Closing to recover all monies due from insurers and shall pay any monies received (after taking into account any deductible under such Seller’s Group Insurance Policies and less any Taxation suffered on the proceeds and any reasonable out of pocket expenses suffered or incurred by such Seller or any member of such Seller’s Group in connection with the claim) to the Purchaser or, at the Purchaser’s written direction, the relevant Target Group Company as soon as practicable after receipt.

13.3GlaxoSmithKline and the Purchaser shall co-operate together after the date of this Agreement with a view to determining the most effective way of insuring the Purchaser’s Group following Closing, taking into account the fact that the Purchaser’s Group will be consolidated with GlaxoSmithKline’s Group following Closing.  In the event that they determine that it is preferable for GlaxoSmithKline’s Group’s existing insurance arrangements to remain in place following Closing and for the Purchaser’s Group to be included within them, the provisions in this Cause 13.3 shall not apply to the extent they are no longer relevant and the parties shall seek to agree the details in relation to such insurance arrangements to be included in the Support Services Agreement.

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14.FRANCE BUSINESS AND THE NETHERLANDS BUSINESS

14.1France Business

Notwithstanding any other provision of this Agreement, this Agreement shall not constitute a binding agreement by a Seller to sell or purchase its France Business, provided that:

14.1.1in the event that a France Put Option Exercise occurs before Closing, this Clause 14.1 (other than this Clause 14.1.1) shall terminate and shall cease to have effect, and the sale and purchase of the relevant France Business shall be subject to the terms of this Agreement as if it had been with effect from the date of this Agreement;

14.1.2in the event that a France Put Option Exercise does not occur before Closing:

(i)the provisions of Clauses 2, 6 and 9 (the “Disapplied Provisions”) shall not apply to the relevant France Business;

(ii)prior to the relevant France Closing, the provisions of Schedule 7 and Schedule 8 (the “Suspended Provisions”) shall not apply to the relevant France Business; and

(iii)in respect of the Disapplied Provisions and, prior to the relevant France Closing, the Suspended Provisions only:

(a)the term “Contributed Business” shall be deemed to exclude the relevant France Business;

(b)the term “Target Group Companies” shall be deemed to exclude, in the case of Novartis, Novartis Santé Familiale S.A.S. and, in the case of GlaxoSmithKline, any Target Group Companies that relate to its France Business;

(c)Target Group Businesses shall be deemed to exclude, in the case of GlaxoSmithKline only, its France Business;

(d)the term “Assumed Liabilities” shall be deemed to exclude the relevant France Assumed Liabilities; and

(e)the term “Employees” shall be deemed to exclude the relevant France Employees;

14.1.3with effect from a France Closing, the Suspended Provisions shall apply to the France Business mutatis mutandis save that in respect of the Suspended Provisions only (A) the term “Closing” shall be deemed to refer to that France Closing and (B) the term “Closing Date” shall be deemed to refer to the date of that France Closing;

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14.1.4the parties shall negotiate in good faith to agree any amendments to this Agreement and any Ancillary Agreements as are required in order to give effect to the principles set forth in this Clause 14.1 for the purposes of complying with the information and consultation requirements in respect of the relevant works council(s) in respect of GlaxoSmithKline’s France Business (in the case of GlaxoSmithKline) and the Délégation Unique du Personnel (being the relevant works council in respect of Novartis France Business) (in the case of Novartis); and

14.1.5the provisions of Clause 8 shall apply to the relevant France Business as if the remaining provisions of this Clause 14.1 did not have any force or effect.

14.2Netherlands Business

Notwithstanding any other provision of this Agreement, this Agreement shall not constitute a binding agreement to sell or purchase the Netherlands Business, provided that:

14.2.1in the event that the Netherlands Put Option Exercise occurs before Closing, this Clause 14.2 (other than this Clause 14.2.1) shall terminate and shall cease to have effect, and the sale and purchase of the Netherlands Business shall be subject to the terms of this Agreement as if it had been with effect from the date of this Agreement;

14.2.2in the event that the Netherlands Put Option Exercise does not occur before Closing:

(i)the Disapplied Provisions shall not apply to the Netherlands Business;

(ii)prior to the Netherlands Closing, the Suspended Provisions shall not apply to the Netherlands Business; and

(iii)in respect of the Disapplied Provisions and, prior to the Netherlands Closing, the Suspended Provisions only:

(a)the term “Contributed Business” (when used in respect of GlaxoSmithKline) shall be deemed to exclude the Netherlands Business;

(b)the term “GlaxoSmithKline Consumer Group Businesses” shall be deemed to exclude the Netherlands Business;

(c)the term “Assumed Liabilities” (when used in respect of GlaxoSmithKline) shall be deemed to exclude the Netherlands Assumed Liabilities; and

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(d)the term “Employees” (when used in respect of GlaxoSmithKline) shall be deemed to exclude the Netherlands Employees;

14.2.3with effect from the Netherlands Closing, the Suspended Provisions shall apply to the Netherlands Business mutatis mutandis save that in respect of the Suspended Provisions only (A) the term “Closing” shall be deemed to refer to the Netherlands Closing and (B) the term “Closing Date” shall be deemed to refer to the date of the Netherlands Closing;

14.2.4the parties shall negotiate in good faith to agree any amendments to this Agreement and any Ancillary Agreements as are required in order to give effect to the principles set forth in this Clause 14.2 for the purposes of complying with such information and consultation requirements (if any) required under Applicable Law with the relevant works council or employee representative body (if any) in respect of GlaxoSmithKline’s Netherlands Business; and

14.2.5the provisions of Clause 8 shall apply to the Netherlands Business as if the remaining provisions of this Clause 14.2 did not have any force or effect.

15.OTHER PROVISIONS

15.1Further Assurances

Without prejudice to any restriction or limitation on the extent of any party’s obligations under this Agreement, each of the parties shall from time to time, so far as each is reasonably able, do or procure the doing of all such acts and/or execute or procure the execution of all such documents in a form reasonably satisfactory to the party concerned as it may reasonably consider necessary to transfer the relevant Contributed Business to the Purchaser or otherwise to give the other parties the full benefit of this Agreement.

15.2Ancillary Agreements

The parties shall negotiate in good faith to agree definitive and legally binding documentation in respect of each of the Ancillary Agreements for which heads of terms are in Agreed Terms on the date of this Agreement, and shall duly execute and deliver such definitive and legally binding documentation in respect of the Ancillary Agreements at Closing. Following Closing, the parties shall continue to negotiate in good faith to agree definitive and legally binding documentation in respect of any Ancillary Agreements that are not executed at Closing, and such documentation shall supersede the heads of terms in the Agreed Terms.

15.3Whole Agreement

15.3.1This Agreement and the Ancillary Agreements contain the whole agreement between the parties relating to the subject matter of this Agreement at the date hereof to the exclusion of any terms implied by law

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which may be excluded by contract and supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in this Agreement.

15.3.2The Purchaser acknowledges that, in entering into this Agreement, it is not relying on any representation, warranty or undertaking not expressly incorporated into it.

15.3.3Each of the parties agrees and acknowledges that its only right and remedy in relation to any representation, warranty or undertaking made or given in connection with this Agreement shall be for breach of the terms of this Agreement and each of the parties waives all other rights and remedies (including those in tort or arising under statute) in relation to any such representation, warranty or undertaking.

15.3.4In Clauses 15.3.1 to 15.3.3, “this Agreement” includes the Ancillary Agreements and all documents entered into pursuant to this Agreement.

15.3.5Nothing in this Clause 15.3 excludes or limits any liability for fraud.

15.4No Assignment

No party may, without the prior written consent of the other parties, assign, grant any security interest over, hold on trust or otherwise transfer the benefit of the whole or any part of this Agreement.

15.5Third Party Rights

15.5.1Subject to Clause 15.5.2, the parties do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.

15.5.2Certain provisions of this Agreement confer benefits on the Affiliates of the Purchaser and the Affiliates of any Seller (each such Affiliate being, for the purposes of this Clause 15.5, a “Third Party”) and, subject to Clause 15.5.3, are intended to be enforceable by each Third Party by virtue of the Contracts (Rights of Third Parties) Act 1999.

15.5.3Notwithstanding Clause 15.5.2, this Agreement may be varied in any way and at any time without the consent of any Third Party.

15.6Variation or waiver

15.6.1No variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the parties.

15.6.2No failure or delay by a party in exercising any right or remedy provided by Applicable Law or under this Agreement or any Ancillary Agreement shall

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impair such right or remedy or operate or be construed as a waiver or variation of it or preclude its exercise at any subsequent time and no single or partial exercise of any such right or remedy shall preclude any further exercise of it or the exercise of any other remedy.

15.7Method of Payment and set off

15.7.1Except as set out in Clause 15.7.2, payments (including payments pursuant to an indemnity, compensation or reimbursement provision ) made or expressed to be made by the Purchaser or the Sellers pursuant to this Agreement or any claim for breach of this Agreement shall, insofar as the payment or claim relates to or affects any Shares (including the underlying Target Group Companies transferred (directly or indirectly) by reason of the transfer of those Shares), assets or liabilities, transferred pursuant to this Agreement and the Local Transfer Documents, be made or received (as the case may be) by:

(i)the relevant Seller, for itself or on behalf of its Share Seller or Business Seller (each in respect of the Shares and/or assets and liabilities to be transferred by it pursuant to this Agreement and the relevant Local Transfer Documents); and

(ii)the Purchaser, for itself and on behalf of the relevant members of the Purchaser’s Group (each in respect of the Shares and/or the assets and liabilities to be transferred by it pursuant to this Agreement and the relevant Local Transfer Documents).

15.7.2The repayment of the Estimated Intra-Group Non-Trade Receivables and the Estimated Intra-Group Non-Trade Payables pursuant to Clause 6.4.3 and any adjustments to such repayment pursuant to Clause 7.4 shall be settled by payments between the Seller, for itself and on behalf of the relevant members of the Seller’s Group, and the Purchaser, for itself and on behalf of the relevant Target Group Companies.

15.7.3Without prejudice to Clause 6.3.2, any payments pursuant to this Agreement shall be made in full, without any set-off, counterclaim, restriction or condition and without any deduction or withholding (save as may be required by law or as otherwise agreed), except that payments due between any Seller and the Purchaser:

(i)in relation to repayments of the Estimated Intra-Group Non-Trade Payables and Estimated Intra-Group Non-Trade Receivables pursuant to Clause 6.4.3; or

(ii)in relation to adjustments to those repayments pursuant to Clause 7.4,

respectively, shall be discharged to the fullest extent possible by way of set-off against each other.

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15.7.4Any payments pursuant to this Agreement shall be effected by crediting for same day value the account specified by each Seller or the Purchaser (as the case may be) on behalf of the party entitled to the payment (reasonably in advance and in sufficient detail to enable payment by telegraphic or other electronic means to be effected) on or before the due date for payment.

15.7.5Payment of a sum in accordance with this Clause 15.7 shall constitute a payment in full of the sum payable and shall be a good discharge to the payer (and those on whose behalf such payment is made) of the payer’s obligation to make such payment and the payer (and those on whose behalf such payment is made) shall not be obliged to see to the application of the payment as between those on whose behalf the payment is received.

15.8Costs

15.8.1Subject to Clause 15.9, each Seller shall bear all costs incurred by it and its Affiliates in connection with the preparation and negotiation of, and the entry into, this Agreement the relevant Ancillary Agreements and the sale of its Target Group.

15.8.2The Purchaser shall bear all such costs incurred by it and its Affiliates in connection with the preparation and negotiation of, and the entry into, this Agreement the relevant Ancillary Agreements and the purchase of Target Groups.

15.9Notarial Fees, Registration, Stamp and Transfer Taxes and Duties

Each Seller shall bear the cost of all notarial fees and all registration, stamp and transfer taxes and duties or their equivalents in all jurisdictions where such fees, taxes and duties are payable as a result of that Seller’s sale of its Target Group to the Purchaser pursuant to this Agreement.

15.10Interest

If any party defaults in the payment when due of any sum payable under this Agreement, the Local Transfer Documents or the Tax Indemnity the liability of that party shall be increased to include interest on such sum from the date when such payment is due until the date of actual payment (as well after as before judgment) at a rate per annum of two per cent. above LIBOR. Such interest shall accrue from day to day.

15.11Grossing-up

15.11.1All sums payable under this Agreement, the Local Transfer Documents and the Tax Indemnity shall be paid free and clear of all deductions, withholdings, set-offs or counterclaims whatsoever save only as may be permitted by Clause 15.7.3 or required by law.  Subject to 15.11.2 to 15.11.7 (inclusive), if any deductions or withholdings are required by law,

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the party making the payment (the “Payer”) shall (except in the case of any interest payable under this Agreement) be obliged to pay to the party  to whom the payment is being made (the “Payee”) such sum as will after such deduction or withholding has been made leave the Payee with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding, provided that if the Payee shall have assigned or novated the benefit in whole or in part of this Agreement or shall, after the date of this Agreement, have changed its tax residence or the permanent establishment to which the rights under this Agreement are allocated then the liability of the Payer under this Clause 15.11.1 shall be limited to that (if any) which it would have been had no such assignment, novation or change taken place.

15.11.2If either Seller is or becomes aware of any facts making it reasonably likely that the Purchaser will be required to deduct or withhold any amount in respect of the Purchase Consideration (a “Relevant Tax Deduction”) payable to a Seller (the “Withholding Seller”), then that Seller shall, as soon as reasonably practicable, give notice to the other Seller and the Purchaser (including details of the relevant facts and, so far as possible, details of the rate and basis of such withholding).

15.11.3The Sellers and the Purchaser shall, and shall procure that the members of their respective groups shall (at the Withholding Seller’s cost), co-operate with each other in good faith and use all reasonable efforts to reduce or mitigate any Relevant Tax Deduction (or its amount) and /or to enable the Withholding Seller or the relevant Share Seller or Business Seller to obtain any available credit or refund in respect of such Relevant Tax Deduction, including, without limitation, making any available claim under an applicable double taxation treaty.

15.11.4Without prejudice to the generality of Clause 15.11.3, the Sellers and the Purchaser shall co-operate in good faith to establish or agree the amount or basis of calculation of any Relevant Tax Deduction prior to Closing (and in this regard the Purchaser shall consider reasonably any relevant information or evidence provided or obtained by the Sellers) including, if requested by the Withholding Seller and at the Withholding Seller’s expense, by seeking to obtain a ruling or confirmation from a relevant Tax Authority, or obtaining an opinion from reputable local tax counsel or a firm of accountants of international standing satisfactory to the Purchaser (acting reasonably) and instructed jointly by the Withholding Seller and the Purchaser.

15.11.5The Purchaser shall make any Relevant Tax Deduction in the minimum amount required by applicable law, provided that:

(i)if a double taxation treaty between the jurisdiction under the laws of which the Relevant Tax Deduction is required and the jurisdiction of residence of the Withholding Seller or the relevant Share Seller or Business Seller is in force, the Purchaser shall (and shall procure that

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any relevant member of the Purchaser’s Group shall) make any Relevant Tax Deduction in an amount not exceeding the rate specified in such double taxation treaty (which may be nil), provided that the Withholding Seller has provided the Purchaser with such evidence as is required under applicable law to establish the entitlement of the Withholding Seller (or relevant Share Seller or Business Seller) to the benefit of the applicable treaty; and

(ii)if an opinion from reputable local counsel or a firm of accountants of international standing has been obtained at the request of the Withholding Seller as envisaged by Clause 15.11.4, the Purchaser shall (and shall procure that any relevant member of the Purchaser Group shall) make such Relevant Tax Deduction in an amount or on a basis which is consistent with that opinion (which may result in no withholding or deduction), provided that the Withholding Seller has indemnified the Purchaser and any relevant member of the Purchaser’s Group, to the Purchaser’s reasonable satisfaction, against any Liabilities arising (including any interest and penalties) should such opinion be wholly or partly incorrect.

15.11.6The Purchaser shall promptly provide the Withholding Seller with evidence reasonably satisfactory to the Withholding Seller that a Relevant Tax Deduction has been made and an appropriate amount paid to the relevant Tax Authority.

15.11.7If any Relevant Tax Deduction is required an additional sum shall be payable in accordance with Clause 15.11.1 only if and to the extent that such deduction or withholding would not have been required had the Purchaser been resident for Tax purposes only in the United Kingdom.

15.12Structure of indemnity payments

Where it is agreed or determined that an amount is payable by either Seller to the Purchaser or to another member of the Purchaser’s Group pursuant to any indemnity or covenant to pay in this Agreement, or as damages in respect of a breach of this Agreement, then both Sellers and the Purchaser shall consult in good faith for a period of not less than ten Business Days (or such longer or shorter period as the parties may agree) with a view to agreeing an acceptable arrangement for satisfying that obligation to pay the amount so claimed in an efficient manner that does not prejudice the interests of the Purchaser’s Group (which may involve, by way of example only, a subscription for deferred shares in the Purchaser or making an additional contribution to the Purchaser in respect of existing shares in the Purchaser).  If both Sellers and the Purchaser fail to agree on any particular manner of payment during the course of such consultations (but not before), the Seller which is liable to make the payment under or in respect of this Agreement shall make that payment in cash to the person entitled to it.

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15.13Changes to share rights

15.13.1GlaxoSmithKline shall be entitled, by written notice to Novartis and the Purchaser not less than 20 Business Days before the Closing Date, to stipulate that, subject to the parties implementing the changes agreed pursuant to the final sentence of this clause 15.13.1, the A Shares which shall be issued to members of GlaxoSmithKline’s Group under this Agreement shall be split, before Closing, into two classes of Shares, referred to as “A1” and “A2” shares.  To the extent permitted by Applicable Law, GlaxoSmithKline shall be entitled to specify the rights attaching to each of these classes of shares, provided that the rights attaching to the A1 and A2 shares, in aggregate, may not in any respect exceed the rights attaching to the A Shares as set out in the Agreed Terms Shareholders’ Agreement.  If GlaxoSmithKline gives notice of the same, the parties shall promptly agree and implement such changes to the Agreed Terms Shareholders’ Agreement as are necessary to give effect to the division of the A Shares into “A1” and “A2” shares and to ensure that both Sellers will be in the same relative economic and governance position as they would have been in had the A Shares not been divided into two classes.

15.13.2Novartis shall be entitled, by written notice to GlaxoSmithKline and the Purchaser not less than 20 Business Days before the Closing Date, to stipulate that, subject to the parties implementing the changes agreed pursuant to the final sentence of this clause 15.13.2, the B Shares which shall be issued to members of Novartis’s Group under this Agreement shall be split, before Closing, into two classes of Shares, referred to as “B1” and “B2” shares.  To the extent permitted by Applicable Law, Novartis shall be entitled to specify the rights attaching to each of these classes of shares, provided that the rights attaching to the B1 and B2 shares, in aggregate, may not in any respect exceed the rights attaching to the B Shares as set out in the Agreed Terms Shareholders’ Agreement.  If Novartis gives notice of the same, the parties shall promptly agree and implement such changes to the Agreed Terms Shareholders’ Agreement as are necessary to give effect to the division of the B Shares into “B1” and “B2” shares and to ensure that both Sellers will be in the same relative economic and governance position as they would have been in had the B Shares not been divided into two classes.

15.13.3GlaxoSmithKline shall be entitled, by written notice to Novartis and the Purchaser not less than 20 Business Days before the Closing Date, to stipulate that it will only have one shareholder in the Purchaser as at Closing.  If GlaxoSmithKline gives notice of the same, the parties shall promptly agree such changes to the Agreed Terms Shareholders’ Agreement and Agreed Terms Articles of Association as are necessary to give effect to the fact that the A Shares will be held by just one shareholder as at Closing.

15.13.4Novartis shall be entitled, by written notice to GlaxoSmithKline and the Purchaser not less than 20 Business Days before the Closing Date, to

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stipulate that it will only have one shareholder in the Purchaser as at Closing.  If Novartis gives notice of the same, the parties shall promptly consult each other in good faith with a view to agreeing such changes to the Agreed Terms Shareholders’ Agreement and Agreed Terms Articles of Association as are necessary to give effect to the fact that the B Shares will be held by just one shareholder as at Closing

15.14Notices

15.14.1Any notice or other communication in connection with this Agreement (each, a “Notice”) shall be:

(i)in writing in English;

(ii)delivered by hand, fax, or by courier using an internationally recognised courier company.

15.14.2A Notice to GlaxoSmithKline shall be sent to such party at the following address, or such other person or address as GlaxoSmithKline may notify to the Purchaser from time to time:

GlaxoSmithKline

980 Great West Road
Brentford
Middlesex  TW8 9GS
United Kingdom

Fax: +44 (0)208 0476904

Attention: Company Secretary and General Counsel of Consumer Healthcare

with a copy to the GlaxoSmithKline’s Lawyers, marked for the urgent attention of Richard Smith (delivery of such copy shall not in itself constitute valid notice).

15.14.3A Notice to Novartis shall be sent to such party at the following address, or such other person or address as Novartis may notify to the Purchaser from time to time:

Novartis

c/o Novartis International AG
Postfach
CH-4002 Basel
Switzerland

Fax:         +41 613244300

Attention:Head of Legal M&A, Novartis International AG

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with a copy to Novartis’s Lawyers, marked for the urgent attention of Jennifer Bethlehem (delivery of such copy shall not in itself constitute valid notice).

15.14.4A Notice to the Purchaser shall, prior to Closing, be sent to each Seller at the addresses specified above, and, with effect from Closing, be sent to such party at the following address, or such other person or address as the Purchaser may notify to the Sellers from time to time:

The Purchaser

980 Great West Road
Brentford
Middlesex  TW8 9GS
United Kingdom

Fax: +44 (0)208 0476904

Attention:  Company Secretary and General Counsel of Consumer Healthcare

with a copy to GlaxoSmithKline’s Lawyers, marked for the urgent attention of Richard Smith, and to Novartis’s Lawyers, marked for the urgent attention of Jennifer Bethlehem (delivery of such copy shall not in itself constitute valid notice).

15.14.5A Notice shall be effective upon receipt and shall be deemed to have been received:

(i)at the time of delivery, if delivered by hand or courier; or

(ii)at the time of transmission in legible form, if delivered by fax.

15.15Invalidity or Conflict

15.15.1If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, the provision shall apply with whatever deletion or modification is necessary so that the provision is legal, valid and enforceable and gives effect to the commercial intention of the parties.

15.15.2To the extent it is not possible to delete or modify the provision, in whole or in part, under Clause 15.15.1, then such provision or part of it shall, to the extent that it is illegal, invalid or unenforceable, be deemed not to form part of this Agreement and the legality, validity and enforceability of the remainder of this Agreement shall, subject to any deletion or modification made under Clause 15.15.1, not be affected.

15.15.3If there is any conflict between the terms of this Agreement and any of the Ancillary Agreements this Agreement shall prevail (as between the parties between this Agreement and as between any member of the relevant Seller’s Group and any member of the Purchaser’s Group) unless (i) such

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Ancillary Agreement expressly states that it overrides this Agreement in the relevant respect and (ii) that Seller and the Purchaser are either also parties to that Ancillary Agreement or otherwise expressly agree in writing that such Ancillary Agreement shall override this Agreement in that respect.

15.15.4For the avoidance of doubt, nothing in this Agreement is intended to limit or exclude the Liabilities of any party under any Ancillary Agreement (other than, to the extent expressly stated, the Tax Indemnity).

15.16Counterparts

This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any party may enter into this Agreement by executing any such counterpart. Delivery of a counterpart of this Agreement by email attachment shall be an effective mode of delivery.

15.17Governing Law and Submission to Jurisdiction

15.17.1This Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, and any non-contractual obligations arising out of or in connection with the Agreement and such documents shall be governed by and construed in accordance with English law.

15.17.2Each of the parties irrevocably agrees that the courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, and that accordingly any proceedings arising out of or in connection with this Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, shall be brought in such courts. Each of the parties irrevocably submits to the jurisdiction of such courts and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

15.18Appointment of Process Agent

15.18.1Novartis hereby irrevocably appoints Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by Novartis.

15.18.2Novartis agrees to inform the Purchaser in writing of any change of address of such process agent within 28 days of such change.

15.18.3If such process agent ceases to be able to act as such or to have an address in England and Wales, Novartis irrevocably agrees to appoint a new process agent in England and Wales and to deliver to the Purchaser

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within 14 days a copy of a written acceptance of appointment by the process agent.

15.18.4Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law.

This Agreement has been entered into on the date stated at the beginning.

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GLAXOSMITHKLINE PLC
Name:
Function:
NOVARTIS AG
Name:	Name:
Function: Attorney	Function: Attorney
GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED
Name:
Function:

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Schedule 1
Details of the Share Sellers, Shares etc.

Part 1
GlaxoSmithKline Shares

Part A

(1)	(2)
Name	Name of Target	(3)
of Share Seller	Group Company	Shares
Glaxo Group Limited	GlaxoSmithKline Argentina S.A.	84.2%
Setfirst Limited		15.8%
Wellcome Limited (UK)	GlaxoSmithKline Consumer Healthcare S.A.	100%
SmithKline Beecham Limited	GlaxoSmithKline Consumer Healthcare Inc. (Canada)	100% (common shares)
GlaxoSmithKline Inc.		100% (preference shares)
Setfirst Limited	GlaxoSmithKline Consumer Healthcare A/S	100%
Groupe GlaxoSmithKline SAS (France)	GlaxoSmithKline Sante Grand Public SAS	100%
GlaxoSmithKline Beteiligungs GmbH (Germany)	GlaxoSmithKline GmbH & Co. KG	100%
GlaxoSmithKline GmbH & Co. KG	GlaxoSmithKline Healthcare GmbH	100%
GlaxoSmithKline Healthcare GmbH	GlaxoSmithKline Consumer Healthcare GmbH & Co. KG	88.89%

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(1)	(2)
Name	Name of Target	(3)
of Share Seller	Group Company	Shares
GlaxoSmithKline Consumer Holding B.V.		11.11%
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG	Panadol GmbH	100%
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG	Fink GmbH	100%
Fink GmbH	Lingner-Produktion GmbH	100% (DM 2,500,000 shares)
Panadol GmbH		100% (DM 1,600,000 shares)
Panadol GmbH		100% (DM 1,500,000 shares)
Setfirst Limited		100% (DM 80,000 shares)
Setfirst Limited		100% (DM 40,000 shares)
Setfirst Limited		100% (DM 20,000 shares)
Fink GmbH	Fink Naturarznei GmbH	100%
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG	Abtei Pharma Vertriebs GmbH	100%
Setfirst Limited	GlaxoSmithKline Dungarvan Limited	100%
Setfirst Limited	GlaxoSmithKline Consumer Healthcare (Ireland) Limited	100%

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(1)	(2)
Name	Name of Target	(3)
of Share Seller	Group Company	Shares
Glaxo Group Limited	Stafford-Miller (Ireland) Limited	100%
Glaxo Group Limited	GlaxoSmithKline Consumer Healthcare Investments (Ireland) Limited	100%
Setfirst Limited	GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No.2)	100%
SmithKline Beecham Limited (UK)	GlaxoSmithKline Consumer Healthcare SpA	100%
Beecham Group plc (UK)	GlaxoSmithKline Consumer Healthcare Sdn. Bhd.	100%
S.R. One International B.V.	GlaxoSmithKline Consumer Holding B.V.	100%
S.R. One International B.V.	GlaxoSmithKline Consumer Healthcare B.V.	100%
Setfirst Limited	GlaxoSmithKline Consumer Healthcare S.p.z.o.o.	100%
Glaxo Group Limited	GlaxoSmithKline Consumer Healthcare SRL	100%
Glaxo Group Limited	GlaxoSmithKline Consumer Healthcare Pte. Limited	100%
Glaxo Group Limited	GlaxoSmithKline South Africa	100%

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(1)	(2)
Name	Name of Target	(3)
of Share Seller	Group Company	Shares
	(Pty) Limited
Setfirst Limited	GlaxoSmithKline Consumer Healthcare S.A.	100%
Setfirst Limited	GlaxoSmithKline Consumer Healthcare A.B.	100%
Setfirst Limited	GlaxoSmithKline Consumer Healthcare AG	100%
Setfirst Limited	GlaxoSmithKline Consumer Trading Services Limited (UK)	100%
The Wellcome Foundation Limited (UK)	Wellcome Consumer Products Limited	100%
The Wellcome Foundation Limited (UK)	Wellcome Consumer Healthcare Limited (UK)	100%
GlaxoSmithKline LLC	Block Drug Company Inc.	100%
Block Drug Company Inc.	Block Drug Corporation	100%
Block Drug Company Inc.	Stafford-Miller Limited (UK)	100% (common shares)
Wellcome Limited		100% (non-cumulative non-redeemable preference shares)
GlaxoSmithKline LLC	GlaxoSmithKline Consumer Healthcare LLC	100%

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(1)	(2)
Name	Name of Target	(3)
of Share Seller	Group Company	Shares
Block Drug Company Inc.	Stafford-Miller Limited (UK) branches	100%

Part B

(1)	(2)
Name	Name of	(3)
of Share Seller	Joint Venture Entity	Shares
GlaxoSmithKline Consumer Healthcare LLC	GlaxoSmithKline Consumer Healthcare L.P.	0.4%
GlaxoSmithKline LLC		87.6%
Sanofi-Aventis US		12.0%
GSK (China) Investment Co. Limited	The Sino-American Tianjin Smith Kline & French Laboratories Limited	55%
Tianjin Pharmaceutical Group Co. Limited		20%
Tianjin Zhong Xin Pharmaceutical Group Corporation Limited		25%
Setfirst Limited	GlaxoSmithKline Algérie SPA	99%
Nominees / private individuals		1%
Interpharma Dienstleistungen	Laboratoire Pharmaceutique	99%

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Gmbh	Algérien LPA Production SPA
Private individuals		1%
Laboratoire Pharmaceutique Algérien LPA Production SPA	Laboratoire Pharmaceutique Algérien SPA	66%
GlaxoSmithKline SAS		33%
Nominees / private individuals		1%

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Part 2
Novartis Shares

Part A

(1)	(2)
Name	Name of	(3)
of Share Seller	Company	Shares
Novartis AG	Novartis Consumer Health Australasia Pty Ltd	100%
Novartis AG	Novartis Consumer Health S.A.	100%
Novartis AG	Novartis Consumer Health Schweiz AG	100%
Novartis Consumer Health S.A.	N.V. Novartis Consumer Health S.A.	99.33%
Various minority shareholders		0.67%
Novartis Deutschland GmbH	Novartis Consumer Health GmbH	51%
Novartis Consumer Health S.A.		49%
Novartis Farma SpA	Novartis Consumer Health SpA	100%
Novartis Farmacéutica S.A.	Novartis Consumer Health S.A.	100%
Novartis Finance Corporation	Novartis Consumer Health,	80%

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(1)	(2)
Name	Name of	(3)
of Share Seller	Company	Shares
	Inc.
Novartis Consumer Health S.A.		20%
Novartis Groupe France S.A.	Novartis Santé Familiale SAS	100%
Novartis Holding AG	Ex-Lax, Inc.	100%
Novartis Pharma AG	Novartis Consumer Health Canada	100%
Novartis Portugal SGPS Lda	Novartis Consumer Health - Produtos Farmacêuticos	100%
Novartis UK Limited	Novartis Consumer Health UK Limited	100%

Part B

(1)	(2)
Name	Name of	(3)
of Share Seller	Joint Venture Entity	Shares
Novartis Consumer Health S.A.	Novartis Consumer Health-Gebro GmbH	60%
Gebro Pharma GmbH		40%

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Schedule 2
The Properties

Part 1
GlaxoSmithKline Properties

[***]

126

Part 2
Novartis Properties

[***]

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Part 3
Terms Relating to the Company Properties

1.GENERAL PROVISIONS RELATING TO THE COMPANY PROPERTIES

1.1Interpretation

The following further definitions apply in this Part 3 of Schedule 2:

“Company Landlord” means the person for the time being entitled to the reversion immediately expectant on the termination of the term granted by a Company Lease;

“Company Leased Properties” means the properties identified in Parts 1 and 2 of this Schedule 2 which, as at Closing, are held by a Target Group Company under a lease, licence or tenancy agreement, and “Company Leased Property” means any one of them;

“Company Leases” means the leases, licence documents or tenancy agreements under which the Company Leased Properties are held, including all documents supplemental to them, and “Company Lease” means any one of them;

“Company Owned Properties” means the properties identified in Parts 1 and 2 of this Schedule 2 in which the freehold estate (or nearest local law equivalent) is owned by a Target Group Company as at Closing, together (subject to Clause 2.3.2) with all buildings, structures, fixed plant, fixed machinery and fixed equipment thereon (except as excluded in Clause 2.3.2, and “Company Owned Property” means any one of them;

“Company Property Longstop Date” means the date on which a court of competent jurisdiction finally determines that a Company Third Party Consent has been lawfully refused  or cannot be obtained and/or that the Purchaser may not acquire (directly or indirectly, acting through a subsidiary) the relevant Company Property; and

“Company Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from any Company Landlord, superior landlord and/or other third party, including any consents, licences, approvals, permits, authorisations or waivers required by any legislation or regulation or by any statutory, governmental, state, provincial or municipal bodies or authorities which are required under a Company Lease or otherwise in relation to any change of control, shareholders or directors of the relevant Target Group Company, and “Company Third Party Consent” means any one of them.

1.2Company Third Party Consents

1.2.1This paragraph 1.2.1 applies to those Company Properties in relation to which a Company Third Party Consent is required, and if such Company Third Party Consent remains to be obtained as at the Closing Date this paragraph 1.2.1 shall continue to apply until the relevant Company Third

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Party Consent shall have been obtained or until the Company Property Longstop Date.  If any Company Third Party Consents are required:

(i)the Seller in relation to the Target Group Company which owns the Company Property in question shall make an application for, and shall use all reasonable endeavours to obtain each Company Third Party Consent as soon as reasonably practicable following the date of this Agreement and shall at all times keep the Purchaser informed of progress in obtaining such Company Third Party Consents;

(ii)the Purchaser and each Seller shall supply such information and references as may reasonably be required by a Company Landlord, any superior landlord or other relevant third party in connection with a Company Third Party Consent;

(iii)the Purchaser shall be responsible for and undertake to pay, or procure the giving of undertakings to pay the professional and other fees of any Company Landlord, any superior landlord or other relevant person (including any Tax or disbursements in respect of such fees but excluding any Tax on the actual net income, profit or gains of the Company Landlord, any superior landlord or any other relevant person) properly incurred in connection with any application for Company Third Party Consents, whether or not such Company Third Party Consents are given; and

(iv)in respect of the period after Closing only, the Purchaser shall enter into such covenants for the payment of the rent under the Company Lease and for the observance and performance of the covenants and conditions contained in the Company Lease as may reasonably be required by the Company Landlord, any superior landlord or other relevant third party.

1.2.2Each Seller shall give written notice to the other Seller as soon as reasonably practicable after obtaining any Company Third Party Consents which shall be accompanied by a copy of such consent.

1.2.3Save as set out in paragraph 1.2.1(iii) of this Part 3 of Schedule 2, the Seller in relation to the Target Group Company which owns the Company Property in question shall pay any moneys or provide or procure the giving of any guarantees or other security, in each case as may be lawfully required by a Company Landlord, superior landlord or other relevant third party in connection with the obtaining of the Company Third Party Consents, provided that the Purchaser shall indemnify and keep indemnified that Seller in an amount equal to:

(i)any moneys required to be paid by that Seller pursuant to this paragraph; and

(ii)any Liabilities under any guarantees or other security given or procured by that Seller pursuant to this paragraph 1.2.3 and arising out of, or in

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connection with, an act or omission on the part of the Purchaser or (following Closing) the relevant Target Group Company,

and where the Company Landlord, superior landlord or other relevant third party lawfully requires any guarantees or other security to be given by the person who is acquiring a membership interest in respect of the relevant Target Group Company, the Purchaser shall provide or procure the giving of any such guarantees or security.

1.3Company Third Party Consent not Obtained

1.3.1If a Company Third Party Consent has been refused or otherwise not obtained within 12 months following the Closing Date, the Sellers may (acting reasonably) agree that an application is to be made to a court of competent jurisdiction that the relevant Company Third Party Consent has been unreasonably withheld or delayed.

1.3.2If an application is to be made to a court of competent jurisdiction pursuant to paragraph 1.3.1 of this Part 3 of Schedule 2:

(i)the proceedings shall be brought by, and prosecuted at the expense of the Purchaser;

(ii)the Sellers shall provide all such assistance in connection with such proceedings as the Purchaser (acting reasonably) may require in the interests of obtaining the Company Third Party Consent; and

(iii)provided that the Seller has complied with its obligation under paragraph 1.2.1(i) of this Part 3 of Schedule 2, the Purchaser shall indemnify and keep indemnified the Seller for any costs and expenses properly incurred in connection with any such assistance provided by the Seller.

1.3.3If a Company Third Party Consent has not been obtained by the Company Property Longstop Date then the relevant Seller in relation to the Target Group Company which owns the Company Property in question shall indemnify and keep indemnified the Purchaser against all Losses arising out of or in connection with the failure to obtain such Company Third Party Consent.

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Part 4
Terms Relating to the Transferred Properties

1.GENERAL PROVISIONS RELATING TO THE TRANSFERRED PROPERTIES

1.1Interpretation

The following further definitions apply in this Part 4 of Schedule 2:

“Expert” has the meaning given to it in paragraph 1.3.2(i) of this Part 4 of Schedule 2;

“Landlord” means the person for the time being entitled to the reversion immediately expectant on the termination of the term granted by a Lease;

“Leases” means the leases, licences or tenancy agreements under which the Transferred Leased Properties are held by the relevant member of the Seller’s Group, including all documents supplemental to them, and “Lease” means any one of them;

“Letting Document” means any lease, licence or tenancy agreement to which a Transferred Property is subject;

“Licence” means a right in favour of the Purchaser and all persons authorised by it to occupy the Licensed Premises during the Licence Period pursuant to this Part 4 of Schedule 2;

“Licence Fee” means the payments to be made by the Purchaser to the Seller’s Group pursuant to paragraph 1.4.4 of this Part 4 of Schedule 2;

“Licence Period” means a period, which may be different for each of the Licensed Premises, commencing on the Closing Date and ending on the earliest of the following dates:

(i)the date on which this Agreement is terminated by whatever means whether in whole or in relation to the relevant Licensed Premises;

(ii)the date immediately preceding the date on which the term of the relevant Lease ends by whatever means;

(iii)the date of Property Transfer Completion in relation to the relevant Transferred Property; and

(iv)the Property Longstop Date;

“Licensed Premises” means any of the Transferred Properties for which all relevant Property Third Party Consents have not been obtained prior to, or at, the Closing Date;

“President” has the meaning given to it in paragraph 1.3.2(ii) of this Part 4 of Schedule 2;

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“Property Agreed Terms” means a transfer in the terms agreed between the Sellers, the Purchaser and any relevant third party or determined pursuant to paragraph 1.3.2 of this Part 4 of Schedule 2 and signed for identification by or on behalf of the Sellers and by or on behalf of the Purchaser from time to time before or after the date of this Agreement, with such alterations as may be agreed from time to time in writing between the Sellers, the Purchaser and any relevant third party;

“Property Longstop Date” means the date on which a court of competent jurisdiction finally determines that a Property Third Party Consent has been lawfully refused;

“Property Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from any Landlord, superior landlord and/or other third party, including any consents, licences, approvals, permits, authorisations or waivers required by any legislation or regulation or by any statutory, governmental, state, provincial or municipal bodies or authorities for or in connection with the transfer of a Transferred Property by the relevant member of the Seller’s Group to the Purchaser and includes (where the context so admits) Sublease Consents;

“Property Transfer Completion” means the completion of the transfer of a Transferred Property under this Agreement, where such completion does not take place on the Closing Date because any relevant Property Third Party Consents have not been obtained on or prior to such date;

“Property Transfer Completion Date” means the date of Property Transfer Completion in accordance with paragraph 1.7 of this Part 4 of Schedule 2;

“Registered Title” means the registered title relating to a Transferred Property;

“Sublease Consent” has the meaning given to it in paragraph 1.11.2 of this Part 4 of Schedule 2;

“transfer”, for the purposes of this Part 4 of Schedule 2 only, means in respect of a Transferred Leased Property, the transfer or assignment of the relevant Lease or Leases, and in the case of a Transferred Owned Property the transfer thereof, and “a transfer” means and includes any instruments, deeds or agreements effecting such transfer;

“Transferred Leased Properties” means the leasehold properties identified in Parts 1 and 2 of this Schedule 2 which are not owned by a Target Group Company as at Closing, and “Transferred Leased Property” means any one of them; and

“Transferred Owned Properties” means the properties identified in Parts 1 and 2 of this Schedule 2 in which the freehold estate (or nearest local law equivalent) is not owned by a Target Group Company as at Closing, together (subject to Clause 2.3.2) with all buildings, structures, fixed plant, fixed machinery and fixed equipment thereon (except as excluded in Clause 2.3.2), and “Transferred Owned Property” mean any one of them.

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1.2Each of the Transferred Properties and/or the Leases thereof shall be transferred subject to the terms set out in this Part 4 of Schedule 2 and all other applicable terms of this Agreement.

1.3Pre-Closing

1.3.1Prior to Closing, the Business Sellers and the Purchaser shall agree (acting reasonably) the form of all documents on Property Agreed Terms necessary for the transfer of each of the Transferred Properties pursuant to the terms set out in this Part 4 of Schedule 2 and all other applicable terms of this Agreement.

1.3.2Any dispute arising out of or connected with paragraph 1.3.1 of this Part 4 of Schedule 2 which is not resolved by agreement between the parties within nine months of such dispute arising shall be referred for and resolved by expert determination as follows:

(i)either Seller may initiate an expert reference under this provision by proposing to the other Seller the appointment of an expert (the “Expert”);

(ii)the Expert shall either be the nearest equivalent to a chartered surveyor in the relevant jurisdiction or (in relation to legal issues) a single QC (or equivalent), in each case with no less than 15 years’ post-qualification experience in commercial real estate in the relevant jurisdiction chosen by agreement between the Sellers or, failing agreement within 14 days of the initiation of the reference, by the President for the time being of the relevant professional body to which the Expert belongs (the “President”) on the application of either Seller;

(iii)the Sellers shall request that the Expert determines the referred dispute within ten days of receiving the reference;

(iv)if the Expert has been appointed but is unable or unwilling to complete the reference, another Expert shall be appointed by agreement between the Sellers or, failing agreement within 7 days of the parties being notified that the Expert is unable or unwilling to complete the reference, by the President on the application of either party;

(v)the Expert shall act as an expert and not as an arbitrator;

(vi)the Sellers shall have the right to make representations and submissions to the Expert, but there will be no formal hearing;

(vii)the Sellers shall make all relevant documents and information within their control available to the Expert;

(viii)the costs of the Expert shall be borne by the Sellers in equal shares; and

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(ix)the decision of the Expert shall, in the absence of fraud or manifest error, be final and binding on the parties.

1.3.3This paragraph 1.3.3 applies to those Transferred Properties in relation to which a Property Third Party Consent is required and if such Property Third Party Consent remains to be obtained as at the Closing Date this paragraph 1.3.3 shall continue to apply until the relevant Property Third Party Consent shall have been obtained or until the Property Longstop Date. If any Property Third Party Consents are required:

(i)the Seller in relation to the Transferred Property in question shall make an application for, and shall use all reasonable endeavours to obtain each Property Third Party Consent as soon as reasonably practicable following the date of this Agreement for the transfer of the Transferred Property and shall, at all times, keep the Purchaser and the other Seller informed of progress in obtaining such Property Third Party Consents;

(ii)the Purchaser and each Seller shall supply such information and references as may reasonably be required by a Landlord, any superior landlord or other relevant third party in connection with a Property Third Party Consent;

(iii)in respect of the period after Closing only, the Purchaser shall enter into such covenants for the payment of the rent in respect of the Transferred Leased Properties and for the observance and performance of the covenants and conditions on the part of the lessee contained in any Lease as may reasonably be required by the Landlord, any superior landlord or other relevant third party;

(iv)if reasonably required by a Landlord, any superior landlord or any other relevant third party, the Purchaser shall provide a rent deposit or the Purchaser shall procure that a surety acceptable to such person guarantees the Purchaser’s obligations under the Lease following the transfer of the relevant Transferred Leased Property; and

(v)the Purchaser shall be responsible for and undertake to pay, or procure the giving of undertakings to pay the professional and other fees of any Landlord, any superior landlord or other relevant person (including any Tax or disbursements in respect of such fees but excluding any Tax on the actual net income, profit or gains of the Landlord, any superior landlord or any other relevant person) properly in connection with any application for Property Third Party Consents, whether or not such Property Third Party Consents are given.

1.3.4Each Seller shall give written notice to each other Seller as soon as reasonably practicable after obtaining any Property Third Party Consents which shall be accompanied by a copy of such consent.

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1.3.5Subject to the Purchaser complying with its obligations under paragraphs 1.3.3(iii) to (v) of this Part 4 of this Schedule 2, the Seller in relation to the Transferred Property in question shall pay, or shall procure that a member of the Seller’s Group pays, any moneys or provide or procure the giving of any guarantees or other security, in each case as may be lawfully required by a Landlord, superior landlord or other relevant third party in connection with the obtaining of the Property Third Party Consents, provided that the Purchaser shall indemnify and keep indemnified such Seller in an amount equal to:

(i)any moneys required to be paid or procured to be paid by the Seller pursuant to this paragraph; and

(ii)any Liabilities under any guarantees or other security given or procured by the Seller pursuant to this paragraph and arising out of, or in connection with, an act or omission on the part of the Purchaser.

1.4Licence

1.4.1In the event that any Property Third Party Consents are not obtained on or before the Closing Date, notwithstanding the terms of the Leases, the Seller shall procure that the owner of the Transferred Property in question allows the Purchaser to occupy the Licensed Premises for the Licence Period relating to the relevant Licensed Premises on the terms set out in this paragraph 1.4.

1.4.2The Purchaser acknowledges that the grant of each Licence may amount to a breach of the terms of the relevant Lease.

1.4.3The Licence of each Licensed Premises is granted:

(i)subject to all of the matters to which the relevant Leases relating to the Transferred Leased Property are  subject;

(ii)subject to the matters referred to in the Registered Title and the Letting Documents;

(iii)out of whatever right, title and interest that the owner of the Transferred Property has in the Licensed Premises and/or under the relevant Lease;

(iv)in such state of repair and condition as the Licensed Premises may be in as at the date on which the relevant Licence is granted; and

(v)without making any statement or representation that the owner of the Transferred Property is entitled to grant it.

1.4.4From Closing and pending Property Transfer Completion, the Purchaser shall pay to the owner of the Transferred Property in question a “Licence Fee” equivalent to:

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(i)all rents and other charges (including VAT due thereon under the relevant Lease where payable at the date of this Agreement by the relevant owner) payable in respect of the Licensed Premises; and

(ii)all outgoings (including VAT due thereon under the relevant Lease) (including, but not limited to, rates, service charges, management charges, levies, air-conditioning charges, insurance, heating, electricity, gas, telecommunications and other services and the cost of complying with fire and other statutory regulations) payable by the relevant owner in respect of the Licensed Premises or charged upon the owner or occupier of the Licensed Premises,

such payments to be made not less than ten Business Days before any such sum falls due subject to the Seller in relation to the Transferred Property in question giving the Purchaser not less than ten Business Days’ prior written notice to that effect. To the extent that there has been a prepayment at the Closing Date of the amounts in paragraphs 1.4.4(i) and (ii) of this Part 4 of Schedule 2 by the owner of the Transferred Property which is not otherwise accounted for in the Closing Statement, the Purchaser shall pay to such owner within ten Business Days of written demand an amount equal to the amount of such prepayment in respect of any period after the Closing Date.

1.4.5Throughout the Licence Period, the Purchaser shall, in respect of the Licensed Premises only:

(i)keep the Licensed Premises in no worse a state of repair than they are in at the Closing Date, fair wear and tear excepted;

(ii)observe and perform the covenants and conditions on the part of the lessee in the relevant Lease under which the Licensed Premises are held (other than in relation to the payment of rent and other charges paid as part of the Licence Fee and subject to paragraph 1.4.5(i) of this Part 4 of Schedule 2); and

(iii)use the Licensed Premises only in accordance with the terms of the Lease of the relevant Licensed Premises and in compliance with the law and regulations where the relevant Licensed Premises is located (save for any such law or regulation that prohibits the use of the Licensed Premises without a Property Third Party Consent having been obtained).

1.4.6The Purchaser and each Seller agrees that:

(i)the Licence is personal to the Purchaser and may only be exercised by the Purchaser and those authorised by it;

(ii)(subject to paragraph 1.4.5 of this Part 4 of Schedule 2) the Purchaser and all persons authorised by it are permitted to have the unrestricted use and occupation of the Licensed Premises; and

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(iii)no relationship of landlord and tenant is created as a result of the Licence.

1.4.7If a Landlord or any other relevant third party commences proceedings, raises any lawful objection or takes any other action in connection with the Purchaser’s occupation or use of any of the Licensed Premises pending the obtaining of the relevant Property Third Party Consents, the Purchaser and the Sellers shall meet and negotiate in good faith in order to determine which steps should be taken in respect of the relevant Transferred Property.

1.4.8Throughout the Licence Period, the Purchaser shall, in respect of the Licensed Premises only, indemnify and keep indemnified the owner of the Transferred Property in question from and against any Licence Fee, any Losses arising from the Licence and/or as a result of the occupation of the Licensed Premises by the Purchaser.

1.4.9The Purchaser and the Sellers shall each inform each other forthwith of any notice received by any of them in relation to any of the Licensed Premises from the Landlord or any other third party.

1.5Determination of Licence

1.5.1The Licence in relation to any one or more of the Licensed Premises shall determine:

(i)immediately if the Property Longstop Date occurs;

(ii)by the Seller in relation to the Transferred Property in question giving at least three months’ prior written notice to the Purchaser if the Purchaser fails to make the payment of the Licence Fee for a period of one month or is otherwise in material breach of the provisions of the Licence for a continuous period of one month following written notification by such Seller to the Purchaser of the same, and in either case the Purchaser has failed to remedy the relevant failure to pay or to remedy the  breach prior to the expiry of the three month notice period or, if the breach is not capable of remedy within such three month period, the Purchaser has failed to commence to remedy the breach within that period and thereafter failed diligently to continue with such remedy; or

(iii)if the relevant Landlord in relation to a Transferred Leased Property prosecutes forfeiture proceedings (or the nearest local law equivalent) as a result of the occupation by the Purchaser of the Licensed Premises then the parties shall either:

(a)agree that the Licence shall determine on a date to be agreed between the parties (acting reasonably); or

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(b)in the absence of such agreement, either party may require a QC (or equivalent) with no less than 15 years’ post-qualification experience in commercial real estate in the relevant jurisdiction to be appointed (such appointment to be by agreement between the Sellers or, failing agreement, within 14 days, by the President (as defined in paragraph 1.3.2(ii) of this Part 4 of Schedule 2)). Should the QC determine that there is more than a 50% chance of the proceedings in question resulting in the Lease in question being forfeited (or equivalent), then the Licence shall determine on a date to be agreed between the Sellers (acting reasonably) in order to afford the relevant Seller the opportunity to apply for relief from forfeiture or otherwise challenge the proceedings in question on the basis that any breach resulting from the grant of the Licence has been cured,

provided that this paragraph 1.5.1(iii) shall at all times operate without prejudice to paragraphs 1.4.7, 1.5.1(i) and 1.12.

1.5.2If, for whatever reason, the Licence Period comes to an end in relation to any of the Licensed Premises then:

(i)the Licence insofar as it relates to the relevant Licensed Premises shall be severable from the remainder of this Agreement and this Agreement shall otherwise remain in full force and effect;

(ii)the Purchaser shall be entitled to a refund in respect of any Licence Fee prior to the termination of the Licence for the Licensed Premises and which relates to the period following termination of the Licence;

(iii)it shall not prejudice or affect any claim in respect of any prior breach of this Agreement by the Purchaser in respect of that Licensed Premises; and

(iv)unless the Licence Period comes to an end due to Property Transfer Completion in respect of the relevant Licensed Premises taking place, the Purchaser shall:

(a)vacate the Licensed Premises forthwith;

(b)remove from the Licensed Premises all items belonging to it;

(c)leave the Licensed Premises in a clean and tidy condition; and

(d)at the request of the Seller in relation to the Transferred Property in question, reinstate the Licensed Premises or any part or parts thereof to at least as good a state of repair or condition as at Closing, fair wear and tear excepted.

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1.6Closing

1.6.1The transfer of the Transferred Property shall only take place on Closing to the extent that all necessary Property Third Party Consents in respect of the relevant transfer have been obtained prior to the Closing Date.

1.6.2Completion of the transfer of the Transferred Property shall take place at such place (or places) as the parties may agree.

1.7Property Transfer Completion

Property Transfer Completion in respect of a Transferred Property shall take place on the date falling 15 Business Days following the grant of all relevant Property Third Party Consents for such Transferred Property or on such other date as the parties shall agree acting reasonably (but not before the Closing Date).

1.8General Transfer Provisions

1.8.1Each Seller shall procure that each member of that Seller’s Group shall transfer the Transferred Property to the Purchaser subject to the terms set out in this Part 4 of Schedule 2 and all other applicable terms of this Agreement on the Closing Date or (if later) Property Transfer Completion.

1.8.2The Transferred Property is sold subject to the Letting Documents (if any) but otherwise with vacant possession together with all buildings, structures, fixed plant, fixed machinery and fixed equipment thereon except as excluded in Clause 2.3.2.

1.8.3The transfer of each Transferred Property shall contain covenants with the relevant transferor by the Purchaser to comply with the:

(i)obligations arising from the matters mentioned in the Registered Title; and

(ii)obligations on the part of the landlord arising under the Letting Documents (if any),

insofar as the relevant transferor may remain liable directly or indirectly for them after the Closing Date or Property Transfer Completion (as the case may be) and to indemnify and keep indemnified the relevant transferor against any non-compliance, and a further covenant by the Purchaser to indemnify the relevant transferor against any liability arising under an authorised guarantee agreement (or equivalent) entered into by the relevant transferor.

1.8.4The transfer of each Transferred Property shall be on the nearest equivalent terms that exist under local (national) law to a transfer of real property in England and Wales made with full title guarantee save that where it is a Transferred Leased Property the covenant set out in Section 4(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1994 shall

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not extend to the imposition on the transferor of liability for any subsisting breach of obligation relating to the physical state of the Transferred Leased Property.

1.8.5On the Closing Date or Property Transfer Completion (as the case may be) in respect of each of the Transferred Properties:

(i)each Seller shall procure that each relevant transferor delivers to the Purchaser a duly executed transfer in respect of the relevant Transferred Property on Property Agreed Terms; and

(ii)the Purchaser shall deliver to the Seller a duly executed transfer in respect of the relevant Transferred Property on Property Agreed Terms.

1.8.6The Purchaser shall  procure that all transfers are duly stamped, filed or registered at the relevant registries on a timely basis and within the statutory period (if any) and the Seller in relation to the Transferred Property in question shall promptly assist the Purchaser with any requisitions or enquiries raised in relation thereto.  Any notarial fees and registration, stamp and transfer taxes and duties (or their equivalents in any jurisdiction) in connection with such transfers shall be borne as provided in Clause 15.8.

1.9Subjections

Notwithstanding anything contained in this Agreement:

1.9.1Each of the Transferred Properties is transferred subject to and (where appropriate) with the benefit of the following matters (to the extent applicable under the laws of the relevant jurisdiction):

(i)any unregistered interest which overrides first registration under Schedule 1 of the Land Registration Act 2002 (the “2002 Act”) and any interest which fall within Section 11(4)(c) of the 2002 Act and any unregistered interests which override registered dispositions under Schedule 3 of the 2002 Act or their local jurisdiction equivalent (if any);

(ii)such unregistered interests as may affect that Transferred Property to the extent and for so long as they are preserved by the transitional provisions of Schedule 12 of the 2002 Act or its local jurisdiction equivalent (if any);

(iii)all matters contained or referred to in the Letting Documents;

(iv)all matters contained or referred to in the Property, Proprietorship and Charges registers (or equivalent entries and registers) of the Registered Title relating to that Transferred Property (except fixed and floating charges securing money or liabilities);

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(v)all exceptions, reservations, rights, easements, quasi-easements, wayleaves, rent charges, covenants, conditions, declarations, leases, tenancies (including statutory tenancies), licences and agreements affecting the same;

(vi)(in the case of a leasehold property) the rents, covenants and conditions reserved by or contained in the Lease under which the same is respectively held;

(vii)all local land charges (whether or not registered before the date of this Agreement) and all matters capable of registration as local land charges (whether or not actually registered) or their local jurisdiction equivalent (if any);

(viii)all notices served and orders, demands, proposals, or requirements made by any local or other public or competent authority;

(ix)all actual or proposed orders, directions, plans, notices, instruments, charges, restrictions, conditions, agreements or other matters arising under any statute relating to town and country planning and any laws and regulations intended to control or regulate the construction, demolition, alteration or change of use of land or buildings or to preserve or protect the environment;  and

(x)matters which are fairly disclosed by the Disclosure Letter.

1.9.2The Purchaser is deemed to acquire with full knowledge of the matters referred to in paragraph 1.9.1 of this Part 4 of Schedule 2.

1.9.3Each Seller shall procure that any and all financial charges affecting the Transferred Properties will be discharged on or before the date on which such Transferred Property is to be transferred to the Purchaser, and shall provide to the Purchaser and the other Seller such evidence as the Purchaser or the other Seller may reasonably require in order to satisfy itself that such discharge has been effected and to remove any notices or entries in respect of such charges from any relevant register.

1.9.4The Sellers do not give any warranty as to the use or area of any of the Transferred Properties and shall not be required to define the boundaries of any of the Transferred Properties. The transfer of the Transferred Properties shall not be annulled, nor shall any compensation be allowed or payable, in respect of any error in respect of any such matters.

1.9.5On the date on which the transfer of each Transferred Property is completed, the Seller in relation to the Transferred Property in question shall deliver to the Purchaser (or such other third party as the Purchaser may reasonably direct) all of the original documents in the possession of the Seller or the transferor of the Transferred Property in question in respect of each of the Transferred Properties.

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1.9.6The Purchaser shall not raise any requisition on matters arising after the date of this Agreement, except where the subject matter of the requisition is registered at the Land Registry (or equivalent local registry) after the date of this Agreement and does not relate to any matter referred to in paragraph 1.9.1 of this Part 4 of Schedule 2.

1.9.7To the extent that deposit guarantees have been given by a Seller or any member of a Seller’s Group in respect of any Transferred Property and/or insofar as a Seller or any member of a Seller’s Group retains any residual or ongoing liabilities or obligations including performance guarantees in connection with the Transferred Property, the Purchaser shall use all reasonable endeavours to procure that the Seller or the relevant member of the Seller’s Group is released from all deposit guarantees and all other  residual or ongoing liabilities or obligations and, insofar as the counterparties thereto shall properly and lawfully refuse to give any such release, the Purchaser shall indemnify and keep indemnified that Seller (or the member of that Seller’s Group) in an amount equal to any Liabilities under any such residual or ongoing liabilities or obligations arising out of, or in connection with, an act or omission on the part of the Purchaser.

1.10Insurance

The Sellers shall procure that any existing insurance (if any) on the Transferred Properties shall be maintained and that any such insurance will be cancelled with effect from the Closing Date or, if later, the date of Property Transfer Completion (as the case may be) unless agreed otherwise with the Purchaser.

1.11Grant of Sublease

If a Seller is unable to obtain a Property Third Party Consent from a Landlord for the transfer of a Transferred Leased Property the provisions of this paragraph 1.11 of Part 4 of Schedule 2 shall apply:

1.11.1where a Lease permits a sublease to be granted without the requirement for any Property Third Party Consent from the Landlord, the Seller shall procure that the owner of the Transferred Property in question shall grant to the Purchaser a sublease of the Transferred Leased Property on the same rent and other terms and conditions as the Lease of the Transferred Leased Property with such changes as are appropriate and agreed between the Seller in relation to the Transferred Leased Property in question and the Purchaser acting reasonably and the term of the sublease shall be the term of such Lease less one day; and

1.11.2where the Transferred Leased Property is held from a Landlord on terms which require the consent of the Landlord to:

(i)the grant of a sublease; or

(ii)the terms on which a sublease is granted,

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the Seller in relation to the Transferred Leased Property in question shall use all reasonable endeavours to obtain such consent (“Sublease Consent”) from such Landlord. Where the Seller is able to obtain the appropriate Sublease Consent (or, where applicable, the court of competent jurisdiction referred to in paragraph 1.12.1 of this Part 4 of Schedule 2 declares that the Sublease Consent has been unreasonably withheld or delayed), the Seller shall procure that the owner of the Transferred Property in question shall grant to the Purchaser a sublease of the Transferred Leased Property on the same rent and other terms and conditions as the Lease of the Transferred Leased Property with such changes as are appropriate and agreed between the Seller and the Purchaser acting reasonably and the term of the sublease shall be the term of such Lease less one day.

1.12Property Third Party Consent not Obtained

1.12.1If a Property Third Party Consent (and, where applicable, a Sublease Consent) has been refused or otherwise not obtained within 12 months following the Closing Date, the Sellers may (acting reasonably) agree that an application is to be made to a court of competent jurisdiction that the relevant Property Third Party Consent has been unreasonably withheld or delayed.

1.12.2If an application is to be made to a court of competent jurisdiction pursuant to paragraph 1.12.1 of this Part 4 of Schedule 2:

(i)the proceedings shall be brought by, and prosecuted by the relevant Seller;

(ii)the Purchaser and the other Seller shall provide all such assistance in connection with such proceedings as the relevant Seller (acting reasonably) may require in the interests of obtaining the Property Third Party Consent; and

(iii)provided that the Seller has complied with its obligations under paragraphs 1.3.3(i) and 1.11.2 of this Part 4 of this Schedule 2, the Purchaser shall indemnify and keep indemnified the Sellers for any costs and expenses properly incurred in connection with any such assistance provided by them and in bringing and prosecuting proceedings under this paragraph.

1.12.3If a Property Third Party Consent has not been obtained by the Property Longstop Date then the relevant Seller in relation to the Transferred Property in question shall indemnify and keep indemnified the Purchaser against all Losses arising out of or in connection with the failure to obtain such Property Third Party Consent.

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Part 5
Site Separation

1.1.1Interpretation

The following further definition applies in this Part 5 of Schedule 2:

“Separation Properties” means any Property or part of a Property which, as at the date of this Agreement, forms part of a wider building or site that is used by both the Target Group and a Seller’s retained business.

1.2Separation

1.2.1As soon as reasonably practicable following the date of this Agreement, and in any event prior to Closing, the Sellers and the Purchaser will agree the form of transfers, leases, facilities services arrangements or other agreements (the “Separation Documents”) to reflect the arrangements described in this Part 5 of Schedule 2.

1.2.2Without prejudice to the principles as to the preservation of arrangements existing at the date of this Agreement set out in the remainder of this paragraph, all Separation Documents are to be negotiated between the parties in good faith, on an arm’s length basis and on reasonable commercial terms.

1.2.3The Separation Documents will enable the owner of the Separation Property and the relevant Seller’s retained business to continue to use the Property and the adjoining or neighbouring property of that Seller’s retained business respectively in the same manner (including as to terms of use/occupation and costs) as they are used at the date of this Agreement and will incorporate such other provisions (including as to site security or physical site separation) as the Sellers may agree are fair and reasonable in all the circumstances.

1.2.4Each Separation Document will grant and reserve rights to continue to use all roads, access ways and conduits used and enjoyed by the relevant Separation Property (or the adjoining or neighbouring property of the relevant Seller’s retained business, as the case may be) at the date of this Agreement on terms reflecting as closely as possible their use at the date of this Agreement.

1.2.5Each Separation Document is to be in a form appropriate to the jurisdiction in which the relevant Separation Property is situated and will comply with all formalities and other requirements in the relevant jurisdiction.

1.2.6The Separation Documents which are underleases will follow the form of the relevant headlease (other than in respect of the amount of rent and the length of term) insofar as is reasonably appropriate.

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1.2.7In the event of any disagreement under or in respect of this paragraph 1.2, the matter may be referred by either Seller to  the person (or persons) within each Seller with ultimate responsibility (on a national level) for property matters within the jurisdiction in question, and in the event that the matter is not resolved by agreement between the parties within three months, may be referred by either party to an independent lawyer in the relevant jurisdiction, being a partner in a reputable law firm with not less than ten years’ post-qualification experience in dealing with commercial property transactions (the “Independent Lawyer”).  In the absence of agreement between the Sellers, the Independent Lawyer is to be appointed by the President of the Law Society (or other body responsible for regulation of the legal profession in the relevant jurisdiction) on the application of either party.

1.2.8The Independent Lawyer will act as an expert and not as an arbitrator and his decision will be binding on the parties.

1.2.9The Independent Lawyer may obtain any additional professional advice in order to reach a decision as he may deem necessary or desirable.

1.2.10The cost of the determination by the Independent Lawyer will be met by the Sellers in equal shares.

1.3Preservation of Rights

1.3.1If following Closing the Purchaser or either Seller shall be of the view that a Separation Document omits the grant or reservation of any rights (including any rights of access, rights to use facilities and/or rights in respect of any item of apparatus or equipment) which is required for the purposes of the business carried out at a Separation Property or the adjoining or neighbouring property of the relevant Seller’s retained business (each such right being an “Omitted Right or Easement”), it shall give the notice referred to in paragraph 1.3.2 and the Sellers (acting reasonably and in the utmost good faith) will meet and attempt to reach agreement with regard to any amendments needed to the relevant Separation Document, or any additional document or documents that are necessary.

1.3.2If any party identifies any Omitted Rights or Easements, that party shall give written notice thereof to the other parties as soon as reasonably practicable and in any event within two years of the Closing Date (time to be of the essence).

1.3.3Any dispute or difference as to Omitted Rights or Easements shall be resolved in the manner set out in paragraph 1.2.7, and as soon as practicable following agreement or determination as to any Omitted Rights or Easements (and in any case within two months of such agreement or determination) the Purchaser and the Sellers will procure to be executed any deeds or other documents required in order to give effect to the agreed or determined position.

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2.GENERAL

2.1The Purchaser and each of the Sellers acknowledge and undertake to each other that:

2.1.1notwithstanding that certain of the arrangements provided for or envisaged by this Part 5 of Schedule 2 (including the reference to the grant or reservation of rights in paragraph 1.3.1) may not be capable of being directly or appropriately applied in jurisdictions other than England and Wales (“Other Jurisdictions”) under the laws, established law practices and procedures of those jurisdictions, the commercial principles underlying the provisions and intentions of this Part 5 of Schedule 2 shall be applied as closely as possible in the Other Jurisdictions to produce as nearly as possible the same commercial results (taking into account any Applicable Law) as would be achieved in England and Wales on the application of those arrangements;

2.1.2to the extent necessary in order to achieve in Other Jurisdictions the commercial results intended by this Schedule, Clause 15.1 will apply; and

2.1.3to the extent required to give effect to these provisions each party agrees to ensure that any relevant local registration, filing or other requirement is complied with as soon as practicable, and in any event within the requisite time period for such registration, filing or other requirement to be submitted, carried out or otherwise completed (as the case may be).

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Schedule 3
Excluded Assets

Part 1
GlaxoSmithKline Excluded Assets

1The GlaxoSmithKline Excluded Businesses and the shares in the companies mentioned in the definition of GlaxoSmithKline Excluded Businesses.

2Any shares in, and assets of, Horlicks Limited, a private limited company incorporated in the UK, and its successors and assigns and any person Controlled by Horlicks Limited from time to time, including any rights which relate to the Horlicks product in India, Nepal and/or Bhutan.

3The shares that any member of GlaxoSmithKline’s Group holds in Aspen Pharmacare Holdings Limited.

4The manufacturing and production facilities at:

(i) Buenos Aires, Argentina;

(ii) Jacarepagua, Brazil; and

(iii) Pulogadung, Indonesia.

Part 2
Novartis Excluded Assets

1The Novartis Excluded Businesses.

2The land and buildings of Novartis’s Seller’s Group at:

(i)Plot Number (Parzelle) 329, Route de L’Etraz No 6, Switzerland;

(ii)Plot Number (Parzelle) 330, Chemin du Coutelet No10, Switzerland;

(iii)Plot Number (Parzelle)331, Route de L’Etraz No 8, Switzerland;

(iv)Plot Number (Parzelle) 332, Le Coutelet, Switzerland; and

(v)Plot Number (Parzelle) 333, Le Coutelet Sur la CroixRoute de L’Etraz No 6, Switzerland.

3Subject to paragraph 11.8 of Schedule 6, the Endo Excluded Contract.

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4That part of the Novartis OTC Business conducted by Sandoz SPA (or persons Controlled by Sandoz SPA) in Algeria, except, for the avoidance of doubt, the Algerian Distribution Contracts

5That part of the Novartis OTC Business conducted by Saudi Pharmaceutical Distribution Co. Ltd. (or persons Controlled by Saudi Pharmaceutical Distribution Co. Ltd.) in Saudi Arabia, except, for the avoidance of doubt, the Saudi Distribution Contracts.

6Any assets of Novartis Pharma Logistics Inc. (including Vehicles) physically situated in Costa Rica.

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Schedule 4
Product Approvals etc.

Part 1
Terms Relating to the Product Approvals and Product Applications

1.GENERAL PROVISIONS

1.1The Purchaser shall do all things necessary to effect the transfer of each Product Approval and Product Application, including complying with requirements and requests of Governmental Entities with respect to the transfer of each Product Approval and Product Application.

1.2The Marketing Authorisations shall be transferred in accordance with Part 2 of this Schedule 4.

2.PRODUCT APPLICATIONS

2.1The Purchaser shall file or cause to be filed applications for the transfer of each Product Application in each country or territory in which such transfer is required to be submitted as soon as possible after the Closing Date.

2.2Pending the transfer of each Product Application each Seller shall, and shall cause the relevant members of its Group to:

2.2.1upon reasonable request from the Purchaser and at the Purchaser’s expense, reasonably cooperate and coordinate with the Purchaser in relation to the transfer of the Product Applications, including by providing the Purchaser with regulatory documentation concerning the Products owned or controlled by that Seller or any of its Affiliates;

2.2.2perform such acts and services as may be requested by the Purchaser that are reasonably necessary or required by any Governmental Entity to maintain or renew any Product Application or are reasonably necessary for the Purchaser to pursue the regulatory approval for any Product Application, including conducting any studies, including clinical and stability studies, concerning the Products; and

2.2.3notify the Purchaser as soon as is reasonably practicable of any written communication received by such Seller or any member of its Group with respect to any Product Application and shall consult with the Purchaser with respect to such communication and take into account the Purchaser’s views as to the form and content of any communication with any Governmental Entity concerning such Product Application.

3.FEES AND EXPENSES

From and after the Closing Date, the Purchaser shall promptly reimburse the relevant members of each Seller’s Group for all maintenance and renewal fees and similar fees

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paid, and all out of pocket expenses reasonably incurred in connection with the satisfaction of any commitments or obligations by such members of such Seller’s Group with respect to each Product Approval and each Product Application.

4.NOTIFICATION

As soon as a Seller or the Purchaser or any of their respective Affiliates receives notification, if any, of impending approval or approval of the transfer of a Product Application from a Governmental Entity, the notified party or the party whose Affiliate was notified shall inform the other parties of the expected date of appointment or transfer and actual date of appointment or transfer of that Product Application.

5.RESPONSIBILITY FOR TRANSFER

Notwithstanding any other provision of this Agreement, no Seller nor any of its Affiliates shall have any Liability to the Purchaser in the event that the transfer of any Product Application alone results in any further obligations, commitments or Liabilities in relation to such Product Application.

Part 2
Marketing Authorisations Transfer Provisions

1.Transfer Of Marketing Authorisations

Marketing Authorisation Transfer and Marketing Authorisation Re-Registration

1.1Subject to paragraphs 1.2 and 1,3, each Seller and the Purchaser hereby agree they will each use, and will procure that their respective Affiliates will use, all reasonable endeavours to ensure that, as soon as reasonably practicable after the Closing Date:

(i)subject to paragraph 1.1(ii), each Marketing Authorisation shall be transferred in accordance with Applicable Law by the Marketing Authorisation Holder to the Marketing Authorisation Transferee (“Marketing Authorisation Transfer”); and

(ii)where Applicable Law does not permit Marketing Authorisation Transfer, a new marketing authorisation shall be registered in the name of the Marketing Authorisation Transferee to replace the existing Marketing Authorisation (“Marketing Authorisation Re-Registration”) and such Seller shall procure that the relevant Marketing Authorisation Holder takes all necessary steps to withdraw, abandon, cancel or allow to lapse the superseded Marketing Authorisation as soon as practicable after the Marketing Authorisation Re-Registration Date.

1.2The parties agree that the Marketing Authorisations relating to the GlaxoSmithKline Alliance Market Businesses shall be retained by the Marketing Authorisation Holder on Closing, provided that (whether pursuant to the Alliance Market Distribution Agreement or otherwise), in the event that the Purchaser determines that any Alliance Market Territory shall cease to be operated as an Alliance Market Territory by GlaxsoSmithKline, GlaxoSmithKline shall procure that the relevant Marketing

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Authorisation Holder shall transfer the relevant Marketing Authorisations to the Purchaser for nil consideration.

1.3The parties agree that the transfer of any Marketing Authorisation from the Marketing Authorisation Holder to the Marketing Authorisation Transferee in respect of any Delayed Businesses shall not complete until on or after the relevant Delayed Closing Date.

1.4Any Marketing Authorisation Transfer or Marketing Authorisation Re-Registration (as applicable) shall each be effected on a Market-by-Market basis (such that there shall not be any staggered Marketing Authorisation Transfer or Marketing Authorisation Re-Registration (as the case may be) on a Product-by-Product basis in any Market), unless otherwise agreed between the relevant Seller and the Purchaser.

1.5With effect from the Closing Date until the Marketing Authorisation Transfer Date or the Marketing Authorisation Re-Registration Date (as applicable), each Seller shall procure that each Marketing Authorisation Holder shall hold the Marketing Authorisation(s) in its name but for the account, risk and benefit of the relevant Marketing Authorisation Transferee.

Submission of MA Documentation

1.6Without prejudice to paragraph 1.7 below, the Purchaser shall be responsible for preparing and submitting, or for procuring that there is prepared and submitted (in any such case at the Purchaser’s cost and expense), all notices, applications, submissions, reports and any other instruments, documents, correspondence or filings necessary to complete Marketing Authorisation Transfer or Marketing Authorisation Re-Registration (as applicable) (the “MA Documentation”).  The MA Documentation shall be prepared in accordance with Applicable Law as soon as reasonably practicable.

1.7At a Seller’s election, the Purchaser shall procure that advanced drafts of the MA Documentation are submitted to that Seller so as to allow that Seller and/or the Marketing Authorisation Holder a reasonable opportunity to provide comments on such MA Documentation before it is submitted to the relevant Governmental Entity. The Purchaser shall incorporate all comments on such drafts as may reasonably be made by that Seller and/or the Marketing Authorisation Holder PROVIDED THAT the Purchaser shall not be obliged to incorporate any comments if the Purchaser considers, acting reasonably that to do so would materially delay Marketing Authorisation Transfer or Marketing Authorisation Re-Registration (as applicable).

1.8Where under Applicable Law the MA Documentation is required to be submitted to the relevant Governmental Entity:

(i)by the Marketing Authorisation Holder, the Purchaser shall procure that the finalised MA Documentation is provided to the relevant Seller after such MA Documentation is finalised in accordance with paragraph 1.7 above and that Seller shall, in turn, procure that the Marketing Authorisation Holder submits such MA Documentation to the relevant Governmental Entity (the timing and date of such submission to be agreed with the Purchaser) and that Seller shall

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promptly thereafter advise the Purchaser of such submission and provide a copy of the relevant MA Documentation (in the form submitted) to the Purchaser; and

(ii)by the Marketing Authorisation Transferee, the Purchaser shall procure that the relevant Marketing Authorisation Transferee submits the finalised MA Documentation to the relevant Governmental Entity as soon as reasonably after such MA Documentation is finalised in accordance with paragraph 1.7 above and the Purchaser shall promptly thereafter advise the relevant Seller of such submission and provide a copy of the relevant MA Documentation (in the form submitted) to that Seller.

1.9From the Closing Date, each Seller shall procure that the relevant Marketing Authorisation Holder shall, as soon as reasonably practicable, sign any notices, applications, submissions, reports and other instruments, documents, correspondence or filings presented to it by the Purchaser or the relevant Marketing Authorisation Transferee that are necessary to effect Marketing Authorisation Transfer or Marketing Authorisation Re-Registration (as applicable). The Marketing Authorisation Holder shall:

(i)provide notice of its consent to a Marketing Authorisation Transfer or Marketing Authorisation Re-Registration if required by any Governmental Entity; and

(ii)provide to the Purchaser or the relevant Marketing Authorisation Transferee any information or other data or technical or other information in its possession that relates to the relevant Marketing Authorisation and that is required by a relevant Governmental Entity or otherwise reasonably required by the Purchaser or the relevant Marketing Authorisation Transferee to assist the Purchaser or the relevant Marketing Authorisation Transferee to effect the relevant Marketing Authorisation Transfer or Marketing Authorisation Re-Registration; and

(iii)in the event of any request for information or any query from any relevant Governmental Entity in respect of Marketing Authorisation Transfer or the Marketing Authorisation Re-Registration (as applicable), the relevant party receiving such request or query shall provide copies of any such request or query to that Seller or, as the case may be, to the Purchaser.  The Purchaser shall be responsible for preparing, or shall be responsible for procuring that there is prepared, (at the Purchaser’s cost and expense) any response to such a request or query with the intention that such request or query shall be dealt with as promptly and efficiently as possible.  In advance of finalising any such response, the Purchaser shall procure that the relevant response is submitted to that Seller so as to allow that Seller and/or the relevant Marketing Authorisation Holder a reasonable opportunity to provide comments on such response before it is submitted to the Governmental Entity.  The Purchaser shall procure that relevant Marketing Authorisation Transferee (i) shall submit the response to the relevant Governmental Entity as soon as reasonably practicable after the same has been finalised in accordance with this paragraph 1.9(C) and (ii) shall provide a copy of the relevant response (in the form submitted) to such Seller.

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2.OBLIGATIONS PENDING MARKETING AUTHORISATION TRANSFER OR MARKETING AUTHORISATION RE-REGISTRATION

2.1Unless otherwise required by Applicable Law or a relevant Governmental Entity (or unless otherwise agreed in writing by a Seller and the Purchaser), from the Closing Date until the applicable Marketing Authorisation Transfer Date or Marketing Authorisation Re-Registration Date:

(i)each Seller shall:

(A)maintain in force (or procure that there is maintained in force) each Marketing Authorisation, and shall not voluntarily amend, cancel or surrender any Marketing Authorisation unless requested to do so in writing by the Purchaser or required to do so by any Applicable Law or any Governmental Entity;

(B)with the Purchaser’s consent (not to be unreasonably withheld or delayed) progress (or procure that there is progressed) any registrations, variations or renewals to Marketing Authorisations initiated by such Seller (or any other member of such Seller’s Group) prior to the Closing Date or withdraw them upon the request of the Purchaser;

(C)procure that each Marketing Authorisation Holder shall comply with the terms of any Marketing Authorisation and shall notify the Purchaser as soon as reasonably practicable of the details of any variations or renewals initiated following the Closing Date;

(D)inform the Purchaser of any impending renewals of Marketing Authorisations as at the Closing Date and the parties shall discuss in good faith to what extent any such renewal will be pursued or  withdrawn (it being agreed that the Purchaser shall have the final decision in any such matter);

(E)not without the consent of the Purchaser,  initiate any additional variations or amendments to the Marketing Authorisations, except to the extent required by any Governmental Entity or where failure to do so would breach Applicable Law; and

(F)consider in good faith any request by the Purchaser to apply for a new marketing authorisation in respect of a Product PROVIDED THAT if such Seller agrees to submit such application, any costs or expenses incurred by such Seller in making such application shall be for the Purchaser’s account and shall constitute MA Costs;

(ii)without prejudice to the generality of the foregoing paragraph 2.1(i)(c), the Purchaser acknowledges and agrees that each Marketing Authorisation Holder shall be entitled to do (or to procure that there is done) any or all of the following (and the Purchaser acknowledges that, where the relevant Marketing Authorisation Holder so chooses and unless otherwise agreed, responsibility for

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each of the following activities shall rest with the relevant Marketing Authorisation Holder):

(A)pharmacovigilance activities related to the Marketing Authorisations, which activities shall be conducted in accordance with the Applicable Law, the Pharmacovigilance Agreement, and the standards, policies and procedures of the relevant Seller’s Group from time to time in force; and

(B)conducting any and all communications with a Governmental Entity in respect of a Marketing Authorisation (including, without limitation to the generality of the foregoing, attending any meetings with relevant Governmental Entities and filing and submitting all reports and other documents which it reasonably considers necessary to be submitted in order to comply with Applicable Law or its obligations under this Agreement), PROVIDED THAT responsibility for (a) the costs of preparation of any such documents, reports and/or filings shall be borne by the Purchaser (or the relevant Marketing Authorisation Transferee) to the extent such costs are reasonably necessary, and (b) the submission of MA Documentation shall be the responsibility of the Purchaser in accordance with paragraph 1.6 above, PROVIDED THAT the Seller shall ensure that the Purchaser is kept fully and promptly informed of any such communications or submissions in advance, to the extent reasonably practicable;

(iii)each Seller shall procure that each Marketing Authorisation Holder shall act in accordance with the reasonable instructions of the Purchaser or the Marketing Authorisation Transferee in respect of each Marketing Authorisation in respect of which such Marketing Authorisation Holder is the holder, PROVIDED THAT no Marketing Authorisation Holder shall be obliged to comply with such instructions to the extent the same: (i) infringe the terms of the relevant Marketing Authorisation(s); or (iii) are otherwise inconsistent with the provisions of the Pharmacovigilance Agreement relating to that Seller;

(iv)the Purchaser shall only request artwork changes to the extent such changes are required in order to comply with Applicable Law;

(v)the Purchaser shall submit to the relevant Seller (or shall procure that there is submitted) written details (in such form and with such supporting materials as such Seller may reasonably request) of any new, amended or proposed advertising and promotional activity or training materials in respect of any Product Commercialised pursuant to any Marketing Authorisation (including (without limitation) any material reasonably requested by such Seller in order to validate new and/or amended promotional or training materials), and the Purchaser acknowledges and agrees that no such advertising, promotional or training activity shall be implemented, undertaken or otherwise commenced without the prior written consent of that Seller (for itself and on behalf of the relevant Marketing Authorisation Holder), such consent not to be unreasonably withheld.  The Purchaser further agrees and acknowledges that, if it so

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chooses, the Seller shall be entitled to assume responsibility for obtaining (or procuring that there is obtained) the consent(s) and approval(s) of any relevant Governmental Entity required for such new, amended or proposed advertising and promotional activity or training activity; and

(vi)to the extent permitted by the terms of the relevant Marketing Authorisation, the Purchaser or any other member of the Purchaser’s Group shall Commercialise the Product(s) which are the subject of such Marketing Authorisation (notwithstanding that such Marketing Authorisation is held in the name of the relevant Marketing Authorisation Holder and, for the avoidance of doubt, the proceeds of any such Commercialisation shall be for the benefit of the Purchaser’s Group) and the Purchaser shall:

(A)indemnify each member of the Seller’s Group against any and all actions, claims, demands, investigations, judgments, proceedings, liabilities, loss, damages, payments, costs and expenses arising in relation to the Commercialisation of the Product(s) by the Purchaser or any other member of the Purchaser’s Group under this paragraph 2.1(vi); and

(B)procure that such Product(s) are Commercialised in compliance with the terms of the relevant Marketing Authorisation and/or the requirements of the relevant Governmental Entity.

3.NEW AND PENDING MARKETING AUTHORISATIONS IN RESPECT OF THE PRODUCTS

3.1If, at any time prior to Closing, any member of any Seller’s Group is granted or otherwise comes to hold any marketing authorisation which relates exclusively to one or more Products (a “New Marketing Authorisation”) then:

(i)that Seller undertakes to the Purchaser to notify the Purchaser as soon as reasonably practicable following the date on which the relevant member of that Seller’s Group is granted, or becomes entitled to, the New Marketing Authorisation; and

(ii)the provisions of paragraphs 1 and 2 above shall apply to that new Marketing Authorisation.

3.2Where a member of a Seller’s Group has submitted to any Governmental Entity any application relating to the grant of a new marketing authorisation in respect of its Contributed Business which is pending or in process as at the date of this Agreement (a “Pending Marketing Authorisation”):

(i)that Seller shall continue to be responsible for preparation and submission of all documents required to register such Pending Marketing Authorisation but, following Closing, it shall do so at the Purchaser’s cost and shall pass responsibility for such Pending Marketing Authorisation to the Purchaser (or

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such member of the Purchaser’s Group as the Purchaser may nominate) as soon reasonably possible after Closing, subject to Applicable Law; and

(ii)from the Closing Date, the provisions of paragraph 1 shall apply mutatis mutandis to any registration process for any Pending Marketing Approval.

4.MA COSTS

From the Closing Date, the Purchaser shall be responsible for all necessary costs of preparation and submission of MA Documentation and, save as expressly provided in this Agreement, any other necessary costs incurred by any Seller or a member of such Seller’s Group in connection with the maintenance and any variations, amendments and renewals of the Marketing Authorisations relating to the Products or for any matter requested by the Purchaser pursuant to this Part 2 of Schedule 4 and for all fees and costs reasonably incurred by the relevant member of the Seller’s Group in complying with its obligations in respect of a Marketing Authorisation Transfer or Marketing Authorisation Re-Registration (“MA Costs”).

5.OBLIGATIONS FOLLOWING MARKETING AUTHORISATION TRANSFER OR MARKETING AUTHORISATION RE-REGISTRATION

5.1On and from the relevant Marketing Authorisation Transfer Date or Marketing Authorisation Re-Registration Date (as applicable), the Purchaser shall procure that each Marketing Authorisation Transferee shall assume and be solely responsible for:

(i)all obligations as the holder of such Marketing Authorisation including (subject to the terms of the Pharmacovigilance Agreement) pharmacovigilance activities related to such Marketing Authorisation;

(ii)all activities and actions required by Applicable Law in connection with such Marketing Authorisation; and

(iii)any and all outstanding commitments and obligations to the relevant Governmental Entities with respect to the relevant Marketing Authorisation, save for any such commitments or obligations arising from a breach of this Agreement by the relevant Seller.

5.2In the event that, following Marketing Authorisation Transfer or Marketing Authorisation Re-Registration in respect of any Product, any Seller wishes to apply for a Marketing Authorisation in respect of a retained product, the Purchaser shall (and shall procure that the relevant Marketing Authorisation Transferee shall) co-operate with and provide all reasonable assistance to that Seller (or the relevant member of the Seller’s Group) at that Seller’s costs as may be reasonably required for the purposes of applying for such New Marketing Authorisation, including (without limitation) providing that Seller (or the relevant member of the Seller’s Group) and/or any Governmental Entity with such access to Marketing Authorisation Data or such other data or technical or other information as is reasonably requested by the relevant Governmental Entity or is otherwise reasonably required by that Seller or the relevant member of that Seller’s Group.

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Part 3
Tenders

1.1From the Closing Date until the Marketing Authorisation Transfer Date in any Market, each Seller shall, and shall procure that each member of the Seller’s Group and the relevant Marketing Authorisation Holder shall, to the extent permitted by Applicable Law:

1.1.1inform the Purchaser in writing of any Call for New Tender as soon as reasonably practicable following receipt;

1.1.2co-operate with and provide reasonable assistance to the Purchaser (or the relevant member of the Purchaser’s Group) for the purposes of responding to the Call for New Tender or otherwise applying for a new tender; and

1.1.3where Applicable Law requires such responses or applications to be made by the Marketing Authorisation Holder, the relevant Seller shall procure that the Marketing Authorisation Holder submits such responses or applications on behalf of the Purchaser PROVIDED THAT the Purchaser shall indemnify the relevant Seller and/or the relevant Marketing Authorisation Holder (as the case may be) for any and all costs, expenses and liabilities suffered or reasonably incurred by the relevant Seller and/or the Marketing Authorisation Holder in complying with or as a result of the provisions of this paragraph.

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Schedule 5
Certificate

To: GlaxoSmithKline Consumer Healthcare Holdings Limited (the “Purchaser”)

[Date]

Certificate

This Certificate is issued in accordance with Clause 4.4.1(iii)(b) and paragraph 1.1.4 of Schedule 11 of the contribution agreement between GlaxoSmithKline Plc, Novartis AG and the Purchaser dated 22 April 2014 as amended and restated on 29 May 2014, and further amended and restated on [·] 2015 (the “Agreement”). Unless otherwise defined, capitalised words used in this Certificate shall have the meanings given to them in the Agreement.

We confirm that:

1. no Material Adverse Effect has occurred in relation to us between the date of the Agreement and the date of this Certificate;

2. having made due and careful enquiry, we are not aware of any breach or breaches of Clause 9.1 which alone or together give rise to a Material Adverse Effect having occurred in relation to us; and

[either]

3. having made due and careful enquiry, we are not aware of any breach or breaches of the Seller’s Warranties that would have occurred and that would, alone or together, have given rise to a Material Adverse Effect in relation to us had the Seller’s Warranties been repeated immediately before Closing by reference to the facts, circumstances and knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date.

[or]

3. having made due and careful enquiry, we are aware of the following material breaches of the Seller’s Warranties that would, alone or together, be material and have occurred had the Seller’s Warranties been repeated immediately before Closing by reference to the facts, circumstances and knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date.

[description of material breaches.]

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………………..

Director
For an on behalf of [Novartis AG][GlaxoSmithKline Plc]

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Schedule 6
Shared Business Contracts, Transferred Contracts and Certain Other Businesses

1.DELAYED TRANSFER OF CERTAIN TRANSFERRED CONTRACTS AND SHARED BUSINESS CONTRACTS

1.1Subject to paragraph 4.6, the transfer of any Transferred Contract, Transferred Intellectual Property Contract or Shared Business Contract relating to a Delayed Business (“Delayed Business Contracts”) shall not be transferred to the relevant member of the Purchaser’s Group until the relevant Delayed Closing Date and references in this Schedule 6 to “Closing”, “Closing Date” or “Effective Time” shall be deemed to be to “Delayed Closing Date” insofar as they relate to such Delayed Business Contracts, except paragraphs 2, 3.1 and 4.1.

2.DISCLOSURE

From Closing, the Purchaser shall have the right to full disclosure of all Transferred Contracts and Full Disclosure of the Relevant Part of the Shared Business Contracts and each Seller shall use reasonable efforts to facilitate such disclosure as soon as reasonably practicable.

3.SEPARATION OF SHARED BUSINESS CONTRACTS

3.1Prior to Closing, each Seller and the Purchaser shall discuss and agree in good faith a process to identify all material Shared Business Contracts.

3.2Each Seller shall use its reasonable efforts to maintain relationships under its Shared  Business Contracts and continue to operate the Shared Business Contracts, including without limitation fulfilling all its obligations under its Shared Business Contracts (excluding the Relevant Parts), in the same manner as it has for the 12 months prior to the date of this Agreement.

3.3The Purchaser may, by notice to the relevant Seller:

3.3.1in the case of Novartis, at any time prior to the later of:

(i)the date falling 90 days after the Closing Date or, if the Seller has not provided Full Disclosure of a Shared Business Contract on or prior to Closing, the date falling 90 days after the date on which Full Disclosure of the relevant Shared Business Contract is made; and

(ii)the Marketing Authorisation Transfer Date in respect of the relevant Product in the relevant territory; and

3.3.2in the case of GlaxoSmithKline, at any time prior to the Marketing Authorisation Transfer Date in respect of the relevant Product in the relevant territory,

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(the “Relevant Election Date”),

elect to take the rights and obligations of the Relevant Part of any Shared Business Contract. For the purposes of paragraph 3.3.1(ii) only, if a Shared Business Contract is in relation to more than one Product and/or territory, the first Marketing Authorisation Transfer Date in respect of a Product covered by that Shared Business Contract shall be the relevant date.

3.4If the Purchaser makes an election under paragraph 3.3 above, the relevant Seller and the Purchaser shall use all reasonable endeavours to procure that an arrangement is entered into with the relevant counterparty to each Shared Business Contract, the effect of which shall be that, with effect from whichever is the later of the Marketing Authorisation Transfer Date and the date of the relevant arrangement, the benefit and burden of the Relevant Part is severed from such Shared Business Contract and an agreement or arrangement equivalent to such Shared Business Contract is entered into between the relevant counterparty and a member of the Purchaser’s Group (or the Relevant Part of the Shared Business Contract is sub-licensed to such Purchaser) (a “Separation”). For the avoidance of doubt, no part of any such Shared Business Contract shall be severed and transferred to the Purchaser in so far as it relates to the Seller’s Retained Business, any product other than the products to the extent included in the relevant Seller’s Contributed Business (including the Products) or any Excluded Asset.

3.5If no election is made by the Purchaser under paragraph 3.3 above by the Relevant Election Date, the provisions of sub-paragraphs 5.2.1 and 5.2.2 of this Schedule shall apply in respect of the Relevant Part of such Shared Business Contract until the earlier of 9 months from the Relevant Election Date and the date on which the Purchaser notifies the relevant Seller that an alternative arrangement has been put in place; and in the case of any Shared Business Contract that is a development contract or which otherwise relates to any Ongoing Clinical Trials, the end of the period specified in the Transitional Services Agreement which in any event shall be no less than 9 months from Closing.

3.6For the avoidance of doubt (i) paragraphs 3.3, 3.4 and 3.5 shall not apply in respect of any Shared Business Contract which terminates before the Relevant Election Date and (ii) paragraph 4.6 shall not apply in respect of Shared Business Contracts.

3.7In addition, in relation to a Separation of a Shared Business Contract the Relevant Part of which contains any material non-compete provisions that, without obtaining a Third Party Consent, are reasonably likely to be breached on Closing as a result of the Target Groups both being transferred to the Purchaser’s Group, the parties shall each use their reasonable endeavours to procure that any arrangement entered into with the relevant counterparty in respect of such Separation does not contain such material non-compete provisions or, if it does, that such material non-compete provisions are waived by the relevant counterparty.

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4.OBLIGATION TO OBTAIN THIRD PARTY CONSENTS

4.1In relation to any:

4.1.1Transferred Contract or Transferred Intellectual Property Contract (excluding, for the purposes of this Schedule 6, any Product Approval or Product Application) or Co-Owned Target Group Intellectual Property Right which is not assignable without a Third Party Consent, or a Separation of a Shared Business Contract which is not separable without a Third Party Consent; or

4.1.2Transferred Contract or Transferred Intellectual Property Contract (excluding, for the purposes of this Schedule 6 any Product Approval or Product Application) which contains any material non-compete or change of control provisions that, without obtaining a Third Party Consent, are reasonably likely to be breached or triggered (as relevant) on Closing as a result of the Target Groups both being transferred or the relevant Target Group being transferred (as relevant) to the Purchaser (and/or any member of the Purchaser’s Group)

this Agreement shall not be construed as an assignment or an attempted assignment, a sub-licensing or an attempted sub-licensing, and the relevant Seller and the Purchaser shall each use reasonable endeavours both before and after Closing to obtain all necessary Third Party Consents as soon as possible and shall keep each other informed of progress in obtaining such Third Party Consents. The relevant Seller shall deliver to the Purchaser, on Closing or, if later, as soon as possible after receipt, any Third Party Consent.

4.2In addition, in relation to any Contract (excluding, for the purposes of this Schedule 6, any Product Approval or Product Application) which is transferred to the Purchaser’s Group as part of the Target Group Companies and which contains any non-compete or change of control provisions that, without obtaining a Third Party Consent, are reasonably likely to be breached  or triggered (as relevant) on Closing as a result of the Target Groups both being transferred or the relevant Target Group being transferred (as relevant) to the Purchaser (and/or any other member of the Purchaser’s Group), the parties shall each use reasonable endeavours both before and after Closing to obtain all such necessary Third Party Consents as soon as possible and shall keep each other informed of progress in obtaining such Third Party Consents. Each Seller shall deliver to the Purchaser, on Closing or, if later, as soon as possible after receipt, any such Third Party Consent.

4.3In connection with the obtaining of any Third Party Consent referred to in paragraph 4.1 and 2.2, the Purchaser shall supply to the relevant Seller such information as may be reasonably requested by the relevant Seller or any relevant third party.

4.4Save as otherwise provided in this Agreement, the cost of any fee demanded by the third party as consideration for giving the Third Party Consent shall be paid by the Purchaser provided that:

4.4.1the cost is agreed in advance by the Purchaser (such agreement not to be unreasonably withheld or delayed); and

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4.4.2no party shall be required to bear any internal or administrative costs of the other parties in relation to any Third Party Consent.

4.5The parties agree that the provisions of any document entered into in connection with a Third Party Consent (including by way of novation) shall be without prejudice to the provisions of Clauses 8.1, 8.2 and 12 of this Agreement.

4.6Without prejudice to the obligation in paragraph 4.1 for each Seller and the Purchaser to use their respective reasonable endeavours to obtain Third Party Consents as soon as possible, the transfer to the Purchaser (or any member of the Purchaser’s Group or its third party nominee) of any Transferred Contract shall not occur on Closing or, if later, the date on which the relevant Third Party Consent is obtained (a “Delayed Contract”), in the following circumstances:

4.6.1if the relevant member of a Seller’s Group and the relevant member of the Purchaser’s Group agree in writing in respect of a specific Market that the Delayed Contract shall transfer at a later agreed date (a “Delayed Contract Transfer Date”) in which case such Delayed Contract shall transfer on the Delayed Contract Transfer Date (provided that GlaxoSmithKline and the Purchaser shall use reasonable efforts to agree the earliest Delayed Contract Transfer Date as is reasonably practicable);

4.6.2if a Delayed Contract Transfer Date has not been agreed under sub-paragraph 4.6.1 and such Delayed Contract is required to facilitate the provision of services by the Seller’s Group under the Transitional Distribution Services Agreement in any Market (a “Distribution Contract”), such Delayed Contract shall transfer in accordance with paragraph 4.7.

The parties agree that the provisions of this paragraph 4.6 shall not apply where a Contract is required under Applicable Law to transfer at a date earlier than the dates set out in sub-paragraphs 4.6.1, 4.6.2 and 4.7.

4.7The parties agree that no Distribution Contracts shall transfer to the Purchaser (or a member of the Purchaser’s Group) before the date falling 90 days after the Closing Date (the “Moratorium Date”) (unless such Distribution Contract relates to distribution services provided in the USA).  Following the Moratorium Date (or after the Closing Date if the Distribution Contract relates to distribution services in the USA), the Distribution Contracts shall transfer to the Purchaser (or a member of the Purchaser’s Group) as soon as possible after any relevant Third Party Consent is obtained unless either party notifies the other by the date which is 15 Business Days prior to the Moratorium Date that it believes (acting reasonably) that the transfer of the relevant Distribution Contract prior to the Planned Distribution Transfer Date will result in one or more Identified Risks, in which case, the relevant Distribution Contract shall not transfer to the Purchaser (or a member of the Purchaser’s Group) until the relevant Distribution Transfer Date unless any and all of the Identified Risks have been resolved to the reasonable satisfaction of the party that may be adversely affected by the relevant Identified Risks before such date.

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4.8From the Effective Time until the transfer of any Delayed Contract is effected in accordance with sub-paragraphs 4.6 or 4.7, the provisions of paragraph 5 of this Schedule shall apply to such Delayed Contracts.  Nothing in this sub-paragraph 4.8 shall preclude the Purchaser or any member of the Purchaser’s Group from informing the counterparty to any Delayed Contract of the transfer of the Business to it or from engaging with such counterparty with respect to any matter relating to such Delayed Contract.

5.OBLIGATIONS UNTIL THIRD PARTY CONSENTS ARE OBTAINED/WHERE THIRD PARTY CONSENTS ARE REFUSED

5.1Subject to paragraph 5.2, and the relevant Seller’s obligations under the Transitional Distribution Services Agreement, the Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group shall) assume, carry out, perform and discharge the relevant Seller’s and the relevant Business Sellers’ obligations arising under the Transferred Contracts, the Transferred Intellectual Property Contracts, the Co-Owned Target Group Intellectual Property Rights, and the Relevant Part of the Shared Business Contracts as from the Effective Time but only to the extent such obligations do not constitute Excluded Liabilities.

5.2In respect of any Transferred Contract, Transferred Intellectual Property Contract, the Co-Owned Target Group Intellectual Property Rights or Relevant Part of any Shared Business Contract from the Effective Time until the relevant Third Party Consent has been obtained as contemplated by paragraph 4.1 or where the Third Party Consent has been refused:

5.2.1the relevant Business Seller shall hold on trust to the extent it is lawfully able to do so or, where it is not lawfully able to do so or where holding on trust is not possible under local law, or otherwise impracticable the relevant Business Seller and the relevant member of the Purchaser’s Group shall make such other arrangements between themselves to provide to the relevant member of the Purchaser’s Group, the benefits of the Contract (other than amounts corresponding to any Tax payable by the relevant Business Seller in respect of amounts due under or in respect of the Transferred Contract or Transferred Intellectual Property Contract Co-Owned Target Group Intellectual Property Rights, or Relevant Part of the Shared Business Contract), including the enforcement at the cost and for the account of the relevant member of the Purchaser’s Group of all rights of the relevant Business Seller against any other party thereto; and

5.2.2to the extent that the Purchaser (or the relevant member of the Purchaser’s Group) is lawfully able to do so and subject to the relevant Seller’s obligations under the Transitional Distribution Services Agreement, the Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group shall) perform  the relevant member of the Seller’s Group’s obligations under the Contract (but only to the extent such obligations do not constitute Excluded Liabilities) as agent or sub-contractor and shall indemnify the relevant Seller and the relevant member

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of the Seller’s Group if the Purchaser or the relevant member of the Purchaser’s Group fails to do so;

5.2.3to the extent that the Purchaser (or a member of the Purchaser’s Group) is not lawfully able to perform such obligations, the relevant Seller shall procure that the relevant Business Seller shall (subject to being indemnified by the Purchaser for any Liabilities the relevant Seller or the relevant Business Seller may incur in connection therewith) do all such things as the Purchaser (or the relevant member of the Purchaser’s Group) may direct or reasonably require to enable due performance of the Contract;

5.2.4the Seller shall (or shall procure that the relevant Business Seller) shall act in accordance with any reasonable directions provided to it by the Purchaser (or the relevant member of the Purchaser’s Group) in relation to the management of any Transferred Contract or Relevant Part of any Shared Business Contract (excluding, for the avoidance of doubt, any part of any Shared Business Contract which relates exclusively to the Seller Group’s  Excluded Business), and the Purchaser shall indemnify the relevant Business Seller in respect of any Losses that Business Seller may incur in connection therewith, provided that should a Seller (or a relevant member of that Seller’s Group) believe (acting reasonably) that compliance with any instruction or direction given by the Purchaser (or a member of the Purchaser’s Group) pursuant to this sub-paragraph 5.2.3 will result in a breach of Applicable Law (including a breach of the terms of the relevant Contract): (i) that Seller (or relevant member of its Group), shall inform the Purchaser (or the member of the Purchaser’s Group) which gave the instruction and shall not be required to implement such instruction or direction; and (ii) the parties shall discuss the concerns of the relevant member of the Seller’s Group in good faith, to determine whether an agreement can be reached such that the relevant instruction or direction can be implemented by the Seller (or the relevant Business Seller);

5.2.5without prejudice to the provisions of paragraph 5.2.2, the relevant Seller shall provide (or procure that the relevant member of that Seller’s Group shall provide) the Purchaser (or the relevant member of the Purchaser’s Group) with such information and assistance as the Purchaser (or the relevant member of the Purchaser’s Group) may reasonably require with respect to any Transferred Contract, Transferred Intellectual Property Contract, Co-Owned Transferred Product Intellectual Property Right, and the Relevant Part of the Shared Business Contract which is subject to the provisions of this paragraph 5; and

5.2.6in respect of any Contract for the sale of any Product or Products, the amount of any profit arising from sales pursuant to any such Contract shall be calculated and remitted to the Purchaser in accordance with the relevant provisions of the Transitional Distribution Services Agreement.

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6.FAILURE TO OBTAIN THIRD PARTY CONSENTS

6.1If a Third Party Consent is refused or otherwise not obtained on terms reasonably acceptable to the Purchaser within 18 months of Closing, or in the case of a Separation, 18 months of the earliest Marketing Authorisation Transfer Date applicable to such Shared Business Contract:

6.1.1the relevant Seller shall be entitled to procure the termination of the Transferred Contract, Transferred Intellectual Property Contract or Relevant Part of the Shared Business Contract or Co-Owned Transfer Product Intellectual Property Right and the obligations of the parties under this Agreement in relation to such Transferred Contract, Transferred Intellectual Property Contract, or the Relevant Part of the Shared Business Contract or Co-Owned Transferred Product Intellectual Property Right shall cease forthwith;

6.1.2references in this Agreement to the Transferred Contracts, Transferred Intellectual Property Contracts or Relevant Part of the Shared Business Contracts or Co-Owned Transferred Product Intellectual Property Right (other than in this paragraph 6) shall be construed as excluding such Transferred Contract, Transferred Intellectual Property Contract or the Relevant Part of such Shared Business Contract or Co-Owned Transferred Product Intellectual Property Right; and

6.1.3the relevant Seller and the Purchaser shall each use all reasonable efforts to put in place alternative arrangements so as to give the Purchaser equivalent benefits or rights as would have been enjoyed under the terminated Transferred Contract, Transferred Intellectual Property Contract, Co-Owned Target Group Intellectual Property Rights, or Relevant Part of the Shared Business Contract.

For the purposes of this Schedule, the following terms shall have the following meanings:

“Separation Plan” has the meaning given to it under the Transitional Distribution Services Agreement;

“Identified Risk” means a specifically identified adverse operational, legal or tax impact affecting either a Seller’s Group or the Purchaser’s Group (including an impact on the ability of the relevant Seller’s Group to perform its obligations under the Transitional Distribution Services Agreement) which would arise or which would increase (by more than a de minimis amount) solely by reason of the relevant Distribution Contract transferring to the Purchaser (or the relevant member of the Purchaser’s Group) on a date prior to the Planned Distribution Transfer Date; and

“Planned Distribution Transfer Date” means the Distribution Transfer Date for the applicable Market as set out in the Separation Plan.

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7.CHINESE JOINT VENTURE

7.1The parties acknowledge and agree that the Chinese JV Interests and the Chinese JV Contracts cannot be transferred to the Purchaser without the consent of Tianjin Pharmaceutical Holdings Co. Ltd and Tianjin Zhong Xin Pharmaceutical Group Corporation Limited (the “Tianjin Consents”) and that therefore this Agreement shall not be construed as a transfer or attempted transfer of the Chinese JV Interests or the Chinese JV Contracts without such consent.

7.2All parties shall use reasonable endeavours both before and after Closing to obtain the Tianjin Consents as soon as possible and shall keep each other informed of progress in relation to the same.  GlaxoSmithKline shall deliver to the Purchaser, on Closing or, if later, as soon as possible after receipt, the Tianjin Consents.

7.3In connection with the obtaining of the Tianjin Consents, each of the parties shall supply to the other parties and any relevant third party such information as may be reasonably requested by such other parties or any relevant third party.

7.4In the event that the Tianjin Consents have not been obtained by Closing, from Closing until the Tianjin Consents have been obtained, the Chinese JV Interests and Chinese JV Contracts shall be deemed to be a “Delayed Business” and the provisions of Schedule 22 (Delayed Businesses) shall apply.

8.NOVARTIS US NRT BUSINESS

8.1The parties acknowledge and agree that the Novartis US NRT Business is a Novartis Excluded Asset and therefore shall not be transferred to the Purchaser at Closing or otherwise, except as agreed between the parties in writing.

8.2Promptly following the date of this Agreement, Novartis shall commence the process in relation to the sale (which may include an out-licensing) of the Novartis US NRT Business to a third party unconnected to the parties and shall use reasonable endeavours to effect such sale (or out-licensing as relevant) prior to Closing.

8.3The parties agree that the following provisions shall apply in respect of the sale (or out-licensing as relevant) process referred to above in relation to the Novartis US NRT Business (subject to Applicable Law):

8.3.1Novartis shall inform the Purchaser of, and consult with the Purchaser in relation to, all material steps to be taken in respect of such sale and shall take reasonable account of any views of the Purchaser so expressed in connection with the same;

8.3.2prior to the first circulation of any material draft sale (or out-licensing as relevant) documentation in respect of such sale (or out-licensing as relevant), Novartis shall provide the Purchaser with a reasonable opportunity to review and comment on such documentation and shall take reasonable account of any views of the Purchaser so expressed in connection with the same;

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8.3.3with effect from Closing, and only if Closing occurs, all of the proceeds of any such sale shall (or out-licensing as relevant), unless such proceeds are received by a Novartis OTC Group Company, be paid to the Purchaser to such account as it may direct promptly following receipt of the same by Novartis (or any of its Affiliates); and

8.3.4the Purchaser shall indemnify Novartis for any reasonable costs and expenses incurred in connection with such sale process (or out-licensing process, as relevant), excluding, for the avoidance of doubt, any costs and expenses arising out of, or in connection with the exercising of rights and/or obligations under any definitive documentation in respect of such sale (or out-licensing as relevant) (and the parties shall work together to seek to avoid any potential double taxation of the proceeds).

9.GLAXOSMITHKLINE PAKISTAN AND BANGLADESH

9.1The parties acknowledge and agree that neither the GlaxoSmithKline Pakistan Business nor the GlaxoSmithKline Bangladesh Business can be transferred to the Purchaser without the requisite consent of the shareholders in GlaxoSmithKline Pakistan and GlaxoSmithKline Bangladesh respectively pursuant to and in accordance with Applicable Law (the “GlaxoSmithKline Listed Company Consents”) and that therefore this Agreement shall not be constructed as a transfer or attempted transfer of any such business without the applicable GlaxoSmithKline Listed Company Consent.  To the extent that the relevant member of GlaxoSmithKline’s Group is not able to vote its shares in favour of the transfer of the GlaxoSmithKline Pakistan Business or the GlaxoSmithKline Bangladesh Business (as confirmed by GlaxoSmithKline’s legal advisers) or (if required) any approval of any Court or regulatory body is not granted, paragraph 8.3 below will apply.

9.2GlaxoSmithKline agrees to use its reasonable endeavours to obtain the GlaxoSmithKline Listed Company Consents prior to Closing, and as soon as reasonably practicable following the date of this Agreement.  Without prejudice to the generality of the foregoing, GlaxoSmithKline shall, promptly following the date of this Agreement:

9.2.1commence the process in relation to the obtaining of the GlaxoSmithKline Listed Company Consents; and

9.2.2give the Purchaser a reasonable opportunity to take part in the process of, and to review and comment on any material documentation in relation to (with GlaxoSmithKline to take reasonable account of any such comments), the obtaining of the GlaxoSmithKline Listed Company Consents.

9.3In the event that any GlaxoSmithKline Listed Company Consent is not obtained prior to Closing, such that the GlaxoSmithKline Pakistan Business or the GlaxoSmithKline Bangladesh Business (as the case may be) cannot be transferred to the Purchaser upon Closing in accordance with the provisions of this Agreement:

9.3.1for a maximum of two years, the parties shall use reasonable endeavours to obtain the applicable GlaxoSmithKline Listed Company Consent and to

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procure that the GlaxoSmithKline Pakistan Business and the GlaxoSmithKline Bangladesh Business (as the case may be) is transferred to the Purchaser as soon as reasonably practicable after Closing; and

9.3.2from Closing until such transfer (if any) takes place, each of the GlaxoSmithKline Pakistan Business and the GlaxoSmithKline Bangladesh Business (as the case may be) shall be deemed to be a “Non-Controlled Delayed Business” and the provisions of Schedule 22 (Delayed Businesses) shall apply.

10.GEBRO PHARMA JOINT VENTURE

10.1If, at Closing, (i) the relevant shares in Novartis Consumer Health-Gebro GmbH are not held by a Novartis OTC Group Company and (ii) consent or approval from Gebro Pharma GmbH to the transfer of shares in Novartis Consumer Health-Gebro GmbH has not been obtained, then this Agreement shall not be construed as a transfer or attempted transfer of  the relevant shares in Novartis Consumer Health-Gebro GmbH without such consent and such shares shall be deemed to be a “Delayed Business” and the provisions of Schedule 22 (Delayed Businesses) shall apply.

11.NOVARTIS US RX PRODUCTS

11.1The parties acknowledge and agree that they will effect Closing with respect to the Novartis US RX Products in a manner that ensures that the Purchaser, its Affiliates, and their respective businesses shall not be subject to or bound by the terms of the [***] and that there is no breach of the [***] as a result of the transfer of Novartis US RX Products at Closing.

11.2To give effect to paragraph 11.1 above, the parties have agreed that the business of commercialising the Novartis US RX Products in the United States of America, its states, commonwealths, and territories (the “Novartis US RX Territory”) (the “Novartis US RX Business”) will not be transferred to the Purchaser at Closing, but will dealt with in accordance with the following provisions of this paragraph 11.  To the extent, and for so long as, any assets with respect to the Novartis US RX Products have not been transferred to the Purchaser in accordance with this paragraph 11, such assets shall be deemed to constitute Novartis Excluded Assets.

11.3Novartis will procure that:

11.3.1subject to paragraph 11.3.2 below, at Closing, the Novartis US RX Business will be transferred to Sandoz; and

11.3.2at Closing, the Novartis US RX Contracts will be assigned to Sandoz,

provided that, in each case, Novartis will give the Purchaser reasonable opportunity to comment in advance on the intended terms of such transfer and of any documentation in connection with such transfer and will (acting reasonably) take any such comments into consideration.

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11.4The parties agree that the transfer of the Novartis US RX Business and the assignment of the Novartis US RX Contracts are properly treated as occurring immediately after Closing for US income tax purposes only and will, so far as permitted by Applicable Law, treat, and cause their Affiliates to treat, such transfers in the manner described in section 1.1502-76(b)(1)(ii)(B) of the US Treasury Regulations and shall not take an inconsistent position for US income tax purposes unless otherwise required by Applicable Law.

11.5Subject to paragraph 11.14 below, Novartis will procure that, from Closing until the date of a Novartis US RX Transfer pursuant to paragraph 11.6 below:

11.5.1Novartis Pharma AG (or another member of Novartis’s Group) shall use all reasonable endeavours to supply or procure the supply of Voltaren to Sandoz (or another member Novartis’s Group) in order to enable Sandoz to fulfil its obligations under the Endo Excluded Contract;

11.5.2Sandoz shall use reasonable endeavours to conduct the Novartis US RX Business (or relevant part thereof) in the ordinary course, and to the extent reasonably practicable, in all material respects as carried on by the Novartis Group immediately prior to the date of this Agreement unless otherwise agreed by the Purchaser, including (without limitation) the conduct of distribution, commercial and promotional activities and the management of the commercial relationships with Baxter and Endo on behalf of the Purchaser under the terms of the Novartis US RX Contracts;

11.5.3Sandoz shall not terminate or materially amend the terms of the Novartis US RX Contracts without the prior written consent of the Purchaser; and

11.5.4in the event that Baxter or Endo terminate the relevant Novartis US RX Contracts (other than a termination by Endo to which paragraph 11.12 below relates), Sandoz or another member of Novartis’s Group shall use reasonable endeavours to put in place arrangements with an alternative third party customer on materially the same terms as those provided under the Novartis US RX Contracts,

(the “Novartis US RX Management”).

11.6Subject to paragraph 11.7 below, Novartis will procure that the Novartis US RX Business (or relevant part thereof) shall be transferred by Sandoz to either (i) Novartis Consumer Health Inc. or (ii) if Novartis and the Purchaser so agree, to the Purchaser or to another member of the Purchaser’s Group (a “Novartis US RX Transfer”), by no later than one month after the earliest of the following occurs:

11.6.1upon a switch of either Novartis US RX Product in the Novartis US RX Territory from being a Prescription Product to being a Consumer Healthcare Product;

11.6.231 December 2017, being the expiry date of the [***];

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11.6.3any earlier date on which the Purchaser requests Novartis and Sandoz to effect a Novartis US RX Transfer; or

11.6.4upon Novartis ceasing to own a direct or indirect interest in Novartis Consumer Health Inc.,

each such date being the “Novartis US RX Transfer Date”.

11.7In the event that the Purchaser becomes aware that the term of the [***] may be extended or renewed beyond 31 December 2017, the Purchaser shall:

11.7.1inform Novartis and Sandoz as soon as reasonably practicable of such proposed extension or renewal;

11.7.2consult (acting reasonably and in good faith) with Novartis and Sandoz to determine whether, and on what basis, the Novartis US RX Business may be capable of transfer to (i) Novartis Consumer Health Inc. or (ii) if Novartis and the Purchaser so agree, to the Purchaser or another member of the Purchaser’s Group, without the transfer and the subsequent operation of the Novartis US RX Business resulting in the Purchaser or any of its Affiliates or their respective businesses being subject to or bound by the terms of [***], and without such transfer and operation resulting in a breach of the [***], such consultation being with a view to agreeing a proposal for such transfer and operation;

11.7.3if a proposal for transfer is identified under paragraph 11.7.2 above, consult and negotiate with the [***] to determine whether the proposal can be implemented without the transfer and operation of the Novartis US RX Business in accordance with the proposal resulting in the Purchaser or any of its Affiliates or their respective businesses being subject to or bound by the terms of the [***] resulting in any breach of the [***];

11.7.4if such a proposal is agreed with the [***] under paragraph 11.7.3 above, implement such a proposal as soon as is reasonably practicable; and

11.7.5if no proposal is agreed under paragraph 11.7.2 above, or if it appears that the proposal does not satisfy the [***] as set out in paragraph 11.7.3 above, negotiate (acting reasonably and in good faith) with Novartis and Sandoz to seek to agree whether or not, and on what basis, Sandoz will agree to carrying on the Novartis US RX Management for the period of the extended or renewed [***].

11.8Subject to paragraphs 11.9 and 11.10 below, the parties agree that upon a Novartis US RX Transfer:

11.8.1Novartis (and each other member of Novartis’s Group) shall cease to have any obligations under the other provisions of this paragraph 10 in respect of the Novartis US RX Business (or the part thereof that is the subject of the Novartis US RX Transfer) and the Novartis US RX Business (or that

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part) will cease to form part of the Novartis Excluded Assets and shall be deemed to be a part of the Novartis OTC Business; and

11.8.2any documents or arrangements entered into by the Purchaser and Sandoz relating to the Novartis US RX Management will terminate with immediate effect.

11.9The parties shall use reasonable endeavours to agree by no later than the Novartis US RX Transfer Date, a written plan for the transition of the Novartis US RX Business (or relevant part thereof) to the Purchaser’s Group, which shall include (without limitation):

11.9.1a plan for the transition of distribution, sales and marketing and promotional detailing activities to the Purchaser (or the relevant member of the Purchaser’s Group) (including the transfer of the Novartis US RX Contracts);

11.9.2the steps to be taken to transfer any distribution, supply or licensing arrangements required to operate the Novartis US RX Business from third party counterparties or the relevant members of Novartis’s Group (including Pharma AG) to the relevant member of the Purchaser’s Group

11.9.3the steps to be taken in respect of any regulatory applications or filings required to effect the Novartis US RX Transfer;

11.9.4the transfer of manufacturing stocks and inventory held by the members of  Novartis’s Group in connection with the Novartis US RX Business;

11.9.5the transfer of commercial information relating to the Novartis US RX Business; and

11.9.6the allocation of appropriate levels of resources to support such transition,

(the “Novartis US RX Transition Plan”).

11.10Upon a Novartis US RX Transfer, Novartis shall, and shall procure that Sandoz shall, and the Purchaser shall, use reasonable endeavours to effect the timely and effective transition of the Novartis US RX Business, including the assignment back of the Novartis US RX Contracts, to the Purchaser (or the relevant member of the Purchaser’s Group) in accordance with the Novartis US RX Transition Plan subject to any necessary consents or agreement from any third party.  The Purchaser shall indemnify Novartis (for itself and on behalf of each other member of Novartis’s Group) in respect of any Liabilities arising connection with the Novartis US RX Transition Plan.

11.11With effect from the Effective Time, until the date of any Novartis US RX Transfer or Novartis US RX Product Disposal, the provisions of Part 3 of Schedule 22 (Economic Benefit Transfer) shall apply mutatis mutandis in respect of the Novartis US RX Business as if the Novartis US RX Business were a Delayed Target Group Business.

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11.12If, following a switch of Novartis’s In-Scope Switch Product in the Novartis US RX Territory from being a Prescription Product to being a Consumer Healthcare Product, the Endo Excluded Contract terminates, the Purchaser shall indemnify Novartis in respect of any Liabilities incurred by Novartis (or any of its Affiliates) in relation to the royalties payable under clause 9.2 of the Endo Excluded Contract as it is as at the date of this Agreement.

11.13The Purchaser hereby undertakes to Novartis (for itself and on behalf of each other member of Novartis’s Group) that:

11.13.1the Purchaser will indemnify on demand and hold harmless each member of Novartis’s Group and their respective directors, officers, employees and agents in respect of any and all Liabilities relating directly or indirectly to the Novartis US RX Management or a Novartis US RX Transfer, excluding any Liabilities that would otherwise have constituted Excluded Liabilities had the Novartis US RX Business been a Novartis OTC Business and transferred to the Purchaser on Closing and not been Novartis Excluded Assets; and

11.13.2no member of Novartis’s Group shall have any liability whatsoever to any member of the Purchaser’s Group and the Purchaser will not and will procure that no member of the Purchaser’s Group will bring a claim against any member of Novartis’s Group for breach of paragraph 11.5,

in each case, other than to the extent such Liabilities arises as a result of the Gross Negligence (as defined in paragraph 2.16 of Schedule 22) of a member of Novartis’s Group or their respective directors, officers, employees and agents.

11.14Until the date of a Novartis US RX Transfer of the relevant part of the Novartis US RX Business, Novartis and its Affiliates shall be entitled to dispose of or out-licence, all or part of the Novartis US RX Business and/or the Novartis US RX Products at any time prior to or after Closing (a “Novartis US RX Product Disposal”) provided that:

11.14.1Novartis shall provide the Purchaser with reasonable notice of the intention to undertake a Novartis US RX Product Disposal and shall consult with the Purchaser and shall (acting reasonably and in good faith) take into account any views of the Purchaser prior to engaging with third parties in relation to such Novartis US RX Product Disposal;

11.14.2Novartis shall inform the Purchaser of, and consult with the Purchaser in relation to, all material steps to be taken in respect of such disposal or out-licensing and shall (acting reasonably and in good faith) take reasonable account of any views of the Purchaser so expressed in connection with the same;

11.14.3the disposal or out-licensing is on a reasonable arms’ length basis as between a willing purchaser or licensee (as applicable) and a willing seller or licensor (as applicable);

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11.14.4prior to the first circulation of any material draft disposal documentation in respect of such disposal (or out-licensing as relevant), Novartis shall provide the Purchaser with a reasonable opportunity to review and comment on such documentation and shall (acting reasonably and in good faith) take reasonable account of any views of the Purchaser so expressed in connection with the same;

11.14.5the Purchaser shall perform (or procure the performance of) all acts and things, and execute and deliver (or procure the execution and delivery of) all documents, that may be necessary or reasonably required by Novartis to give effect to such a disposal, including, but not limited to, the transfer by the Purchaser to Sandoz or the third party Purchaser of the Novartis US RX NDAs or any Intellectual Property Rights relating to the Novartis US RX Products;

11.14.6Novartis shall procure that any proceeds of any such disposal or out-licensing are, unless such proceeds are received by a Target Group Company, paid to the Purchaser to such account as it may direct promptly following receipt of the same by Novartis or any of its Affiliates; and

11.14.7the Purchaser shall indemnify Novartis (for itself and as trustee for each other member of its Group) for any reasonable costs and expenses incurred in connection with such disposal process (or out-licensing process, as relevant), excluding, for the avoidance of doubt, any costs and expenses arising out of, or in connection with the exercising of rights and/or obligations under any definitive documentation in respect of such disposal (or out-licensing, as relevant),

in each case subject to Applicable Law.

11.15Upon a disposal or out-licensing under paragraph 11.14 above, Novartis (and each other member of Novartis’s Group) shall cease to have any obligations under the other provisions of this paragraph 11 in respect of the Novartis US RX Business and/or the Novartis US RX Products (or, in each case, the part thereof) disposed of or out-licensed.

11.16The parties acknowledge and agree that in exercising its rights under this paragraph 11, the Purchaser will be acting on behalf of Novartis Consumer Health Inc..

12.NOVARTIS ALGERIA BUSINESS

The parties acknowledge and agree that that part of the Novartis OTC Business conducted by Sandoz SPA (or persons Controlled by Sandoz SPA) in Algeria is an Excluded Asset and therefore shall not be transferred to the Purchaser at Closing or otherwise.

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13.NOVARTIS CHINA BUSINESS

The parties acknowledge and agree that that part of the Novartis OTC Business conducted by Beijing Novartis Pharma Co., Ltd., Shanghai Novartis Trading Ltd., and Sandoz (China) Pharmaceutical Co., Ltd (or persons Controlled by them) in China shall be transferred to the Sino-American Tianjin Smith Kline & French Laboratories, Ltd, rather than the Purchaser. For the purposes of the Warranties deemed repeated by each Seller immediately before Closing pursuant to clause 9.1.5, ownership of the Novartis OTC Business conducted by Beijing Novartis Pharma Co., Ltd., Shanghai Novartis Trading Ltd., and Sandoz (China) Pharmaceutical Co., Ltd  (or persons Controlled by them) in China shall be deemed to have transferred to the Purchaser rather than Tianjin Smith Kline & French Laboratories, Ltd.

14.NOVARTIS SAUDI ARABIA BUSINESS

The parties acknowledge and agree that that part of the Novartis OTC Business conducted by Saudi Pharmaceutical Distribution Co. Ltd. (or persons Controlled by Saudi Pharmaceutical Distribution Co. Ltd.) in Saudi Arabia is an Excluded Asset and therefore shall not be transferred to the Purchaser at Closing or otherwise.

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Schedule 7
Employees

1.INFORMATION AND CONSULTATION

1.1At such time as the parties agree to be appropriate following the public announcement of the matters contemplated by this Agreement, each Seller and the Purchaser or the relevant member of the Purchaser’s Group shall jointly communicate to the Employees an agreed notice which shall (other than to the extent the parties agree otherwise):

1.1.1inform the Employees that following Closing those Employees who continue to be employed in the Contributed Business would be employed by the Purchaser or relevant member of the Purchaser’s Group; and

1.1.2comply with the requirements of any applicable national law.

For the avoidance of doubt, the parties may agree to issue such notice to different Employees or categories of Employees at different times and in different forms.

1.2Notwithstanding the operation of paragraph 1.1 above, each Seller and the Purchaser agree to comply with any more onerous notice requirements imposed by local laws.

1.3Each Seller agrees that it shall be permitted to conduct its own information and consultation exercise in respect of the matters contemplated by this Agreement with its own Employees without interference from the other Seller. Each Seller agrees to co-operate with the other Seller in respect of that other Seller’s information and consultation process to ensure as far as practicable that the communications of a Seller with the Employees of that Seller are aligned with the communications of the other Seller with the Employees of that other Seller.

1.4The Purchaser (on its own behalf and on behalf of any relevant member of the Purchaser’s Group) shall provide each Seller (for itself and any relevant member of such Seller’s Group) with such information and assistance at such times as such Seller may reasonably request or as may be reasonably necessary for such Seller or any other member of such Seller’s Group to comply with any formal or informal requirement to inform or consult with the Employees, a relevant trade union, a relevant works council, or any other employee representatives in connection with the matters contemplated by this Agreement (which formal or informal requirements the Seller hereby undertakes to comply or procure compliance with). Where reasonably necessary to ensure compliance with any formal or informal requirements or obligations to inform or consult with Employees, a relevant trade union, a relevant works council or any other employee representatives in connection with the matters contemplated by this Agreement, each Seller (for itself and for each member of its Group) and the Purchaser (for itself and for each member of its Group) agree that the Purchaser or relevant member of the Purchaser’s Group shall cooperate with and participate in any information, negotiation and/or consultation process as reasonably required by that relevant Seller.

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1.5As soon as practicable following the date of this Agreement each Seller agrees to provide on a timely basis such information, in writing, in respect of its existing terms and conditions of employment as may reasonably be required by the other Seller so as to facilitate that other Seller’s information and consultation exercise with its Employees in respect of the matters set out in this Agreement.

2.TARGET BUSINESS EMPLOYEES

2.1General

2.1.1The Purchaser shall (or shall procure that the relevant member of its Group shall) fulfil all its duties and obligations under Applicable Law in relation to the Target Business Employees.  Where the provisions of local law do not provide for an automatic transfer of the employment of the Target Business Employees to the Purchaser or a relevant member of its Group with effect from (and including) the Closing Date, then paragraph 2.2 below shall apply. Where the provisions of local law do provide for an automatic transfer of employment of the Relevant Target Business Employees to the Purchaser or the relevant member of its Group with effect from (and including) the Closing Date, then paragraph 2.3 below shall apply.

2.1.2Each Seller and the Purchaser acknowledge and agree that, in relation to Deferred Employees of a member of that Seller’s Group:

(i)any Deferred Employee shall be treated for all purposes under this Agreement as if such Deferred Employee were a Target Business Employee or a Target Company Employee (as appropriate);

(ii)the Purchaser’s obligations under this Schedule 7 shall apply in respect of each Deferred Employee in the same way as they do to each Target Business Employee or Target Company Employee (as appropriate); and

(iii)if any Deferred Employee accepts an offer of employment made by the Purchaser under paragraph 2.2.1 below or becomes an employee of a Target Group Company after the Closing Date, such Deferred Employee shall further be treated for all purposes under this Agreement as a Transferred Employee.

2.1.3For the avoidance of doubt, this paragraph 2 shall not apply to any Excluded Employee, who will remain employed by a Seller or the relevant member of that Seller’s Group.

2.1.4The parties agree that no provisions in this paragraph 2 shall require the Purchaser or another member of the Purchaser’s Group (including any Target Group Company) to employ a Relevant Employee on and from the Closing Date until such time as such employee has the right (including, for the avoidance of doubt, under any grace period) or is otherwise permitted under Applicable Law to accept an offer to work for the Purchaser or relevant member of the Purchaser’s Group and to commence working for

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the Purchaser or relevant member of the Purchaser’s Group.  Any such employee will only be a “Transferred Employee” for the purposes of this Agreement from the time (the “Transfer Date”) he becomes an employee of a member of the Purchaser’s Group, and any provisions relating to Transferred Employees in this Agreement shall only apply to any such employee with effect on and from the Transfer Date and with the following amendments:

(i)references to the “Closing Date” and the “Effective Time” in paragraphs 4.1, 4.3.1, 4.3.2 and 4.4 shall be replaced with references to the “Transfer Date”;

(ii)references to an “Employee” in paragraphs 4.2.1, 4.2.2 and 4.3.5 shall be extended to refer to such Transferred Employee, and to the extent required in respect of such Transferred Employee references to the “Closing Date” and the “Effective Time” shall be replaced with references to the “Transfer Date;

(iii)the reference to “basic salary” in paragraph 5.1.1 shall mean the basic salary that applied to such Transferred Employee immediately prior to the Transfer Date;

(iv)references to the “Closing Date” and the “Effective Time” in paragraph 6.2 shall be replaced with references to the “Transfer Date”;

(v)for the purposes of paragraphs 10.1 and 10.8, references to “Closing” and the “Closing Date” shall be construed as references to the “Transfer Date”; and

(iv)such other amendments as the parties may agree, each acting in good faith.

2.2Where no Automatic Transfer of Employment

2.2.1In such timescale as each Seller and the Purchaser may agree, in order to comply with any Applicable Law, but in any event at least 15 days prior to the Closing Date, unless agreed otherwise by each Seller and the Purchaser (such agreement not to be unreasonably withheld by any such party), the Purchaser or relevant member of its Group shall make an offer to each Target Business Employee employed by that Seller  or a member of its Group to employ him or her under a new contract of employment to commence with effect from (and including) the Closing Date provided that such employee continues to be a Target Business Employee until the Closing Date. Save as otherwise agreed with that Seller (such agreement not to be unreasonably withheld), the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that Target Business Employee immediately prior to the Closing Date. The Purchaser shall keep each Seller updated throughout the offer process on when offers are made and accepted or rejected.

2.2.2If the Target Business Employee wishes to accept the offer of employment from the Purchaser or the relevant member of its Group, then the Seller who employs (whether directly or indirectly) that person shall (or shall

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procure that the relevant member of its Group shall), insofar as it is permitted by Applicable Law, waive the requirement on the Target Business Employee concerned to give any period of notice of termination of his or her employment under the terms of his or her employment so as to allow the Target Business Employee to commence employment with the Purchaser or relevant member of its Group with effect from (and including) the Closing Date.

2.2.3If, in relation to any Relevant Employee, the day prior to the Closing Date occurs on a day which is not a Relevant Working Day in the jurisdiction in which that Employee is employed, the parties may agree (such agreement not to be unreasonably withheld by any party), that such Relevant Employees (the “Working Day Relevant Employees”) shall remain employees of the relevant Seller or a member of that Seller’s Group until the first Relevant Working Day on or after the Closing Date (the “Working Day Employee Termination Date”). If so agreed, the parties agree that the transfer of employment of the Working Day Relevant Employees to the Purchaser or one of its Affiliates shall take effect on and from the day following the Working Day Employee Termination Date which applies to the relevant Working Day Relevant Employee. The Purchaser acknowledges that it will be responsible for the total amount actually paid by the relevant Seller or its Affiliate for compensation and benefits, including any withholding taxes and payroll taxes paid by that Seller’s Group, to or in respect of the Working Day Relevant Employees in relation to their ordinary course of employment for the period on and from the Effective Time to (and including) the Working Day Employee Termination Date which applies to the relevant Working Day Relevant Employee. For the purposes of any Brazil Employee (as defined in paragraph 11.4 below), references to the “Closing Date” shall be replaced with references to the “Brazil Transfer Date”.

2.3Where Automatic Transfer of Employment

If the Transfer Regulations do not or are found not to or are alleged not to apply to any person who is a Relevant Target Business Employee, and to whom paragraph 2.2 does not apply, the Purchaser agrees that following Closing:

2.3.1in consultation with the Seller who employs (whether directly or indirectly) that person, the Purchaser or relevant member of the Purchaser’s Group shall within ten Business Days of being so requested by that Seller (as long as the request is made no later than three months after Closing) (or if the Purchaser so chooses) make such Relevant Target Business Employee an offer in writing to employ him or her under a new contract of employment subject to, and to take effect upon, a date agreed between that Seller, the Purchaser and such employee; and

2.3.2save as otherwise agreed with that Seller (such agreement not to be unreasonably withheld) the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were

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provided to that Relevant Target Business Employee immediately prior to the Closing Date.

3.WRONG-POCKET ARRANGEMENTS FOR PERSONS OTHER THAN RELEVANT EMPLOYEES

3.1If the contract of employment of any person other than a Relevant Employee is found or alleged to have effect upon Closing as if originally made with the Purchaser or another member of its Group (including any Target Group Company) as a consequence of this Agreement, or if any Target Group Company employs any person who does not work wholly or substantially in the relevant Contributed Business, or if any Target Group Company employs or becomes liable to employ on or after the Closing Date any person other than a Relevant Employee as a consequence of such person exercising a right of objection against the transfer of his employment relationship away from that Target Group Company or otherwise exercising a right to be re-hired by that Target Group Company (including without limitation in either such case pursuant to Section 631a para. 6 German Civil Code (BGB) and provided in either such case that the right arose in connection with Closing or matters arising prior to Closing), the Seller whose Group had previously employed (whether directly or indirectly) such person agrees that following Closing:

3.1.1in consultation with the Purchaser, that Seller or relevant member of its Group may within ten Business Days of being so requested by the Purchaser (as long as the request is made no later than three months after Closing or, in the case of an objection or a right to be re-hired referred to above, no later than 3 months after that person exercises a right of objection or a right to be re-hired) (or if that Seller so chooses), make to that person an offer in writing to employ him or her under a new contract of employment subject to, and to take effect upon, the termination referred to below; and

3.1.2the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that person immediately prior to the Closing Date.

3.2After the expiry of the ten Business Days referred to at paragraph 3.1 above, and provided that the relevant member of the Purchaser’s Group takes such steps as are legally possible to terminate the employment of the person concerned as soon as reasonably practicable after becoming aware of the finding, allegation, objection or re-hire referred to at paragraph 3.1 above (either by giving notice or transferring the person by agreement to be concluded between the relevant member of the Purchaser’s Group, the person concerned and the relevant member of that Seller’s Group), that Seller shall be responsible for and shall indemnify and keep indemnified the Purchaser (for itself and as trustee for any relevant member of its Group) against all Losses from time to time made, suffered or incurred by the Purchaser (or any other member of its Group) as a result of:

3.2.1the actual or alleged transfer to (or continued employment with or right to be employed by) a member of the Purchaser’s Group and (regardless of

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whether there has been such a transfer) any employment liabilities relating to such person;

3.2.2employing such person on and from the Closing Date until such termination (up to the time reasonably expected to have achieved such termination in accordance with the terms of the contract of employment and Applicable Law but subject to a maximum period of six months unless prevented by the terms of the contract of employment or Applicable Law); and

3.2.3such termination.

3.3Each Seller and the Purchaser agree to co-operate in good faith to minimise the Losses which are subject to the indemnity referred to in paragraph 3.2 above.

4.EMPLOYMENT LIABILITIES

4.1All wages, salaries, employer’s liabilities in respect of associated Taxes and other periodic outgoings in respect of the Transferred Employees which relate to a period:

4.1.1on and after the Effective Time shall be borne or discharged by the Purchaser or relevant member of the Purchaser’s Group; and

4.1.2before the Effective Time shall be borne or discharged by the Seller or relevant member of its Group to which they relate.

4.2Subject to paragraph 4.1, each Seller shall (for itself and for each member of its Group) indemnify and keep indemnified the Purchaser (for itself and as trustee for each other member of its Group) against all Losses (ignoring any amount in respect of Employee Benefits, as to which see Schedule 8) in respect of:

4.2.1the employment of any Employee at any time prior to the Effective Time (excluding any Transferred Employee Benefit Liabilities (as defined in Schedule 8) of that Seller which the Purchaser agrees to assume in accordance with Schedule 8);

4.2.2any termination of the employment of any Employees prior to the Effective Time and any termination of the employment of any Employees on and after the Effective Time but prior to the Closing Date which are not otherwise covered by paragraph 4.3.2 , including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations (excluding any liability arising directly as a result of any breach of the commitments set out in paragraph 5 or 6 below by the Purchaser or a member of the Purchaser’s Group and any act or omission by the Purchaser or any member of the Purchaser’s Group in relation to any Employee before the Closing Date as a result of which that Employee treats his employment as having been terminated prior to the Closing Date);

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4.2.3any amount which becomes payable to any Employee or benefit to which any Employee becomes entitled by reason of this Agreement or the matters it contemplates, including any change of control or other payment or benefit (and including any enhancement of severance terms on a subsequent termination of employment but excluding any Losses relating to any share-based incentive schemes, as to which see paragraph 10 below);

4.2.4any failure by such Seller or any other member of such Seller’s Group to comply with any obligation to inform or consult with employee representatives in connection with the matters contemplated by this Agreement (other than as a result of any failure set out in paragraph 4.3.3 below); and

4.2.5any breach by such Seller or any other member of such Seller’s Group of paragraph 4.1.2 above or paragraph 4.4, 4.5 or 9 below.

Where this paragraph 4.2 refers to an ‘Employee’ this is a reference to an Employee employed prior to the Closing Date by the Seller giving the indemnity (or a member of that Seller’s Group) and not to an Employee of the other Seller’s Group prior to the Closing Date.

4.3The Purchaser shall (for itself and for each member of the Purchaser’s Group) indemnify and keep indemnified each Seller (for itself and as trustee for each other member of such Seller’s Group) against all Losses (ignoring any amount in respect of Employee Benefits, as to which see Schedule 8) in respect of:

4.3.1the employment of any of the Transferred Employees on and after the Effective Time (including, without limitation, any changes to terms and conditions of employment by the Purchaser or any other member of the Purchaser’s Group);

4.3.2any termination of the employment of any Transferred Employees on and after the Effective Time and any termination of the employment of any Employees by a member of the Seller’s Group on and after the Effective Time but prior to the Closing Date who would, but for such termination of employment by a member of the Seller’s Group, have been Transferred Employees (save in each case where such termination is in order to facilitate the transfer of any Relevant Employee pursuant to paragraph 2 of this Schedule 7 or is otherwise in connection with any rejection or objection to such transfer in circumstances where paragraph 4.3.5 does not apply) including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations except as contemplated under paragraph 3.2 above;

4.3.3any failure by the Purchaser or any other member of the Purchaser’s Group to provide information and reasonable assistance to such Seller to enable such Seller or any other member of such Seller’s Group to comply with any obligation to inform or consult with employee representatives in connection with the matters contemplated by this Agreement;

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4.3.4any breach by the Purchaser or any other member of the Purchaser’s Group of paragraph 4.1.1 above or paragraphs 4.4 or 4.5 below; and

4.3.5any act or omission by the Purchaser or any member of the Purchaser’s Group in relation to any Employee before the Closing Date as a result of which that Employee treats his employment as having been terminated prior to the Closing Date.

4.4Any amount payable to or in respect of any Transferred Employee on or after the Closing Date (including without limitation amounts paid under paragraph 4.5 below) which (ignoring vesting conditions and any amount payable in respect of Employee Benefits or otherwise in accordance with Schedule 8) is referable to the period prior to the Effective Time is payable by the Seller to whom such Transferred Employee relates (for itself or on behalf of the relevant Business Seller or relevant Share Seller). Responsibility for amounts payable which are only partly referable to the period prior to the Effective Time (again ignoring vesting conditions) is to be shared between the relevant Seller (for itself or on behalf of the relevant Business Seller or relevant Share Seller) and the Purchaser (for itself or on behalf of the relevant member of the Purchaser’s Group) such that that Seller bears S per cent. of the cost and the Purchaser bears P per cent., where S is the percentage of the period by reference to which the amount was earned which fell before the Effective Time and P is the percentage of that period which falls on and after the Effective Time. Save for the payments described in paragraph 4.5 below, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, pay such amounts when due to the relevant Transferred Employees on or after the Closing Date and shall deduct and/or pay and account for any Tax payable or accountable for by the employer in respect of such amounts. Each Seller covenants to reimburse the Purchaser in respect of any such amount (or S per cent. of it where relevant), including any Tax due payable or accountable for by the employer in respect of such amount, within 30 days of receiving notification that it has been paid, to the extent such amounts are not reflected in the Closing Statement. Each Seller will provide the Purchaser with all information and documentation reasonably necessary to allow such payments to be made.

4.5Following the Closing Date:

4.5.1each Seller shall, or shall procure that a member of that Seller’s Group shall, pay a pro-rated cash bonus for the current bonus year as at the Effective Time and any unpaid cash bonus for the bonus year which ended before the Effective Time to each Transferred Employee formerly employed by that Seller’s Group and who participated in such annual cash bonus plan within 90 days following the Closing Date. For the avoidance of doubt, this paragraph 4.5.1 shall apply whether or not a member of that Seller’s Group provides post-Closing payroll services to a Target Group Company; and

4.5.2where the Seller to whom such Transferred Employee relates is able to determine performance, any such bonus payment made to such eligible employees will be based on that Seller’s determination of performance to

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the Effective Time and (where applicable) pro-rated to the Effective Time; or

4.5.3where that Seller is unable to determine performance (either business or individual), for example, because the Effective Time occurs near the start of the bonus year, that Seller shall calculate any such bonus payment based on a deemed achievement of performance conditions at target level pro-rated to the Effective Time; and

4.5.4as soon as reasonably practicable after the Closing Date, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, provide such information as that Seller requires in order for that Seller to calculate the Tax payable or accountable for by the employer in respect of such bonus payments; and

4.5.5if and to the extent permitted by Applicable Law, the Seller to whom such Transferred Employee relates shall, or shall procure that such other member of that Seller’s Group shall, deduct and/or account for any Tax payable or accountable for by the employer in respect of such bonus payments; or

4.5.6if and to the extent paragraph 4.5.5 above is not permitted by Applicable Law, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, pay and/or account for any Tax payable or accountable for by the employer in respect of such bonus payments and the Seller to whom such Transferred Employee relates shall reimburse the Purchaser in respect of such amounts so paid and/or accounted for; and

4.5.7where any amount in respect of payments made by the Seller to whom such Transferred Employee relates or any other member of that Seller’s Group pursuant to this paragraph 4.5 is reflected in the Closing Statement of that Seller, the Purchaser shall reimburse that Seller in respect of the amount so reflected. For the avoidance of doubt, no reimbursement by the Purchaser shall be due in respect of any such payment to the extent it is not reflected in that Closing Statement.

4.6If any loan made by a member of a Seller’s Group to a Transferred Employee who relates to that Seller (an “Employee Loan”) remains outstanding at the Closing Date, then the parties shall co-operate in good faith to procure an outcome such that:

4.6.1the Employee Loan shall be discharged in full within a reasonable period after the Closing Date and the relevant member of the relevant Seller’s Group shall receive all outstanding amounts of principal and interest under the Employee Loan (either from the relevant Transferring Employee or from a member of the Purchaser’s Group); and

4.6.2a loan in the same amount and on the same terms as to interest and repayment as the outstanding portion of the Employee Loan shall be made available by the Purchaser to the relevant Transferred Employee.

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5.PROTECTION OF TERMS AND CONDITIONS AND TERMINATION RIGHTS POST-CLOSING

5.1Without prejudice to paragraph 5.4 below, the Purchaser shall procure that for a period of 24 months following the Closing Date:

5.1.1each Transferred Employee will (for so long as such Transferred Employee continues in the same role with any member of the Purchaser’s Group save that the Purchaser shall not seek to demote any Transferred Employee to avoid the application of this provision) continue to receive at least the same basic salary;

5.1.2each Transferred Employee will continue to receive contractual benefits (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans) which the Purchaser reasonably considers to be substantially comparable, taken as a whole, to the contractual benefits (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans) of such Transferred Employee immediately prior to the Closing Date; and

5.1.3no Transferred Employee will suffer a change to his overall employment terms (whether contractual or otherwise) and including, without limitation, any related to length of service (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans) which, when taken as a whole viewed in the round (including to the extent relevant alongside any other changes being made at the same time to that Transferred Employee’s employment terms), would in the Purchaser’s reasonable opinion acting in good faith be regarded as materially detrimental.

5.2The Purchaser confirms that, following the Closing Date and for so long as the Transferred Employees continue in the employment of any member of the Purchaser’s Group, the Transferred Employees will be eligible to participate in those share-based incentive schemes or other long-term incentive plans that are operated by the Purchaser or relevant members of the Purchaser’s Group from time to time for employees of equivalent status, subject always to the rules of such share-based incentive schemes or long-term incentive plans and any qualifying conditions.

5.3Each Seller shall provide or shall cause to be provided to any member of the Purchaser’s Group such information reasonably requested in writing by any member of the Purchaser’s Group to enable the Purchaser to comply with its obligations in paragraph 5.1 above.

5.4If the employment of any Transferred Employee is terminated by reason of redundancy within 24 months following the Closing Date, the Purchaser shall procure that there shall be provided to such Transferred Employee benefits which are equivalent to those provided under such redundancy and severance policies and benefits (whether contractual or otherwise and giving due credit to the Transferred Employees for any additional service or earnings from the Closing Date onwards) (but excluding Employee

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Benefits other than the Agreed UK Restructuring Arrangement) as were applicable in respect of the particular Transferred Employee immediately prior to the Closing Date, to the extent that such policies and benefits are notified in writing to the Purchaser prior to the Closing Date. If, at any time during the 24 month period immediately following the Closing Date, the Purchaser places any Transferred Employee into a redundancy selection process, the Purchaser undertakes that, in determining such selection, it will or will procure that the relevant member of the Purchaser’s Group will take no account of the costs of dismissal of any person within the relevant selection pool (including such Transferred Employee). For the avoidance of doubt, redundancy payments of the type described in this paragraph 5.4 (whether paid within 24 months of Closing or later) are not intended to be covered by the apportionment mechanism at paragraph 4.4 above.

5.5For the avoidance of doubt, the provisions of this paragraph 5 are without prejudice to the operation of any rule of law in relation to the terms and conditions of employment of the Transferred Employees.

6.BENEFITS ARRANGEMENTS/SERVICE CONTINUITY

6.1Each Transferred Employee shall have their service with the Seller’s Group and their respective predecessors recognised under any employee benefit plans or arrangements of the Purchaser’s Group for all purposes of eligibility, vesting and accrual of benefits to the extent past service was recognised for such Transferred Employee under a comparable plan or arrangement immediately prior to the Closing Date. Notwithstanding the foregoing, nothing in this paragraph 6.1 shall be construed to require recognition of service for the purposes of calculation of Employee Benefits or that would result in:

6.1.1any additional liability being assumed by the Purchaser’s Group in respect of Employee Benefits other than subject to and in accordance with the provisions of Schedule 8;

6.1.2duplication of benefit;

6.1.3recognition of service for any purposes under any plan or arrangement for which participation, service and/or benefits accrual is frozen or any post-retirement medical plan; or

6.1.4recognition of service under a newly established plan or arrangement for which prior service is not taken into account for employees of the Purchaser’s Group generally.

6.2Without limiting the foregoing, with respect to the Transferred Employees, the Purchaser shall, or shall cause such other member of the Purchaser’s Group to, be responsible for all paid time off benefits, including vacation pay, sick pay, banked leave, flexitime and other payments for time off of normal work hours accrued by the Transferred Employees up to the Closing Date provided that if the value of such matters (excluding normal accrued but untaken annual leave for the year current as at the Closing Date) would exceed US$7.5 million if accrued for in a balance sheet in accordance with IFRS prior to the Effective time; then the Seller to whom such Transferred Employees relate shall compensate the Purchaser for such matters accrued prior to the Effective Time (again

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excluding normal accrued but untaken annual leave for the year current as at the Closing Date) by paying the Purchaser an amount equal to that value, less any amount actually accrued and transferred to the Purchaser for such matters.

6.3With respect to any welfare plan maintained by the Purchaser or any other member of the Purchaser’s Group in which Transferred Employees are eligible to participate after the Closing Date, the Purchaser shall:

6.3.1waive all limitations as to pre-existing conditions, exclusions, evidence of insurability provisions, waiting periods with respect to such participation and coverage requirements or similar provisions under the Purchaser’s benefit plans that are welfare plans (as defined in section 3(1) of ERISA or any equivalent Applicable Law) applicable to such employees to the extent such conditions, exclusions and waiting periods or other provisions were satisfied or did not apply to such employees under welfare plans maintained by the Seller to whom such Transferred Employees relate or other members of its Group prior to the Closing Date; and

6.3.2provide each Transferred Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any analogous deductible or out-of-pocket requirements to the extent applicable under any such plan in the year in which Closing occurs, to the extent credited under the welfare plans maintained by the  Seller to whom such Transferred Employees relate or other members of its Group prior to the Closing Date.

7.US TRANSFERRED EMPLOYEES

With effect on and from the Closing Date, the Purchaser shall, or shall procure that such other members of the Purchaser’s Group shall, assume the responsibility and obligation to provide COBRA continuation coverage to all Transferred Employees who are employed in the United States and/or covered by US Benefit Plans and whose employment is terminated after the Closing Date and their eligible dependents.

8.INTERNATIONAL ASSIGNEES

Where Applicable Law does not provide for the automatic transfer of employment of any International Assignee and/or the other terms governing their international assignment, the Purchaser shall assume and agree to be bound by the individual contract of employment and such other terms governing their international assignment including any tax equalisation agreement entered into between an International Assignee and a member of a Seller’s Group provided that such employee becomes a Transferred Employee and each Seller has disclosed to the other Seller the template international assignment terms of that Seller’s Group prior to the Closing Date.

9.LIABILITY FOR RETENTION ARRANGEMENTS

Each Seller or any other member of the Seller’s Group has or will put in place certain retention arrangements (in the form of cash) to retain key employees in connection with the matters contemplated by this Agreement. To the extent that details of such retention

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arrangements are disclosed to the other Seller prior to the Closing Date, and in respect of arrangements put in place after the date of this Agreement, with the agreement of that other Seller, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, make the cash retention payments when due to the relevant Transferred Employees on or after Closing and shall deduct and/or pay and account for any Tax payable or accountable for by the employer in respect of such cash payments. Each Seller covenants to reimburse the Purchaser in respect of any cash retention payments, whether or not disclosed (including any Tax payable or accountable for by the employer in respect of such payments), which are put in place prior to the Closing Date. Each Seller will provide the Purchaser with all information and documentation reasonably necessary to allow such payments to be made.

10.SHARE-BASED INCENTIVE SCHEMES

This paragraph 10 applies notwithstanding any other provision of this Agreement.

Outstanding share-based awards under Novartis’s Group plans

10.1Subject to paragraph 10.10, Novartis undertakes to use its best endeavours to ensure that share-based awards held by Transferred Employees pursuant to a share-based incentive scheme operated by Novartis or another member of Novartis’s Group (“Novartis Awards”) shall be treated in a manner consistent with the “good leaver treatment” in the share-based incentive schemes operated by the Purchaser, to the extent possible under the relevant plan rules and any applicable law.  Where Novartis Awards are subject to performance (or other) conditions and it is not possible to determine whether or not such conditions have been met at the applicable early vesting date (or within a reasonable period thereafter), the Sellers agree that performance shall be deemed “on target”.

For the avoidance of doubt:

(i)where necessary and subject to (ii), Novartis shall rely on the exercise of existing discretions in the relevant plan rules and (provided the approval of Novartis’s shareholders is not required) shall be expected to amend the relevant plan rules to achieve the “good leaver treatment”;

(ii)Novartis (or relevant member of Novartis’s Group) shall not take any action which would require shareholder approval or which could trigger any significant legal, Tax or operational issues for the relevant Transferred Employee (including the loss of any Tax-favourable treatment), GlaxoSmithKline’s Group, Novartis’s Group or the Purchaser’s Group.

For the purposes of this paragraph 10.1, the “good leaver treatment” shall be that:

(iii)Novartis Awards shall not lapse or be forfeited as a result of Closing except to the extent that they do not vest in accordance with (iv) and/or (v) below;

(iv)Novartis Awards shall vest early as a result of Closing and shall be time pro-rated to take account of the reduced period of time, as a proportion of the

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original vesting period, that the relevant Transferred Employee worked within Novartis’s Group (calculated on the basis of the number of years of service as at the Closing Date, where part years of service are rounded up); and

(v)Novartis Awards that vest after the Closing Date shall remain subject to any relevant performance (or other) conditions, adjusted as necessary to take account of Closing and measured up to the applicable early vesting date.

10.2For the purposes of this paragraph 10.2, “on target” performance shall not be construed as permitting share-based awards to vest in full.

10.3Novartis agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for any Liabilities borne by the Purchaser’s Group in connection with the Novartis Awards, including any Tax.  The Sellers agree to use their best endeavours to ensure that the Purchaser seeks any applicable Tax relief in respect of the Novartis Awards and indemnifies Novartis in respect of any Tax relief obtained, provided always that Novartis provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner.

10.4Subject to paragraph 10.5, Novartis undertakes to inform the Purchaser of the vesting or exercise (as applicable) of the Novartis Awards and to provide, in a timely manner, details of the Novartis Awards that so vest or are exercised so that the Purchaser’s Group can make any applicable withholdings for Tax and pay any Tax for which the Purchaser’s Group is liable in respect of the Novartis Awards to the relevant Tax Authority within any applicable timescale.

10.5To the extent permitted under the relevant plan rules and any applicable law, Novartis undertakes to sell such number of the shares underlying the Novartis Awards as may be necessary for the sale proceeds to satisfy any applicable Tax withholdings and to pay such amounts to the Purchaser in sufficient time for the Purchaser to pay such Tax to the relevant Tax Authority within any applicable timescale, provided always that the Purchaser provides Novartis with any information that Novartis may reasonably request in this respect in a timely manner.

10.6Novartis undertakes to pay any Tax for which Novartis’s Group is liable in respect of the Novartis Awards to the relevant Tax Authority within any applicable timescale.

10.7Novartis undertakes to complete any relevant Tax Return in respect of the Novartis Awards and to submit any such Tax Return to the relevant Tax Authority within any applicable timescale.

10.8This paragraph shall apply where Novartis Awards lapse or are forfeited (or will lapse or be forfeited) either in whole or in part as a result of Closing.  As soon as practicable following Closing with the intention being, where possible, to grant within 30 days of the Closing Date or the first date after the Closing Date when dealing restrictions do not apply (and, in any event, by the later of 90 days from the Closing Date and 90 days from the first date after the Closing Date when the granting of share-based awards is not prevented by dealing restrictions), subject in both cases to the relevant plan rules and any applicable law, GlaxoSmithKline (or member of GlaxoSmithKline’s Group) shall

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grant each relevant Transferred Employee a share-based award over shares in the capital of GlaxoSmithKline substantially equal in value (valued as at the date of grant) to the value of the portion of their Novartis Awards which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing (valued as at the Closing Date), where relevant, disregarding any loss (or expected loss) of Tax-favourable treatment (each a “Compensation Award”).  To the extent that (i) it could reasonably have been expected that any related matching share award and/or free share award would have been granted to a Transferred Employee following Closing in connection with any Novartis Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing (each an “Novartis Matching Award”), and (ii) such Novartis Matching Award has not been granted (or will not be granted) as a result of Closing, on or around the date on which such Novartis Matching Award would, in the ordinary course of business, have been made by Novartis (or member of Novartis’s Group), GlaxoSmithKline (or member of GlaxoSmithKline’s Group) shall grant each relevant Transferred Employee a share-based award over shares in the capital of GlaxoSmithKline substantially equal in value (valued as at the date of grant) to the value of such Novartis Matching Award (valued as at the date of grant of the related Matching Award, defined below), where relevant, disregarding any loss (or expected loss) of Tax-favourable treatment (each a “Matching Award”), subject to the relevant plan rules and any applicable law.

Such Compensation Awards and Matching Awards shall be granted pursuant to the rules of whichever share-based incentive plan operated by GlaxoSmithKline’s Group at the time of grant GlaxoSmithKline considers most closely aligned to the share-based incentive plan operated by Novartis’s Group pursuant to which the related Novartis Award had been granted (or related Novartis Matching Award would have been granted) but will vest according to a vesting schedule substantially similar to the vesting schedule that would have otherwise applied to the related Novartis Award or related Novartis Matching Award if Closing had not occurred.  In such cases:

(i)the Sellers agree to use their best endeavours to ensure that the Purchaser seeks any applicable Tax relief in respect of the Compensation Awards and Matching Awards and indemnifies Novartis in respect of 50 per cent. of any Tax relief obtained, and GlaxoSmithKline undertakes to provide the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner;

(ii)where a Compensation Award or Matching Award is granted in the form of a restricted share award, the Sellers agree to use their reasonable endeavours to ensure that the Purchaser obtains a valid election pursuant to section 431 of the Income Tax (Earnings and Pensions) Act 2003 (or, as applicable, any similar Tax election that is available pursuant to any applicable law in another jurisdiction), provided that, if a Seller makes representations to the other Seller to waive this obligation in respect of certain Compensation Awards or certain Matching Awards and the other Seller consents to such waiver (such consent not to be unreasonably withheld), this paragraph (ii) shall not apply in respect of such Compensation Awards or Matching Awards; and

(iii)Novartis agrees to indemnify GlaxoSmithKline (or relevant member of GlaxoSmithKline’s Group or the Purchaser’s Group) for 50 per cent. of any

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Liabilities borne by GlaxoSmithKline’s Group or the Purchaser’s Group in connection with such Compensation Awards and Matching Awards, including any Tax, provided that:

(A)Novartis shall not indemnify GlaxoSmithKline (or relevant member of GlaxoSmithKline’s Group or the Purchaser’s Group) to the extent that GlaxoSmithKline (or a member of GlaxoSmithKline’s Group or the Purchaser’s Group) compensates Transferred Employees for any loss (or expected loss) of Tax-favourable treatment in respect of Novartis Awards or for any Liabilities to Tax as contemplated in paragraph 10.9 below;

(B)Novartis only agrees to indemnify GlaxoSmithKline (or member of GlaxoSmithKline’s Group or the Purchaser’s Group) to a maximum of 50 per cent. of the total of: (i) the value of the portion of such Novartis Awards that lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing, (ii) the value of Novartis Matching Awards, and (iii) any related Liabilities, including Tax; and

(C)for the avoidance of doubt, Novartis shall not indemnify GlaxoSmithKline (or member of GlaxoSmithKline’s Group or the Purchaser’s Group) for any lapse or forfeiture (or expected lapse or forfeiture) due to a failure to meet any applicable performance (or other) conditions.

For these purposes, the compensation in respect of the portion of an Novartis Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing shall not exceed the difference between (i) the value of the Novartis Award which could reasonably have been expected to vest on the normal vesting date but for Closing (subject, where applicable, to performance (or other) conditions), and (ii) the value of the Novartis Award which actually vested (or will vest) as a result of Closing.

For the purposes of this paragraph 10.8:

(i)the portion of an Novartis Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing shall be valued on the basis of the average price of an ordinary share in the capital of Novartis over the five trading days immediately prior to Closing;

(ii)the value of a Compensation Award to be granted shall be valued on the basis of the average price of an ordinary share in the capital of GlaxoSmithKline over the five trading days immediately prior to the date of grant;

(iii)the value of an Novartis Matching Award shall be valued on the basis of the average price of an ordinary share in the capital of Novartis over the five trading days immediately prior to the date of grant of the related Matching Award;

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(iv)the value of a Matching Award to be granted shall be valued on the basis of the average price of an ordinary share in the capital of GlaxoSmithKline over the five trading days immediately prior to the date of grant; and

(v)any currency conversion shall be made in accordance with Clause 1.13.1.

10.9To the extent that any payment to a Transferred Employee (whether by Novartis’s Group, GlaxoSmithKline’s Group or by the Purchaser’s Group) would trigger Liabilities to Tax under section 280G of the United States Internal Revenue Code (“Section 280G”), the relevant Transferred Employee shall be allowed to choose whether to accept the full payment (and pay any relevant Section 280G Tax) or to receive such lower payment as may be necessary in order to fall below the Section 280G threshold for Tax.  To the extent that any similar Tax would arise pursuant to any applicable law in another jurisdiction, this paragraph 10.9 shall apply mutatis mutandis.

10.10This paragraph shall apply if any member of Novartis’s Group’s corporate executive team (or similar body) is a Transferred Employee (each a “CET Member”).  The treatment of share-based awards held by CET members shall be determined by the remuneration committee of the board of directors of Novartis (acting reasonably and in good faith and following informal consultation with GlaxoSmithKline), subject to the rules of any relevant share-based incentive scheme and any applicable law, and the provisions of paragraphs 10.8 and 10.16 shall apply.

Outstanding Share-Based Awards under GlaxoSmithKline’s Group Plans

10.11GlaxoSmithKline agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for any Liabilities borne by the Purchaser’s Group in connection with share-based awards held by Transferred Employees pursuant to a share-based incentive scheme operated by GlaxoSmithKline or another member of GlaxoSmithKline’s Group and which were granted prior to Closing (“GlaxoSmithKline Awards”), including any Tax.  The Sellers agree to use their best endeavours to ensure that the Purchaser seeks any applicable Tax relief in respect of the GlaxoSmithKline Awards and indemnifies GlaxoSmithKline in respect of any Tax relief obtained, provided always that GlaxoSmithKline provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner.

10.12Subject to paragraph 10.13, GlaxoSmithKline undertakes to inform the Purchaser of the vesting or exercise (as applicable) of the GlaxoSmithKline Awards and to provide, in a timely manner, details of the GlaxoSmithKline Awards that so vest or are exercised so that the Purchaser’s Group can make any applicable withholdings for Tax and pay any Tax for which the Purchaser’s Group is liable in respect of the GlaxoSmithKline Awards to the relevant Tax Authority within any applicable timescale.

10.13To the extent permitted under the relevant plan rules and any applicable law, GlaxoSmithKline undertakes to sell such number of the shares underlying the GlaxoSmithKline Awards as may be necessary for the sale proceeds to satisfy any applicable Tax withholdings and to pay such amounts to the Purchaser in sufficient time for the Purchaser to pay such Tax to the relevant Tax Authority within any applicable timescale, provided always that the Purchaser provides GlaxoSmithKline with any

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information that GlaxoSmithKline may reasonably request in this respect in a timely manner.

10.14GlaxoSmithKline undertakes to pay any Tax for which GlaxoSmithKline’s Group is liable in respect of the GlaxoSmithKline Awards to the relevant Tax Authority within any applicable timescale.

10.15GlaxoSmithKline undertakes to complete any relevant Tax Return in respect of the GlaxoSmithKline Awards and to submit any such Tax Return to the relevant Tax Authority within any applicable timescale.

2014 Performance Awards

10.16This paragraph 10.16 shall apply where: (i) a Transferred Employee would, in the ordinary course of business, have been granted a share-based award pursuant to a share-based incentive scheme operated by the relevant Seller or another member of the relevant Seller’s Group on the basis of performance criteria linked to the relevant Seller’s Group’s 2014 financial year (which may, for the avoidance of doubt, be business and/or individual performance criteria and assessment) (each a “2014 Performance Award”), and (ii) Closing occurs prior to the grant of such 2014 Performance Award.  As soon as practicable following Closing (and, in any event, by the later of 30 days from the Closing Date and 30 days from the date when the value of each 2014 Performance Award has been determined), the relevant Seller shall notify the Purchaser (and, where the relevant Seller is Novartis, shall also notify GlaxoSmithKline) in writing of the value of each 2014 Performance Award and under which share-based incentive plan operated by the relevant Seller’s Group the related 2014 Performance Award would have been granted.  As soon as practicable following the receipt of such notice (and, in any event, by the later of 30 days from the receipt of such notice and 30 days from the first date following the receipt of such notice when the granting of share-based awards is not prevented by dealing restrictions, subject in both cases to the relevant plan rules and any applicable law), GlaxoSmithKline (or member of GlaxoSmithKline’s Group) shall grant each relevant Transferred Employee a share-based award over shares in the capital of GlaxoSmithKline substantially equal in value (valued as at the date of grant) to the value of the 2014 Performance Award which would have been granted but for the occurrence of Closing.  Such 2014 Performance Awards shall be granted pursuant to the rules of whichever share-based incentive plan operated by GlaxoSmithKline’s Group at the time of grant GlaxoSmithKline considers most closely aligned to the share-based incentive plan operated by the relevant Seller’s Group pursuant to which the related 2014 Performance Award would have been granted.  In such cases:

(i)the Sellers agree to use their best endeavours to ensure that the Purchaser seeks any applicable Tax relief in respect of the 2014 Performance Awards and indemnifies the relevant Seller in respect of any Tax relief obtained, and GlaxoSmithKline undertakes to provide the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner;

(ii)where a 2014 Performance Award is granted in the form of a restricted share award, the Sellers agree to use their reasonable endeavours to ensure that the

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Purchaser obtains a valid election pursuant to section 431 of the Income Tax (Earnings and Pensions) Act 2003 (or, as applicable, any similar Tax election that is available pursuant to any applicable law in another jurisdiction), provided that, if a Seller makes representations to the other Seller to waive this obligation in respect of certain 2014 Performance Awards and the other Seller consents to such waiver (such consent not to be unreasonably withheld), this paragraph (ii) shall not apply in respect of such 2014 Performance Awards; and

(iii)the relevant Seller agrees to indemnify GlaxoSmithKline (or relevant member of GlaxoSmithKline’s Group or the Purchaser’s Group) for any Liabilities borne by GlaxoSmithKline’s Group or the Purchaser’s Group in connection with such 2014 Performance Awards, including any Tax.

The grant of a 2014 Performance Award to a Transferred Employee shall be taken into account by the Purchaser when determining the extent to which that Transferred Employee shall participate in incentive arrangements (other than any Compensation Award or Matching Award) for employees of the Purchaser’s Group following Closing.

For the purposes of this paragraph 10.16:

(i)the value of a 2014 Performance Award to be granted shall: (i) be determined by the relevant Seller acting reasonably and in good faith, (ii) be consistent with both past practice and with the level of similar awards granted to employees (where Novartis is the relevant Seller) remaining in service within Novartis’s Group or (where GlaxoSmithKline is the relevant Seller) remaining in service within GlaxoSmithKline’s Group, (iii) take into account the relevant business and/or individual performance criteria linked to the Seller’s Group’s 2014 financial year, and (iv) if Closing occurs before 31 December 2014, be time pro-rated to take account of the reduced period of time, as a proportion of the relevant Seller’s Group’s 2014 financial year, that the relevant Transferred Employee worked within (where Novartis is the relevant Seller) Novartis’s Group or (where GlaxoSmithKline is the relevant Seller) within GlaxoSmithKline’s Group (calculated on the basis of the number of complete months of service as at the Closing Date);

(ii)the number of shares to be placed under a 2014 Performance Award shall be valued on the basis of the average price of an ordinary share in the capital of GlaxoSmithKline over the five trading days immediately prior to the date of grant; and

(iii)any currency conversion shall be made in accordance with Clause 1.13.1.

Future share-based incentives

10.17The Sellers confirm that it is envisaged that any share-based incentives to be provided to employees of the Purchaser’s Group following Closing will be granted pursuant to share-based incentives schemes operated by GlaxoSmithKline or a member of GlaxoSmithKline’s Group (the “JV Awards”). Subject to paragraphs 10.8 and 10.16, the Sellers undertake to use their best endeavours to ensure that the Purchaser indemnifies

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GlaxoSmithKline for any Liabilities borne by GlaxoSmithKline in connection with the JV Awards.

11.Delayed Employees

11.1In this Schedule:

“Delayed Business Employees”	means, in respect of GlaxoSmithKline, the GlaxoSmithKline Delayed Business Employees and, in respect of Novartis, the Novartis Delayed Business Employees;
“Delayed Company Employees”	means, in respect of GlaxoSmithKline, the GlaxoSmithKline Delayed Company Employees and, in respect of Novartis, the Novartis Delayed Company Employees;
“Delayed Employees”	means, in respect of GlaxoSmithKline, the GlaxoSmithKline Delayed Employees and, in respect of Novartis, the Novartis Delayed Employees;
“GlaxoSmithKline Delayed Employees”	means the GlaxoSmithKline Delayed Business Employees and the GlaxoSmithKline Delayed Company Employees;
“GlaxoSmithKline Delayed Business Employees”	means (i) the Relevant GlaxoSmithKline Business Employees who immediately prior to the Closing Date work in any of the Delayed Target Group Businesses, and (ii) any employees of any member of GlaxoSmithKline’s Group who are appointed to their position (whether by internal or external hire) on or after the Closing Date in accordance with a Controlled Business Instruction or Seller Involvement Instruction to work wholly or substantially in the Target Group (other than the GlaxoSmithKline Delayed Company Employees), and in each case for so long as they are not assigned to work other than wholly or substantially in the Target Group;
“GlaxoSmithKline Delayed Company Employees”	means (i) the Relevant GlaxoSmithKline Company Employees who immediately prior to the Closing Date are employees of any of the Delayed Target Group Companies, and (ii) any employees of any of the Delayed Target Group Companies who are appointed to their position (whether by internal or external hire) on or after the Closing Date in accordance with a Controlled Business Instruction

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	or Seller Involvement Instruction to work wholly or substantially in the Target Group, and in each case for so long as they are not assigned to work other than wholly or substantially in the Target Group;
“Inadvertent Novartis Employee”	means any individual who immediately before the Closing Date was employed by a member of Novartis’s Group but who is found or alleged to become or otherwise becomes employed by a member of GlaxoSmithKline’s Group (excluding the Purchaser’s Group) as a result of this Agreement or the transactions it contemplates. For the avoidance of doubt, Inadvertent Novartis Employee shall exclude any Novartis Alliance Market Employee;
“Novartis Delayed Employees”	means the Novartis Delayed Business Employees and the Novartis Delayed Company Employees;
“Novartis Delayed Business Employees”	means (i) the Relevant Novartis Business Employees who immediately prior to the Closing Date work in any of the Delayed Target Group Businesses, and (ii) any employees of any member of Novartis’s Group who are appointed to their position (whether by internal or external hire) on or after the Closing Date in accordance with a Controlled Business Instruction or Seller Involvement Instruction to work wholly or substantially in the Target Group (other than the Novartis Delayed Company Employees), and in each case for so long as they are not assigned to work other than wholly or substantially in the Target Group; and
“Novartis Delayed Company Employees”	means (i) the Relevant Novartis Company Employees who immediately prior to the Closing Date are employees of any of the Delayed Target Group Companies, and (ii) any employees of any of the Delayed Target Group Companies who are appointed to their position (whether by internal or external hire) on or after the Closing Date in accordance with a Controlled Business Instruction or Seller Involvement Instruction to work wholly or substantially in the Target Group, and in each case for so long as they are not assigned to work other than wholly or substantially in the Target Group.

“Controlled Business Instruction”, “Delayed Assets”, “Delayed Closing Date”, “Delayed Target Group Businesses”, “Seller Involvement Instruction” and “Delayed Target Group

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Companies” each have the meanings given to them in Schedule 22. For the purposes of this Schedule, references to “Delayed Target Group Businesses” shall be extended to refer to Delayed Assets and references to “Delayed Business Employees” shall be extended to refer to Employees who work at any of the Delayed Assets.

11.2The parties intend and agree that:

11.2.1the employment of the Delayed Employees shall not be transferred by the relevant Seller or another member of its Group to a member of the Purchaser’s Group on and from the Closing Date but shall transfer on and from the Delayed Closing Date which relates to the Delayed Target Group Company or Delayed Target Group Business associated with that Delayed Employee;

11.2.2notwithstanding the intention at paragraph 11.2.1 above, if the contract of employment of any Delayed Employee is found or alleged to have effect at any time prior to the Delayed Closing Date as if originally made with the Purchaser or another member of the Purchaser’s Group (including any Target Group Company) as a consequence of this Agreement, paragraph 3 shall not apply in relation to that Delayed Employee and as a result the parties shall in good faith seek to agree as soon as reasonably practicable how best to deal with such unintended transfer or allegation of transfer having regard to the reason why the individual’s transfer to the Purchaser or another member of the Purchaser’s Group (including any Target Group Company) was delayed but provided that, if the parties are unable to reach such agreement within a reasonable period and if it is agreed that such Delayed Employee’s contract of employment has so transferred, then such Delayed Employee shall be treated from the time he actually became so employed as a “Transferred Employee” (and no longer a Delayed Employee) for the purposes of this Agreement;

11.2.3no provisions in paragraph 2 shall require the Purchaser or another member of the Purchaser’s Group (including any Target Group Company) to employ, or make an offer to employ, a Delayed Employee, on and from the Closing Date;

11.2.4paragraph 2.2 shall be amended to the extent required so that it applies to Delayed Business Employees and, in respect of such Delayed Business Employees, references to the “Closing Date” shall be replaced with references to the “Delayed Closing Date which relates to the Delayed Target Group Business associated with that Delayed Employee”;

11.2.5paragraph 2.3 shall be amended to the extent required so that it applies to Delayed Business Employees and, in respect of such Delayed Business Employees, references to the “Closing Date” or “Closing” shall be replaced with references to the “Delayed Closing Date which relates to the Delayed Target Group Business associated with that Delayed Employee”;

11.2.6paragraph 3 shall be amended to the extent required so that it applies on each Delayed Closing Date in respect of any person who is not at that time a Delayed Business Employee or Delayed Company Employee and any references to the

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“Closing Date” or “Closing” shall be replaced with references to that “Delayed Closing Date”;

11.2.7in relation to any Inadvertent Novartis Employee who was immediately prior to the Closing Date working wholly or substantially in the Novartis OTC Business (“Inadvertent In-Scope Novartis Employee”), the parties shall co-operate to procure a transfer of his employment to a member of the Purchaser’s Group as soon as reasonably practicable, taking into account the timing of the transfer of employment of any GlaxoSmithKline Delayed Employee to a member of the Purchaser’s Group where such GlaxoSmithKline Delayed Employee is employed by the same member of GlaxoSmithKline’s Group as the Inadvertent In-scope Novartis Employee is employed; and

11.2.8in relation to any Inadvertent Novartis Employee who was not immediately prior to the Closing Date working wholly or substantially in the Novartis OTC Business, the relevant member of GlaxoSmithKline’s Group shall on and after Closing have the same rights against Novartis in respect of the employee and in relation to the transfer of his employment as the Purchaser would have had under paragraph 3 if the transfer or alleged transfer had been to the Purchaser or another member of the Purchaser’s Group.

11.3Notwithstanding the provisions of paragraph 11.2 above, the parties agree that each Delayed Employee and any Inadvertent In-Scope Novartis Employee shall, with effect from and including the Closing Date, be treated for economic purposes as if he is employed by a member of the Purchaser’s Group, and as a consequence will be deemed to be a “Transferred Employee” (meaning that the Purchaser will be economically responsible for all costs and liabilities relating to his employment on and from the Effective Time or termination of his employment on and from the Effective Time) provided that such treatment shall not result, in relation to any Delayed Employee, in any member of the Purchaser’s Group being liable for any costs and liabilities under this Schedule to the extent that any such costs and liabilities arise from (i) any failure by the relevant member of the Seller’s Group prior to a Delayed Employee’s Delayed Closing Date, without good reason, to comply with any Controlled Business Instruction or Seller Involvement Instruction in relation to that Delayed Employee; or (ii) any claim by a Delayed Employee as a result of any breach of contract or Applicable Law by the relevant member of that Seller’s Group (other than in express compliance with any Controlled Business Instruction or Seller Involvement Instruction or as otherwise expressly agreed in writing by the Purchaser) in respect of such Delayed Employee. Any amounts payable pursuant to this paragraph 11.3 shall be paid in accordance with paragraph 3 of Schedule 22. For the avoidance of doubt, no provision of this paragraph 11.3 shall entitle either Seller or any member of the relevant Seller’s Group to recover any amount in respect of any Delayed Employee if that would entitle that Seller or member of that Seller’s Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement. For the purposes of paragraphs 10.1 and 10.8 above, references to “Closing” and the “Closing Date” shall be construed as references to the relevant Closing, Closing Date or Delayed Closing Date that applies to each of the relevant Transferred Employees.

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11.4Notwithstanding any provision of this Agreement, the parties intend and agree that the employment of any Relevant Novartis Business Employees who works in Brazil (“Brazil Employee”) shall not be transferred by Novartis or another member of its Group to a member of the Purchaser’s Group on and from the Closing Date but shall instead transfer to GlaxoSmithKline or a member of its Group on and from 1 April 2015 (or such later date as the parties may agree) (the “Brazil Transfer Date”). For the avoidance of doubt, any such Brazil Employee shall be an “Inadvertent In-scope Novartis Employee” for the purposes of this Agreement from (and including) the Brazil Transfer Date.

11.5The parties agree that where a Brazil Employee (a “Brazil Leave Employee”) is absent on maternity leave which will end on or after the Brazil Transfer Date or is pregnant (and has formally confirmed to a member of Novartis’s Group that she is pregnant prior to the Brazil Transfer Date), and would otherwise have been made an offer of employment to commence with effect from (and including) the Brazil Transfer Date by GlaxoSmithKline or relevant member of its Group in accordance with paragraph 11.4 above, such an offer shall be made, but employment pursuant to such offer shall commence only with effect from (and including) the date on which the Brazil Leave Employee returns to work at the end of such period of maternity leave or at the end of the period of maternity leave following the pregnancy referred to above, as applicable, provided always that the date of such return to work is no more than twelve months after the Brazil Transfer Date. Any such Brazil Leave Employee will only be an “Inadvertent In-scope Novartis Employee” for the purposes of this Agreement from (and including) the date when that Brazil Leave Employee returns to work on or after the Brazil Transfer Date. If any Brazil Leave Employee has not returned to work by the date falling twelve months after the Brazil Transfer Date, then such Brazil Leave Employee shall be treated for all purposes under this Agreement as an Excluded Employee.

12.Global Support Function

12.1In this Schedule:

“Excluded GSF Employees”	means the employees of any member of GlaxoSmithKline’s Group who work wholly or substantially in the GlaxoSmithKline Consumer Business immediately prior to the Closing Date (other than the GlaxoSmithKline Company Employees) but who are part of GlaxoSmithKline’s Global Support Function; and
“Transferring Excluded GSF Employees”	means the employees of any GlaxoSmithKline Consumer Group Company who do not work wholly or substantially in the GlaxoSmithKline Consumer Business immediately prior to the Closing Date but who are either (i) part of GlaxoSmithKline’s Global Support Function or (ii) part of GlaxoSmithKline’s Pharmaceutical division in Costa Rica, Sri Lanka or such other countries as the parties may agree.

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12.2The parties intend and agree that:

12.2.1the employment of the Excluded GSF Employees shall not be transferred by GlaxoSmithKline or another member of its Group to a member of the Purchaser’s Group on and from the Closing Date or at any time as a consequence of this Agreement; and

12.2.2notwithstanding the intention at paragraph 12.2.1 above, if the contract of employment of any Excluded GSF Employee is found or alleged to have effect upon Closing as if originally made with the Purchaser or another member of its Group (including any Target Group Company) as a consequence of this Agreement, paragraph 3 shall not apply in relation to that Excluded GSF Employee and as a result such Excluded GSF Employee shall be treated as a “Transferred Employee” for the purposes of this Agreement.

12.3The Purchaser shall (for itself and for each member of the Purchaser’s Group) indemnify and keep indemnified GlaxoSmithKline (for itself and as trustee for each other member of its Group) against all Losses (ignoring any amount in respect of Employee Benefits relating to the period prior to the Effective Time, as to which see Schedule 8) in respect of:

12.3.1the employment of any of the Excluded GSF Employees on and after the Effective Time; and

12.3.2any termination of the employment of any Excluded GSF Employees on and after the Effective Time including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations (but excluding any costs of applying the Agreed UK Restructuring Arrangement to the extent that such costs, if they were to relate to a Transferred Employee, would not have been covered under paragraph 17 of Schedule 8),

but in each case excluding (i) any Losses to the extent that any such Loss arises directly as a result of any failure by GlaxoSmithKline or any member of its Group to comply with its obligations or instructions under the Services Agreement or (ii) any Losses to the extent that they relate to any claim by an Excluded GSF Employee as a result of any breach of contract or Applicable Law by GlaxoSmithKline (other than in express compliance with any obligations or instructions under the Services Agreement or as otherwise expressly agreed in writing by the Purchaser) in respect of such Excluded GSF Employee. For the avoidance of doubt, no provision of this paragraph 12.3 shall entitle GlaxoSmithKline or any member of its Group to recover any amount in respect of any Excluded GSF Employee if that would entitle GlaxoSmithKline or any member of its Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement.

12.4The parties intend and agree, notwithstanding that the Transferring Excluded GSF Employees will not work wholly or substantially in the GlaxoSmithKline Consumer Business immediately prior to the Closing Date, that:

12.4.1the employment of the Transferring Excluded GSF Employees shall be transferred by GlaxoSmithKline or another member of its Group to a member of the Purchaser’s Group on and from the Closing (or the Delayed Closing Date

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which relates to the Delayed Target Group Company associated with that Transferring Excluded GSF Employee); and

12.4.2paragraph 3 shall not apply in relation to any Transferring Excluded GSF Employee.

For the avoidance of doubt, any such Transferring Excluded GSF Employee shall not be a “Transferred Employee” for the purposes of this Agreement.

12.5GlaxoSmithKline shall (for itself and for each member of its Group) indemnify and keep indemnified the Purchaser (for itself and as trustee for each other member of its Group) against all Losses (ignoring any amount in respect of Employee Benefits relating to the period prior to the Effective Time, as to which see Schedule 8) in respect of:

12.5.1the employment of any of the Transferring Excluded GSF Employees on and after the Effective Time; and

12.5.2any termination of the employment of any Transferring Excluded GSF Employees on and after the Closing Date including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations,

but in each case excluding (i) any Losses to the extent that any such Loss arises directly as a result of any failure by the Purchaser or any member of its Group to comply with its obligations or instructions under the Services Agreement (if applicable) or (ii) any Losses to the extent that they relate to any claim by a Transferring Excluded GSF Employee as a result of any breach of contract or Applicable Law by the Purchaser or any member of its Group (other than in express compliance with any obligations or instructions under the Services Agreement (if applicable) or as otherwise expressly agreed in writing by GlaxoSmithKline) in respect of such Transferring Excluded GSF Employee. For the avoidance of doubt, no provision of this paragraph 12.5 shall entitle the Purchaser or any member of its Group to recover any amount in respect of any Transferring Excluded GSF Employee if that would entitle the Purchaser or any member of its Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement.

13.Alliance Market Businesses

13.1In this Schedule:

“Export Market Territories”	means, in relation to GlaxoSmithKline, GSK Export Market Territories and, in relation to Novartis, Novartis Export Market Territories;
“GlaxoSmithKline Alliance Market Employees”	means the employees of any member of GlaxoSmithKline’s Group who work wholly or substantially in the GlaxoSmithKline Consumer Business immediately prior to the Closing Date (other than the GlaxoSmithKline Company

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	Employees) but who work in any of the GlaxoSmithKline Alliance Market Businesses; and
“GSK Export Market Territories”	means Armenia, Azerbaijan, Bahrain, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Estonia, Georgia, Ghana, Israel, Jordan, Kazakhstan, Kuwait, Latvia, Lebanon, Lithuania, Malta, Oman, Saudi Arabia, Serbia, Slovenia, Tanzania, Trinidad, UAE, Vietnam and Yemen;
“Novartis Alliance Market Employees”	means the employees of any member of Novartis’s Group who work wholly or substantially in the Novartis OTC Business immediately prior to the Closing Date (other than the Novartis Company Employees) but who work in any of the Novartis Alliance Market Businesses.
“Novartis Export Market Territories”	means Belarus, Jordan, Kazakhstan, Lebanon, Nigeria and Serbia.

For the purposes of this Schedule, references to “GlaxoSmithKline Alliance Market Employees” shall be extended to refer to Employees who work in any of the GSK Export Market Territories and references to “Novartis Alliance Market Employees” shall be extended to refer to Employees who work in any of the Novartis Export Market Territories.

13.2The parties intend and agree that:

13.2.1the employment of the GlaxoSmithKline Alliance Market Employees shall not be transferred by GlaxoSmithKline or another member of its Group to a member of the Purchaser’s Group on and from the Closing Date or at any time as a consequence of this Agreement; and

13.2.2notwithstanding the intention at paragraph 13.2.1 above, if the contract of employment of any GlaxoSmithKline Alliance Market Employee is found or alleged to have effect upon Closing as if originally made with the Purchaser or another member of its Group (including any Target Group Company) as a consequence of this Agreement, paragraph 3 shall not apply in relation to that GlaxoSmithKline Alliance Market Employee and as a result such GlaxoSmithKline Alliance Market Employee shall be treated as a “Transferred Employee” for the purposes of this Agreement.

13.3The Purchaser shall (for itself and for each member of the Purchaser’s Group) indemnify and keep indemnified GlaxoSmithKline (for itself and as trustee for each other member of its Group) against all Losses (ignoring any amount in respect of Employee Benefits relating to the period prior to the Effective Time, as to which see Schedule 8) in respect of:

13.3.1the employment of any of the GlaxoSmithKline Alliance Market Employees on and after the Effective Time; and

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13.3.2any termination of the employment of any GlaxoSmithKline Alliance Market Employees on and after the Effective Time including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations,

but in each case excluding (i) any Losses to the extent that any such Loss arises directly as a result of any failure by GlaxoSmithKline or any member of its Group to comply with its obligations or instructions under the relevant Alliance Market Distribution Agreement for that Alliance Market Territory or, where there is no such agreement, the relevant distribution arrangements in place between a member of GlaxoSmithKline’s Group and a member of the Purchaser’s Group from time to time for that Alliance Market Territory or Export Market Territory (together the “Distribution Arrangements”) or (ii) any Losses to the extent that they relate to any claim by a GlaxoSmithKline Alliance Market Employee as a result of any breach of contract or Applicable Law by GlaxoSmithKline (other than in express compliance with any obligations or instructions under the relevant Distribution Arrangements for that Alliance Market Territory or Export Market Territory or as otherwise expressly agreed in writing by the Purchaser) in respect of such GlaxoSmithKline Alliance Market Employee. For the avoidance of doubt, no provision of this paragraph 13.3 shall entitle GlaxoSmithKline or any member of its Group to recover any amount in respect of any GlaxoSmithKline Alliance Market Employee if that would entitle GlaxoSmithKline or any member of its Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement.

13.4The parties intend and agree that:

13.4.1the employment of the Novartis Alliance Market Employees shall not be transferred by Novartis or another member of its Group to a member of the Purchaser’s Group on and from the Closing Date but shall instead transfer to GlaxoSmithKline or a member of its Group on and from the Closing Date;

13.4.2no provisions in paragraph 2 shall require the Purchaser or another member of the Purchaser’s Group (including any Target Group Company) to employ, or make an offer to employ, a Novartis Alliance Market Employee, on and from the Closing Date;

13.3.3paragraph 2.2 shall be amended in respect of any Novartis Alliance Market Employees so that any references to the “Purchaser” shall be replaced with references to “GlaxoSmithKline”;

13.4.4paragraph 2.3 shall be amended in respect of any Novartis Alliance Market Employees so that any references to the “Purchaser” shall be replaced with references to “GlaxoSmithKline”; and

13.4.5if the contract of employment of any person other than a Novartis Alliance Market Employee is found or alleged to have effect upon Closing as if originally made with GlaxoSmithKline or another member of its Group as a consequence of this Agreement, paragraph 3 shall apply in relation to that person but shall be

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amended so that any references to the “Purchaser” shall be replaced with references to “GlaxoSmithKline”.

13.5The parties acknowledge that any Novartis Alliance Market Employee shall not be a “Transferred Employee” for the purposes of this Agreement but agree that the protections of terms and conditions and termination rights post-Closing in paragraph 5 shall apply to the Novartis Alliance Market Employee (save that any references to the “Purchaser” shall be replaced with references to “GlaxoSmithKline”) and any other provisions in this Agreement as the parties may agree, each acting in good faith, should apply in relation to the Novartis Alliance Market Employees after appropriate amendments have been made.

13.6The Purchaser shall (for itself and for each member of the Purchaser’s Group) indemnify and keep indemnified GlaxoSmithKline (for itself and as trustee for each other member of its Group) against all Losses (ignoring any amount in respect of Employee Benefits relating to the period prior to the Effective Time, as to which see Schedule 8) in respect of:

13.6.1the employment of any of the Novartis Alliance Market Employees on and after the Effective Time; and

13.6.2any termination of the employment of any Novartis Alliance Market Employee on and after the Closing Date including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations,

but in each case excluding (i) any Losses to the extent that any such Loss arises directly as a result of any failure by GlaxoSmithKline or any member of its Group to comply with its obligations or instructions under the relevant Distribution Arrangements for that Alliance Market Territory or Export Market Territory or (ii) any Losses to the extent that they relate to any claim by a Novartis Alliance Market Employee as a result of any breach of the obligations under paragraph 13.5 above, breach of contract or Applicable Law by GlaxoSmithKline (other than in express compliance with any obligations or instructions under the relevant Distribution Arrangements for that Alliance Market Territory or Export Market Territory or as otherwise expressly agreed in writing by the Purchaser) in respect of such Novartis Alliance Market Employee. For the avoidance of doubt, no provision of this paragraph 13.6 shall entitle GlaxoSmithKline or any member of its Group to recover any amount in respect of any Novartis Alliance Market Employee if that would entitle GlaxoSmithKline or any member of its Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement.

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Schedule 8
Employee Benefits

In this Schedule 8:

“Delayed Business Employees” has the meaning given to it in Schedule 7;

“Delayed Company Employees” has the meaning given to it in Schedule 7;

“Delayed Employees” has the meaning given to it in Schedule 7;

“Employee Benefits” means benefits to or in respect of any current or former employee, including without limitation, any pension, early retirement, disability, death benefit, long service awards, termination indemnity (such as Italian TFR) or post-retirement medical benefits or deferred compensation linked to retirement, disability or death benefits or old age part-time benefits (such as German ATZ) and jubilee payments;

“Employee Benefit Liabilities” means liabilities and obligations (whether funded or unfunded) in respect of any employee benefit promise, scheme, plan, fund, program, policy, practice or other individual or collective arrangement providing Employee Benefits;

“Oncology Funding Assumptions” means, in relation to any Transferred Employee Benefits which are similar or comparable to benefits in the same country which are Transferred Employee Benefits under the Oncology Sale and Purchase Agreement (the “Equivalent Oncology Benefits”), the method and assumptions used under the Oncology Sale and Purchase Agreement to value those Equivalent Oncology Benefits.   For the avoidance of doubt, the Oncology Funding Assumptions are only available in respect of Transferred Employee Benefits for which there are Equivalent Oncology Benefits;

“Other Party” means (i) where GlaxoSmithKline is the Seller, Novartis and (ii) where Novartis is the Seller, GlaxoSmithKline;

“Other Party Group” means (i) where GlaxoSmithKline is the Other Party, GlaxoSmithKline’s Group and (ii) where Novartis is the Other Party, Novartis’s Group;

“Other Party Funding Assumptions” means, in relation to any Transferred Employee Benefits, where a member of the Other Party Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc.), and there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund those similar or comparable benefits to a funding target which is determined by reference to a method and assumptions other than IFRS (such as would, for example, be the case in relation to UK HMRC-registered defined benefit pension obligations), then that method and those assumptions as in force in relation to those similar or comparable benefits immediately prior to the date of this Agreement (so, taking the example of UK defined benefit obligations, this would be the method and assumptions used to determine the relevant plan’s technical provisions as at the date of this Agreement — regardless of whether the plan is in fact fully funded on that basis at any relevant time);

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“Other Party IFRS Assumptions” means, in relation to any Transferred Employee Benefits, where a member of the Other Party Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc.), the method and assumptions used most recently prior to the date of this Agreement to value those similar or comparable benefits by the Other Party Group (or any relevant member thereof) for IFRS accounting purposes;

“Seller Funding Assumptions” means, in relation to any Transferred Employee Benefits, if there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund those Transferred Employee Benefits to a funding target which is determined by reference to a method and assumptions other than IFRS (such as would, for example, be the case in relation to UK HMRC-registered defined benefit pension obligations), then that method and those assumptions as in force in relation to those Transferred Employee Benefits immediately prior to the date of this Agreement (so, taking the example of UK defined benefit obligations, this would be the method and assumptions used to determine the relevant plan’s technical provisions as at the date of this Agreement — regardless of whether the plan is in fact fully funded on that basis at any relevant time);

“Seller IFRS Assumptions” means, in relation to any Transferred Employee Benefits, the method and assumptions used by the Seller’s Group (or the most relevant member thereof) most recently prior to the date of this Agreement to value those Transferred Employee Benefits for IFRS accounting purposes;

“Swiss Actuary” means an actuary: (a) who can reasonably be viewed: (i) as independent of both the Other Party and each Seller; and (ii) as familiar with Swiss pension issues; and (b) whom the Other Party and each Seller have agreed should be jointly appointed by them for the purposes of determining the Swiss Assumptions or who in default of such agreement has been appointed by the Swiss Association of Actuaries or other industry body of actuaries in Switzerland as agreed by each Seller and the Other Party;

“Swiss Assets” means cash with a value equal to the aggregate of:

(i)the value of the vested benefits, as at the Effective Time, held by the Swiss Pension Providers on behalf of each Transferred Employee in Switzerland;

multiplied by

(ii)the applicable coverage ratio as determined by the board of trustees of the Swiss Pension Providers in accordance with Article 44 BVV2 (Swiss Ordinance on Occupational Retirement, Survivors’ and Disability Pension Plans) under the partial liquidation regulations of each of Novartis Pensionskasse 1, Novartis Pensionskasse 2 and Kaderkasse Novartis on the assumption that the Swiss Assets were to transfer to the Purchaser’s replacement pension vehicle at the Effective Time;

“Swiss Assumptions” means, in relation to any Transferred Employee Benefits in Switzerland, Novartis’s Seller IFRS Assumptions adjusted:

(i)by replacing — other than in so far as the Transferred Employee Benefits relate to any Swiss Potential Early Retirees — any assumed “cash balance” annuity conversion rate in Novartis’s Seller IFRS Assumptions with a conversion rate

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which the Swiss Actuary certifies to GlaxoSmithKline and Novartis as representing a reasonable estimate of the likely effective overall blended conversion rate which will apply in relation to the Transferred Employee Benefits in question, having regard to the changes to the rate which can (having regard to longevity projections, legal and governance constraints around Swiss pension structures and such other matters as the Swiss Actuary considers relevant) in the Swiss Actuary’s opinion reasonably be expected to occur during the expected service lives of the Transferred Employees to whom the Transferred Employee Benefits relate, and weighting the impact of those changes by reference to the ages of the relevant employees (and so the extent to which the changes will in fact operate to reduce the effective liability on GlaxoSmithKline); and

(ii)by removing any reserve for death or disability benefits to the extent that the Swiss Actuary certifies to GlaxoSmithKline and Novartis that it constitutes a reserve for liabilities to and in respect of the relevant Transferred Employees which could reasonably be externally insured by the Purchaser’s Group without introducing a new ongoing cost on the Purchaser’s Group which was not reflected in Novartis’s ongoing cost base prior to the date of this Agreement;

“Swiss EB Liabilities” means those of the Transferred Employee Benefit Liabilities that are attributable to the Transferred Employees in Switzerland;

“Swiss Employee Benefits” means the benefits to which the Swiss EB Liabilities relate;

“Swiss Pension Providers” means the provider(s) of Swiss Employee Benefits;

“Swiss Post-Closing Employers” means the Target Group Companies, and any relevant members of the Purchaser’s Group which employ the Transferred Employees in Switzerland on and from Closing;

“Swiss Potential Early Retirees” means those Transferred Employees employed in Switzerland who have “grandfathered” entitlements to a wholly or partly unreduced early retirement pension under the old final salary scheme operated by Novartis in Switzerland which closed at the end of 2010;

“Temporary Participation Plan” means any plan or arrangement (whether funded or unfunded) for the provision of Employee Benefits in which Transferred Employees participate prior to Closing and continue (for any reason, whether by special arrangement as is the case for the Swiss Post-Closing Employers or because they are Delayed Business Employees or Delayed Company Employees, or otherwise) to participate for a temporary period after Closing;

“Temporary Participation Cessation Date” means, in relation to any Temporary Participation Plan, the date on which Transferred Employees cease to participate in the relevant plan or arrangement; and

“Vaccines Funding Assumptions” means, in relation to any Transferred Employee Benefits which are similar or comparable to benefits in the same country which are Transferred Employee Benefits under the Vaccines Sale and Purchase Agreement (the “Equivalent Vaccines Benefits”), the method and assumptions used under the Vaccines Sale and Purchase Agreement to value those Equivalent Vaccines Benefits.   For the avoidance of doubt, the

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Vaccines Funding Assumptions are only available in respect of Transferred Employee Benefits for which there are Equivalent Vaccines Benefits.

For the purposes of each of the Other Party Funding Assumptions, the Other Party IFRS Assumptions, the Seller Funding Assumptions, the Seller IFRS Assumptions,  the Swiss Assumptions (and, for the avoidance of doubt, the Vaccines Funding Assumptions and the Oncology Funding Assumptions), any economic and financial assumptions which are based (whether expressly or implicitly) on yields, rates or indices shall be updated for the purposes of such definitions to take account of those yields, rates or indices as at the Effective Time (or the latest practicable time prior to the Effective Time).

1.Except to the extent otherwise requested by each Seller and expressly agreed by the Other Party before Closing (such Other Party agreement not to be unreasonably withheld to the extent that it is not reasonably possible for such Seller or its Affiliates to retain the relevant Employee Benefit Liabilities — for example, where a relevant Target Group Company operates its own standalone arrangement, liability for which cannot lawfully be assumed by another member of such Seller’s Group, or where liability unavoidably transfers by operation of law under European Council Directive 2001/23/EC or its local implementing legislation), any Employee Benefit Liabilities in respect of service in the relevant Target Group or with any member of such Seller’s Group (including any relevant Target Group Company) or in any plan or arrangement in which any member of such Seller’s Group (including any relevant Target Group Company) participates or has participated:

(a)(in the case of a Transferred Employee) prior to Closing; or

(b)(in the case of any other person) at any time,

(together, “Pre-Closing EB Liabilities”) will stay with or be assumed by such Seller or its Affiliates (excluding any relevant Target Group Company) and such Seller shall fully indemnify the Purchaser and its Affiliates and/or any relevant Target Group Company against any such Employee Benefit Liabilities and against any liabilities and obligations to or in respect of any plan or arrangement for the provision of Employee Benefits in which any member of such Seller’s Group (including any relevant Target Group Company) participates or participated prior to Closing.  For the avoidance of doubt, the Other Party’s agreement under this paragraph 1 may, if the Other Party so determines, relate only to certain specified categories or tranches of relevant Pre-Closing EB Liabilities under a particular benefit programme (in other words, it does not need to be “all or nothing”), in which case it is only those specified Pre-Closing EB Liabilities which are excluded from the scope of the Purchaser’s indemnity entitlement hereunder.

2.Where and to the extent that the Other Party agrees under paragraph 1 that any Pre-Closing EB Liabilities may transfer to or remain with the Purchaser and/or its Affiliates and/or any relevant Target Group Company (such Pre-Closing EB Liabilities being the “Transferred Employee Benefit Liabilities” and the benefits to which they relate being the “Transferred Employee Benefits”), the Purchaser will be compensated in respect of such Transferred Employee Benefit Liabilities as set out in the rest of this Schedule 8. Subject to being so compensated but without prejudice to paragraphs 9 and 11, the Purchaser shall, or shall procure that its relevant Affiliate shall, assume, with a full

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discharge for each Seller and its Affiliates, the Transferred Employee Benefit Liabilities. The Other Party acknowledges its agreement to the principle that the post-retirement medical healthcare plan to which it admits US Transferred Employees who immediately before Closing were members of such a plan will take account of periods of employment with the Seller’s Group to the extent previously recognised under the equivalent Seller’s Group plan for the purposes of determining eligibility, contributions, and vesting; again, therefore, subject to appropriate identification during the period before Closing of such liabilities and to the operation of the compensation mechanism set out in this Schedule 8, they will become Transferred Employee Benefit Liabilities.

2A.This paragraph 2A applies where there are Transferred Employee Benefits in a Temporary Participation Plan.  In such a case, notwithstanding that the Transferred Employee Benefit Liabilities may (subject to the Purchaser’s agreement as per paragraph 1 above) include liabilities in respect of service after the Effective Time, the Transferred Employee Benefit Liabilities which are included in the calculation of the Employee Benefit Indemnification Amount as per paragraph 3 below shall (unless each Seller and the Purchaser agree otherwise in any particular case) comprise only those liabilities attributable to service before the Effective Time.  Conversely, although the Transferred Employee Benefit Liabilities will not for the purposes of paragraph 1 and 2 above include liabilities in respect of Transferred Employees or other individuals who leave employment or crystallise benefits before the Temporary Participation Cessation Date in relation to the relevant Temporary Participation Plan (unless each Seller and the Purchaser agree otherwise in any particular case and without prejudice to the Purchaser or its Affiliates’ obligation to comply with any requirements in relation to such individuals before they leave employment or crystallise benefits), the parties agree that the calculation of the Employee Benefit Indemnification Amount under paragraph 3 below in relation to any Temporary Participation Plan shall be carried out on the basis of a conclusive presumption (regardless of any actual knowledge to the contrary) that:

2A.1any individual who is a Delayed Employee on the day after the Closing Date is or will become a Transferred Employee, and

2A.2no Contingent Individual will leave employment or crystallise benefits before the relevant Temporary Participation Cessation Date. For these purposes a “Contingent Individual” is a Transferred Employee or other individual who on the day after the Closing Date has not left employment or crystallised benefits and in respect of whom liabilities: (a) would become Transferred Employee Benefit Liabilities if he does not leave employment or crystallise benefits before the relevant Temporary Participation Cessation Date; but (b) would not otherwise become Transferred Employee Benefit Liabilities.

United Kingdom

For the avoidance of doubt, it is also agreed that, where the Seller is Novartis, no UK defined benefit pension liabilities are to be Transferred Employee Benefit Liabilities.  Without limiting paragraph 1 but subject to paragraphs 22 to 24, this means that Novartis must prior to Closing procure that no Novartis OTC Group Company is a participating employer under the governing documents, or an ‘employer’ for the purposes of the Pensions Act 1995 and the Pensions Act 2004, in the Chiron UK

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Pension Scheme or the Novartis UK Pension Scheme, and Novartis shall under paragraph 1 fully indemnify the Purchaser and its Affiliates (including any Target Group Company) against any liabilities and obligations to or in respect of either of those plans, including any debt under section 75 of the Pensions Act 1995, except to the extent such liabilities and obligations relate to the payment by or on behalf of Novartis Consumer Health UK Limited of contributions in respect of defined contribution benefits at the rates applicable to the relevant members and an appropriate share of administrative expenses, as referred in paragraphs (a) and (c) of the definition of “Ongoing Pension Costs” in the deed of interim participation and cessation to be entered into by Novartis Consumer Health UK Limited on or about the date of this Agreement (but subject to clause 3.6 of that deed),  to the Novartis UK Pension Scheme in respect (in both cases) of the period from and including the Effective Time to and including the UK Temporary Period of Participation Cessation Date.  For the avoidance of doubt, amounts payable to the Pensions Regulator or the Pension Protection Fund shall not be treated as administrative expenses for the purposes of this clause and any amounts payable to the Novartis UK Pension Scheme other than under paragraphs (a) and (c) of the definition of “Ongoing Pension Costs” referred to above (subject to clause 3.6 as referred to above) shall be covered by the indemnity set out in this clause.

Switzerland

For the avoidance of doubt, it is also agreed that the Purchaser shall procure that the Swiss Potential Early Retirees will as at Closing be provided with equivalent early retirement benefit provisions under the replacement pension plan to be provided by the Purchaser for and in respect of the Transferred Employees employed in Switzerland under the terms of this Agreement, provided that the Swiss Actuary confirms that such early retirement benefit provisions are allowed for in the Swiss Assumptions.

3.The value of the Transferred Employee Benefit Liabilities shall be determined on employee census data and plan provision as at the Effective Time (and making the conclusive presumptions at 2A.1 and 2A.2 above) on the Vaccines Funding Assumptions where available, failing which on the Oncology Funding Assumptions if those are available, failing which on:

(i)in relation to any Transferred Employee Benefits in Switzerland, the Swiss Assumptions; and

(ii)in relation to any other Transferred Employee Benefits, the Seller IFRS Assumptions, PROVIDED that if any of the following values is available then that value will be used instead:

(A)if a member of the Other Party Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc.) and neither (B) nor (C) below is available, the value which is midway between the value based on the Seller IFRS Assumptions and the Other Party IFRS Assumptions;

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(B)if (C) below is not available but there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund the Transferred Employee Benefits to a funding target which would lead to a greater value being placed on the Transferred Employee Benefit Liabilities than the Seller IFRS Assumptions, the value derived using the Seller Funding Assumptions; and

(C)if there is both: (i) a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund the Transferred Employee Benefits to a funding target which would lead to a greater value being placed on the Transferred Employee Benefit Liabilities than the Seller IFRS Assumptions; and (ii) a member of the Other Party Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc.), the value which is midway between the value based on the Seller Funding Assumptions and the Other Party Funding Assumptions.

Where there are any Transferred Employee Benefit Liabilities which prior to Closing were externally funded by assets held in a trust or other vehicle established for the purposes of meeting such Transferred Employee Benefit Liabilities, and the actuary chosen by the Seller and the actuary chosen by the Purchaser agree under paragraph 4 (or it is otherwise determined under paragraph 5) that, having regard to all relevant matters as they subsisted immediately after Closing, it would be reasonable to expect all or part of such assets to be or remain available to the Purchaser or its Affiliates to meet the cost of such Transferred Employee Benefit Liabilities (whether by transfer out to another vehicle or because a Target Group Company is expected to remain affiliated to the vehicle on more than a merely temporary basis), then the value as at the Effective Time of the assets which, ignoring matters arising after Closing, they would expect to be made or remain so available (the “Available Assets”) (including for the avoidance of doubt, in the case of Switzerland, the Swiss Assets to the extent that they are so agreed or determined) as agreed under paragraph 4 or determined under paragraph 5 will be deducted from the value of the Transferred Employee Benefit Liabilities,  and the remaining value of the Transferred Employee Benefit Liabilities (if any) is the “Employee Benefit Indemnification Amount”. The determination of the Employee Benefit Indemnification Amounts shall be carried out on a country-by-country basis and, where necessary, on a plan-by-plan basis.

If any Employee Benefit Indemnification Amount is greater than the amount paid in respect of it via the Estimated Employee Benefit Adjustment (or, where no such estimate was made, greater than zero), the relevant Seller shall pay or procure payment, by way of a reduction in the Purchase Consideration paid for the particular part of the Target Group to which the payment relates, an amount equal to the difference (or, where no such estimate was made, such amount) to the Purchaser, or at the request of the Purchaser to an Affiliate of the Purchaser, as compensation for the Transferred Employee Benefit Liabilities. If any Employee Benefit Indemnification Amount is less than the amount paid in respect of it via the Estimated Employee Benefit Adjustment (if any), the Purchaser shall pay an amount equal to the difference to the relevant Seller.

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4.Each Seller and its Affiliates shall, within 45 days after Closing, provide its actuary, the Swiss Actuary (if relevant) and the actuary chosen by the Purchaser with all relevant plan, asset, assumptions and employee census information needed to calculate the Employee Benefit Indemnification Amounts in respect of any Transferred Employees or Delayed Employees to the extent not otherwise within the control of the Purchaser or its Affiliates (including any Target Group Company). The actuary chosen by the Seller shall provide the actuary chosen by the Other Party with its calculation of the Employee Benefit Indemnification Amounts (including, but not limited to, any supporting documentation on which it relied as well as the methodologies it employed in calculating the Employee Benefit Indemnification Amounts), on a plan-by-plan basis, within 90 days following Closing. The actuary chosen by the Other Party shall review the calculation of the Employee Benefit Indemnification Amounts of the Seller’s actuary within 120 days following Closing. The Employee Benefit Indemnification Amounts shall be determined, on a plan-by-plan basis, by mutual agreement between the Seller and the Other Party within 180 days following the Closing Date.

5.If such Seller and the Purchaser cannot agree on any Employee Benefit Indemnification Amount within the 180-day period referred to in paragraph 4, such parties shall appoint within five days an independent actuary acceptable to both parties, or such actuary shall be selected by the President of the Institute and Faculty of Actuaries in the UK if they cannot agree, and the independent actuary thus appointed shall review their calculations and, within 75 days after appointment, render a final and binding decision on the amount of that Employee Benefit Indemnification Amount, and, in making such decision, shall be limited to adopting the position taken by either one of that Seller or the Purchaser. The cost of any independent actuary shall be borne jointly by that Seller and the Purchaser.

6.In connection with the procedures referred to in this Schedule 8, each Seller and the Purchaser shall provide each other and the actuaries referred to in this Schedule 8 with access to the relevant business records and other relevant documents and information as may reasonably be requested. All documents, records and information provided for the purposes of this Schedule 8 must be accurate and complete in all material respects.

7.Each payment in respect of an Employee Benefit Indemnification Amount shall be made by the relevant Seller so far as possible (by way of a reduction in the Purchase Consideration paid for the particular part of the Target Group to which the payment relates) within 14 days following its final determination. Each Seller may make an accelerated or advance payment at its own discretion (which, for the avoidance of doubt, includes in relation to each Employee Benefit Indemnification Amount so much (if any) of the Estimated Employee Benefit Adjustment as the Seller notified pursuant to Clause 6.4 was intended to relate to that Employee Benefit Indemnification Amount). Each relevant Employee Benefit Indemnification Amount shall include interest calculated from the Effective Time to (and including) the date of payment at a rate per annum of LIBOR (but where amounts are prepaid or paid in stages or treated as paid via inclusion in the Estimated Employee Benefit Adjustment then the interest will cease to accrue on so much of such Employee Benefit Indemnification Amount as has been paid). Such interest shall accrue from day to day. Any such payment shall be made in US dollars (and any underlying values shall be expressed in US dollars) and any

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currency other than US dollars shall be converted into US dollars at the exchange rates determined in accordance with Clause 1.13 of this Agreement on the Closing Date.

8.To the extent (if any) that there are any Transferred Employee Benefit Liabilities which prior to Closing were externally funded by assets held in a trust or other vehicle established for the purposes of meeting such Transferred Employee Benefit Liabilities, the Purchaser will, if requested by a Seller before Closing (or the relevant Temporary Participation Cessation Date) and unless it is not reasonably practicable to do so, establish or nominate a trust or other vehicle which is capable of receiving a transfer of assets from the pre-Closing trust or other vehicle to the extent that such assets relate to such Transferred Employee Benefit Liabilities.

9.If, within one year of Closing, a Seller or the Purchaser notifies the other that the membership or other benefit data (the “Data”) used for calculating any Employee Benefit Indemnification Amount may be inaccurate, other than by reason of an Excluded Matter, then a “Data Dispute” has arisen and the following provisions shall apply:

(a)On such notification, the Seller shall procure that its actuary and the Purchaser shall procure that its actuary consult each other with a view to agreeing whether the Data is inaccurate and if so, what the accurate Data should be.  If that Seller’s actuary and the Purchaser’s actuary agree that the Data is inaccurate, they will jointly certify this to be the case and advise on what the accurate Data should be.  The notification is deemed to have occurred on the date of the certification.

(b)If that Seller’s actuary and the Purchaser’s actuary fail to agree whether the Data is inaccurate within 60 days of the notification by one party to the other that the Data may be inaccurate, paragraph 5 shall apply mutatis mutandis.  The notification is deemed to have occurred when the independent actuary advises that the Data is inaccurate and what the accurate Data should be.

(c)On the occurrence of the Data Dispute, such Seller and the Purchaser shall respectively procure that a valuation of the relevant Employee Benefit Indemnification Amount is carried out in accordance with paragraphs 3 and 4 (mutatis mutandis) but on the basis of the accurate Data as agreed under sub-paragraph (a) or determined under sub-paragraph (b).

(d)If as a consequence of sub-paragraph (c), such Seller has paid to the Purchaser an amount which on the basis of the further valuation is not payable, such amount (the “Overpayment”) shall be repaid within 21 days of the amount of the Overpayment being agreed or determined. Any such payment shall bear interest calculated from (and including) the date the Overpayment was made to (and including) the date the payment is made in full in accordance with this sub-paragraph (d) at a rate per annum of LIBOR. Such interest shall accrue from day to day.

(e)If as a consequence of sub-paragraph (c), such Seller has not paid to the Purchaser an amount which on the basis of the further valuation is payable, such amount (the “Outstanding Amount”) shall be paid within 21 days of the

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amount of the Outstanding Amount being agreed or determined. Any such payment shall bear interest calculated from (and including) the Closing Date to (and including) the date the payment is made in full in accordance with this sub-paragraph (d) at a rate per annum of LIBOR. Such interest shall accrue from day to day.

For the purposes of this paragraph 9, the “Excluded Matters” are:

(i)assets which were assumed to be Available Assets ultimately turning out not to be available to the Purchaser or its Affiliates to meet the cost of the Transferred Employee Benefit Liabilities to which they related, and

(ii)liabilities in respect of individuals being assumed to be Transferred Employee Benefit Liabilities but turning out not to be because the individuals leave service or crystallise benefits before the date liabilities are transferred.

10.Except as otherwise agreed by each Seller, the Purchaser shall where a trust or other vehicle has been established under paragraph 8, procure that all of the assets transferred as envisaged by paragraph 8 are paid into such trust or other vehicle. If, after such payment or transfer, or after payment of an Employee Benefit Indemnification Amount or after making an Estimated Employee Benefit Adjustment, the Purchaser and/or its Affiliates achieves a reduction in its liability to any Tax in respect of or in connection with payment or transfer, the Purchaser shall pay to that Seller (for itself and on behalf of the relevant Share Seller or Business Seller, as applicable), within 30 days after the Purchaser would otherwise have been liable to pay the saved Tax, a sum equal to the amount of that Tax reduction so far as possible by way of an increase in the Purchase Consideration in respect of the particular part of the Target Group to which the payment relates.  This paragraph 10 applies for a period of four years following the later of the date on which a transfer of assets is made, or payment of any Employee Benefit Indemnification Amount or Estimated Employee Benefit Adjustment is made to the Purchaser.

11.Each Seller covenants with the Purchaser to pay to the Purchaser an amount equal to any cost, claim or liability incurred by any member of the Purchaser’s Group which it is or becomes liable to make on or at any time after Closing by reason of any change or purported change made to the terms of any relevant Transferred Employee Benefits prior to Closing proving to be or have been legally ineffective or by reason of such terms and/or benefits failing to comply with any mandatory legal requirements (excluding any obligation to equalise guaranteed minimum pensions in the United Kingdom). The relevant Seller shall not be liable under this paragraph 11 in respect of any individual claim (or a series of claims arising from similar or identical facts or circumstances) unless the liability in respect of such claim or series of claims exceeds US$100,000. If the Purchaser becomes aware of any fact, matter or circumstance that may give rise to a claim against the relevant Seller under this paragraph 11, the Purchaser shall as soon as reasonably practicable give notice in writing to the relevant Seller of such facts, matters or circumstances as are then available regarding the potential claim. Failure to give such notice within such period shall not affect the rights of the Purchaser to make a relevant claim under this paragraph 11, except that the relevant Seller shall not be liable for any increase in the amount of such claim arising from such failure. The latest date

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on which the Purchaser may give notice of a claim under this paragraph 11 is the fourth anniversary of the Closing Date.

12.Notwithstanding any general provision to the contrary in Schedule 7 and subject to being compensated in accordance with this Schedule 8, the Purchaser shall admit Transferred Employees in the United States who participated in a post-retirement medical plan immediately prior to Closing to its own post-retirement medical plan. Subject to being compensated in accordance with this Schedule 8, periods of employment with the relevant Seller’s Group (including, without limitation, any current or former Affiliate of the relevant Seller, to the extent previously recognised under the applicable benefit plan arrangement provided by the relevant Seller’s Group), shall be taken into account for the purposes of determining, as applicable, the eligibility for participation, contributions, and vesting for any employee under such post-retirement medical plan.

13.Notwithstanding any general provision to the contrary in Schedule 7, the US Transferred Employees shall, as of the Closing Date, become eligible to participate in a US tax-qualified defined contribution plan to the extent such plan is sponsored by the Purchaser or a relevant member of the Purchaser’s Group. The Purchaser agrees that it will use commercially reasonable efforts to cause such plan to accept rollovers of the account balances of the US Transferred Employees (including participant loan promissory notes) from the relevant employer’s tax-qualified retirement plans; provided that (i) the Purchaser will not be required to accept any such rollovers that might result in material liability to the Purchaser or may otherwise cause the relevant plan to cease to qualify under Section 401(a) of the Code and (ii) the Purchaser will not be required to amend any plan to permit participant loans.

14.GlaxoSmithKline covenants to pay Novartis an amount equal to any payment Novartis or any member of Novartis’s Group (excluding, for the avoidance of doubt, any Novartis OTC Group Companies — as to which, see paragraph 1 above) is or becomes liable to make on or at any time after Closing to or in respect of any post-retirement benefit plan or arrangement (whether funded or unfunded, including without limitation any occupational pension scheme and any arrangement with only one member) in which the Purchaser, the GlaxoSmithKline Consumer Group Companies or GlaxoSmithKline’s Group participates or has at any time participated (each a “GlaxoSmithKline Retirement Plan”). This covenant does not apply to liabilities in respect of any arrangement in which Novartis or a member of Novartis’s Group participates after Closing. If a financial support direction or contribution notice in respect of a pension scheme under the UK Pensions Act 2004 is received by Novartis or a member of Novartis’s Group in respect of a GlaxoSmithKline Retirement Plan, Novartis shall, within five Business Days notify GlaxoSmithKline of the financial support direction, and will continue to pass on all related correspondence. Subject to that, however, Novartis will not be required to take any positive action in respect of the financial support direction (including entering into any discussion or negotiations with the UK Pensions Regulator or GlaxoSmithKline as to possible financial support arrangements) in order to benefit from the indemnity in respect of the direction or notice in this paragraph 14.

15.Novartis covenants to pay GlaxoSmithKline an amount equal to any payment GlaxoSmithKline or any member of GlaxoSmithKline’s Group (excluding, for the

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avoidance of doubt, any GlaxoSmithKline Consumer Group Companies — as to which see paragraph 1 above) is or becomes liable to make on or at any time after Closing to or in respect of any post-retirement benefit plan or arrangement (whether funded or unfunded, including without limitation any occupational pension scheme and any arrangement with only one member) in which the Purchaser, the Novartis OTC Group Companies or Novartis’s Group participates or has at any time participated (each an “Novartis Retirement Plan”). This covenant does not apply to liabilities in respect of any arrangement in which GlaxoSmithKline or a member of GlaxoSmithKline’s Group participates after Closing. If a financial support direction or contribution notice in respect of a pension scheme under the UK Pensions Act 2004 is received by GlaxoSmithKline or a member of GlaxoSmithKline’s Group in respect of a Novartis Retirement Plan, GlaxoSmithKline shall, within five Business Days notify Novartis of the financial support direction, and will continue to pass on all related correspondence. Subject to that, however, GlaxoSmithKline will not be required to take any positive action in respect of the financial support direction (including entering into any discussion or negotiations with the UK Pensions Regulator or Novartis as to possible financial support arrangements) in order to benefit from the indemnity in respect of the direction or notice in this paragraph 15.

16.If, after Closing, the Purchaser or any member of the Purchaser’s Group participates in a GlaxoSmithKline Retirement Plan (as defined in paragraph 14 above), unless otherwise agreed among GlaxoSmithKline, Novartis and the Purchaser, then the parties agree that the mechanism for giving effect to GlaxoSmithKline’s commitment at paragraph 1 above to the Purchaser in relation to such plan will be for GlaxoSmithKline to procure that the only amounts (as certified by the actuary to the GlaxoSmithKline Retirement Plan) which the Purchaser or any member of the Purchaser’s Group is required to contribute to that GlaxoSmithKline Retirement Plan will relate to the service of the employees of the Purchaser or any member of the Purchaser’s Group from and after the Effective Date. The obligation in this paragraph 16 will continue to apply only for so long as Novartis retains a shareholding in the Purchaser.

17.By way of exception to the general principle at paragraph 1, where a Transferred Employee in the UK who had joined service with GlaxoSmithKline’s Group before 1 April 2005 is made redundant within 24 months of Closing, then the Purchaser shall pay GlaxoSmithKline an amount equal to the cost of applying the Agreed UK Restructuring Arrangement to an employee of the employee’s actual age at the date he is made redundant, but (unless the employee is prior to his redundancy still actively participating in a GlaxoSmithKline Retirement Plan) only to so much of the employee’s benefits in a GlaxoSmithKline Retirement Plan as were accrued prior to Closing and provided further that the Purchaser’s aggregate liability under this paragraph in respect of all such Transferred Employees in the UK who are so made redundant is capped at £1,000,000. This cost shall be calculated on a basis consistent with that which is used across the GlaxoSmithKline’s Seller’s Retained Business for internal cross-charging purposes in relation to the Agreed UK Restructuring Arrangement, and GlaxoSmithKline shall supply the Purchaser with such evidence as the Purchaser may reasonably require to verify that. Subject to receipt of such payment, GlaxoSmithKline shall apply the Agreed UK Restructuring Arrangement to the relevant employee’s GlaxoSmithKline Retirement Plan benefits. GlaxoSmithKline’s commitments under paragraphs 1 and 16 above shall be amended accordingly.

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18.The parties agree that where any Transferred Employee has accrued defined contribution benefits prior to Closing in a Seller’s Group arrangement then:

(a)that Seller shall use commercially reasonable efforts to procure the vesting of those benefits (if they would otherwise lapse as a result of Closing);

(b)the parties shall, provided this will not impose unreasonable administrative burdens on the Purchaser’s Group, co-operate in good faith to procure a transfer of the account balances of such Transferred Employee from that Seller’s Group arrangement to a Purchaser’s Group arrangement; and

(c)for the avoidance of doubt, the Purchaser will comply with the provisions of paragraph 6.1 of Schedule 7.

Switzerland: temporary period of participation

19.Novartis and the Purchaser shall use all reasonable endeavours to procure that, with effect from Closing, the Swiss Post-Closing Employers shall be admitted to participate in the relevant plans operated by the Swiss Pension Providers, to enable the Swiss Post-Closing Employers to continue to provide Swiss Employee Benefits to, and in respect of, the Transferred Employees in Switzerland for the period from Closing up to 31 December 2015 or such earlier date as the Swiss Pension Providers may permit under their temporary affiliation agreements with the Swiss Post-Closing Employers.

20.The Purchaser shall use all reasonable endeavours to procure that the Swiss Post-Closing Employers shall each enter into a temporary affiliation agreement with the board of trustees of the Swiss Pension Providers on such terms as the Seller and the Purchaser may have agreed prior to Closing.

21.The Sellers and the Purchaser agree that, if, during the period on and from the Effective Time up to and including the Temporary Participation Cessation Date in relation to the plans operated by the Swiss Pension Providers, there is underperformance in the investment returns achieved in respect of the assets held by the Swiss Pension Providers in respect of the Transferred Employees in Switzerland who are cash balance members (so that the assets are not sufficient to provide the mandatory 1.5% p.a interest rate accrual), then there may be payment due from the Swiss Post-Closing Employers to the Swiss Pension Providers in accordance with the terms of the relevant affiliation agreement. If such a payment is demanded by the Swiss Pension Providers, then Novartis undertakes to pay to the Purchaser 50% of the amount demanded from the Purchaser or any Affiliate (including without limitation a Swiss Post-Closing Employer) to the Swiss Pension Providers within 14 days of being notified of such demand.  The Purchaser shall, as soon as reasonably practicable, pay (or procure that its Affiliate pays) any such amount received from Novartis to the Swiss Pension Providers, to the extent that the amount is still owed to the Swiss Pension Providers by the Purchaser or its Affiliate.

UK: temporary period of participation

22.Novartis and the Purchaser shall use all reasonable endeavours to procure that, with effect from Closing, Novartis Consumer Health UK Limited shall continue to participate

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in the defined contribution section of the Novartis UK Pension Scheme, to enable Novartis Consumer Health UK Limited to continue to provide Employee Benefits to, and in respect of, the Transferred Employees in the UK for the period from Closing up to the UK Temporary Period of Participation Cessation Date.

23.Novartis and the Purchaser shall use all reasonable endeavours to procure that with effect on and from Closing Novartis Consumer Health UK Limited shall enter into a deed of interim participation and cessation with the Novartis UK Trustee on such terms as each Seller, the Purchaser and the Novartis UK Trustee may reasonably agree.

24.In these paragraphs 22 to 24 of this Schedule 8:

24.1“Novartis UK Trustee” means Novartis UK Pension Trustees Limited as trustee of the Novartis UK Pension Scheme.

24.2“UK Temporary Period of Participation Cessation Date” means close of business on the date of termination of the Transitional Services Agreement which is expected to be 1 March 2016, or such other date as Novartis Consumer Health UK Limited shall notify to the principal company of the Novartis UK Pension Scheme and the Novartis UK Trustee as being the date on which the Transferred Employees in the United Kingdom are to be transferred onto the payroll and benefits systems operated by or behalf of the Purchaser’s Group.

Other jurisdictions: temporary periods of participation

25.Each Seller and Purchaser may agree that an employing entity in the Purchaser’s Group shall be admitted to participate, for a temporary period with effect from Closing, in one or more Employee Benefit plans operated by a member of the Seller’s Group, or in which a member of the Seller’s Group participates.

26.In such event, the relevant Seller and Purchaser shall use all reasonable endeavours to enter into an agreement with the provider or board of trustees of the relevant Employee Benefit plan on such terms as the provider or board of trustees may reasonably require.

Specific assurance in relation to plans operated by Swiss Pension Providers

27.Novartis warrants to GlaxoSmithKline that, assuming the Temporary Participation Cessation Date is on or before 31 December 2015,  the regulations governing the plans operated by the Swiss Pension Providers would oblige the Swiss Pension Providers to transfer to the replacement pension arrangement put in place for the Transferred Employees, in addition to amounts calculated as at Closing in respect of benefits accrued to that date, the contributions paid after the Effective Time in respect of the retirement accounts of the Transferred Employee by the employees or their employers.  For the avoidance of doubt, Novartis gives no warranty as to whether the Swiss Pension Providers will comply with this obligation.

Liabilities relating to Inadvertent In-Scope Novartis Employees and Novartis Alliance Market Employees

28.Save to the extent they have become Transferred Employee Benefit Liabilities under paragraphs 1 and 2 above such that the Purchaser is compensated for them under this Schedule 8, Novartis covenants to pay to GlaxoSmithKline an amount equal to any

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payment GlaxoSmithKline or any member of GlaxoSmithKline’s Group is or becomes liable to make on or at any time after Closing in respect of the Employee Benefits of Inadvertent Novartis Employees (as defined in paragraph 11.1 of Schedule 7).  To the extent that such Employee Benefits become Transferred Employee Benefit Liabilities, then the preceding sentence shall apply as if it were the Purchaser (and not Novartis) which made the covenant.

29.Novartis covenants to pay to GlaxoSmithKline an amount equal to any payment GlaxoSmithKline or any member of GlaxoSmithKline’s Group is or becomes liable to make on or at any time after Closing in respect of the Employee Benefits of any Novartis Alliance Market Employees (as defined in paragraph 13.1 of Schedule 7). To the extent that such Employee Benefits become Transferred Employee Benefit Liabilities, then the preceding sentence shall apply as if it were the Purchaser (and not Novartis) which made the covenant.

Jubilee payments

30.For the purposes of calculating the amount of jubilee payments and long service awards falling within the definition of “Transferred Employee Benefit Liabilities” the following principles shall apply:

30.1in relation to Transferred Target Company Employees, liabilities to make jubilee payments and grant long service awards will be treated as falling within Transferred Employee Benefit Liabilities and shall be calculated on the basis of the value of such liabilities determined in accordance with the preceding provisions of this Schedule;

30.2in relation to Transferred Target Business Employees in respect of whom each of the following applies:

(a)liabilities to make jubilee payments or grant long service awards transfer to a member of the Purchaser’s Group by operation of law; and

(b)the relevant member of the Purchaser’s Group replicates or will replicate the benefits which applied while they were employees of the relevant Seller’s Group,

liabilities to make jubilee payments or grant long service awards will be treated as falling within the Transferred Employee Benefit Liabilities and shall be calculated on the basis of the benefit scales which applied while the Transferred Target Business Employees were employees of the relevant Seller’s Group;

30.3in relation to Transferred Target Business Employees for whom either:

(a)liabilities to make jubilee payments or grant long service awards do not transfer by operation of law but the relevant member of the Purchaser’s Group provides or will provide replacement benefits which replicate the benefits provided by the relevant Seller’s Group); or

(b)the relevant member of the Purchaser’s Group provides or will provide replacement jubilee or long service benefits but does not or will not replicate the benefits which applied while they were employees of the relevant Seller’s Group,

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liabilities to make jubilee payments or grant long service awards will be treated as falling within the Transferred Employee Benefit Liabilities and shall be calculated on the basis of the benefit scales which applied while the Transferred Target Business Employees were employees of the relevant Seller’s Group or, if less, the value of the actual benefit to be provided by the relevant members of the Purchaser’s Group;

30.4for the avoidance of doubt, no amount will be included within “Transferred Employee Benefit Liabilities” in respect of jubilee payments or long service awards in relation to Transferred Target Business Employees for whom liabilities to make such payments or grant such awards do not transfer by operation of law and no replacement benefits are provided by any member of the Purchaser’s Group; and

30.5the Purchaser and the Sellers will negotiate in good faith with a view to agreeing an appropriate and simple method in each jurisdiction for valuing jubilee payments and long service awards which are not disproportionate to the amounts of such payments but which is suitably even-handed as between the parties.  Any such agreement will override the foregoing provisions of this paragraph 30 to the extent there is any inconsistency.

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Schedule 9
Products

Part 1
GlaxoSmithKline Products

[***]

Part 2
Novartis Products

[***]

Part 3
Novartis Pipeline Products

[***]

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Schedule 10
VAT

1.VAT: RECORDS

1.1Each Seller may, on or before the date of Closing, obtain a direction from the relevant Tax Authority for the retention and preservation by it of any VAT records relating to its period of ownership of the relevant part of the Target Group and, where any such direction is obtained, that Seller shall:

1.1.1preserve the records to which that direction relates in such a manner and for such period as may be required by the direction or by Applicable Law; and

1.1.2allow the Purchaser, upon the Purchaser giving reasonable notice, reasonable access to and copies of such records where reasonably required by the Purchaser for its Tax purposes.

1.2If no such direction as is referred to in paragraph 1.1 above is obtained on or before the date of Closing and any documents in the possession or control of a member of a Seller’s Group are required by law to be preserved by the Purchaser, that Seller shall, as soon as reasonably practicable after Closing, deliver such documents to the Purchaser.

2.VAT: GOING CONCERN - EU MEMBER STATES

2.1The Sellers and the Purchaser shall use reasonable endeavours (including, for the avoidance of doubt, the making of an election or application in respect of VAT to any Tax Authority or entering into a written agreement) to secure that, to the extent reasonably possible, the sale of all or any part of the Target Group Businesses, so far as carried on in the European Union, is treated as neither a supply of goods nor a supply of services for the purposes of the laws governing VAT in each relevant member state.

2.2Each Business Seller shall have the right to seek a ruling from the relevant Tax Authority as to whether the sale of all or part of the Target Group Businesses, so far as carried on in the relevant member state, should be treated as neither a supply of goods nor a supply of services for the purposes of the laws governing VAT in that member state and to account for VAT (and accordingly to seek an additional payment from the Purchaser under Clause 3.3.3) in accordance with that ruling. The relevant Seller shall not be obliged to challenge (or to procure that any relevant Business Seller challenges) that ruling unless required to do so by the Purchaser. If the Purchaser wishes to challenge, or to require the relevant Business Seller to challenge, any such ruling it may do so, provided that it bears the full cost of, and agrees to indemnify the relevant Business Seller in respect of any loss arising from or in connection with, that challenge and that such challenge shall not affect the date on which VAT must be paid to the relevant Seller under paragraph 4 below.

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2.3Insofar as no ruling has been obtained from a relevant Tax Authority prior to Closing, each Seller shall determine in good faith if (or the extent to which) VAT is payable in respect of the sale of the Target Group Businesses carried on by a member of that Seller’s Group and shall be entitled to charge (or not to charge) VAT to the Purchaser in accordance with such determination.

3.VAT: GOING CONCERN - NON-EU JURISDICTIONS

3.1To the extent that any state outside the European Union provides for relief or exemption from VAT on the transfer of a business or a company or treats such a transaction as being non-taxable for VAT purposes, the Sellers and the Purchaser shall use reasonable endeavours (including, for the avoidance of doubt, the making of an election or application in respect of VAT to any Tax Authority or entering into a written agreement) to secure such relief, exemption or treatment, to the extent reasonably possible, as regards the sale of all or part of the Target Group Businesses (insofar as the business of the Target Group is carried on in the relevant state) under this Agreement.

3.2The relevant Business Seller shall have the right to seek a ruling from the relevant Tax Authority as to whether the sale of all or part of the Target Group Businesses, so far as the business of the Target Group is carried on in the relevant state, is eligible for a relief or exemption or is otherwise eligible to be treated as non-taxable for the purposes of the laws governing VAT in that state and to account for VAT and accordingly seek an additional payment from the Purchaser under Clause 3.3.3) in accordance with that ruling. The relevant Seller shall not be obliged to challenge (or to procure then the relevant Business Seller challenges) that ruling unless required to do so by the Purchaser. If the Purchaser wishes to challenge, or to require the relevant Business Seller to challenge, any ruling it may do so, provided that it bears the full cost of, and agrees to indemnify the relevant Business Seller in respect of any loss arising from or in connection with, that challenge and that such challenge shall not affect the date on which VAT must be paid to the relevant Seller under paragraph 4 below. Insofar as no ruling has been obtained from a relevant Tax Authority prior to Closing, each Seller shall determine in good faith if (or the extent to which) VAT is payable in respect of the sale of the Target Group Businesses carried on by a member of that Seller’s Group and shall be entitled to charge (or not to charge) VAT to the Purchaser in accordance with such determination.

4.VAT: TIME, MANNER AND CURRENCY OF PAYMENT

4.1Any amounts which the Purchaser is obliged to pay to a Seller under this Agreement in respect of VAT shall be paid by the Purchaser, on its own account or on behalf of another member of the Purchaser’s Group, to that Seller or to such member of that Seller’s Group as that Seller may direct. Such amounts shall be paid in the currency in which the VAT in question must be accounted for to the relevant Tax Authority.

4.2Subject to any provision or express agreement to the contrary, any amounts in respect of VAT payable in any jurisdiction in respect of the transfer at Closing of any of the Target Group Businesses or Shares shall be paid in accordance with paragraph 4.1 above at Closing against production of a valid VAT invoice (or equivalent, if any).

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4.3Notwithstanding any other provision of this Agreement, the Purchaser shall not be liable to account to a Seller or any member of a Seller’s Group for or in respect of penalties or interest arising solely from the failure of that Seller or any other member of that Seller’s Group to account promptly for VAT to the relevant Tax Authority following that Seller having been placed in the appropriate amount of funds for that purpose by the Purchaser.

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Schedule 11
Closing Obligations

1.GENERAL OBLIGATIONS

1.1The Sellers’ Obligations

On Closing, each Seller shall deliver or make available to the Purchaser the following:

1.1.1the Ancillary Agreements (other than the France SAPA and the Netherlands SAPA, and any other Ancillary Agreements that have not been agreed and are subject to any of Clauses 8.11, 8.12, 8.13 and 8.14) duly executed by the relevant members of that Seller’s Group;

1.1.2evidence reasonably satisfactory to the Purchaser that that Seller, and each of its relevant Affiliates, is authorised to execute this Agreement, the Ancillary Agreements and the Local Transfer Documents (including, where relevant, any notarial deeds referred to in this Schedule 11), in each case, to the extent that they are parties thereto;

1.1.3the Certificate duly executed by that Seller; and

1.1.4the statutory books of the Target Group Companies (which shall be written up to but not including the Closing Date), the certificate of incorporation (and certificate of incorporation on change of name, if any) and common seal (if any) of each Target Group Company and share certificates (or other documents of title) in respect of all the issued share capital of each Target Group Company.

1.2Novartis’s Obligations

In addition, Novartis shall, on or before Closing:

1.2.1if requested by the Purchaser by notice in writing not less than five Business Days prior to the Closing Date:

(i)procure the present auditors of each Novartis OTC Group Company to resign their office as such, such resignations to take effect as at the Closing Date;

(ii)procure board meetings of the relevant Novartis OTC Group Companies are held, or written resolutions of the board are passed, at or by which it shall be resolved that each of the transfers relating to the relevant Shares shall, so far as possible, be approved for registration;

(iii)procure any then present directors and officers (if any) of each Novartis OTC Group Company that are not Novartis Employees resign their offices to take effect at the Closing Date as such and to relinquish any

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rights which they may have under any contract of employment with any Novartis OTC Group Company or under any statutory provisions (including any right to damages or compensation for breach of contract, loss of office, redundancy or unfair dismissal or any other account whatsoever) and to confirm that no agreement or arrangement is outstanding under which any Novartis OTC Group Company has or could have any obligation to any of them including in respect of remuneration or expenses; and

1.2.2procure that the First Novartis Shareholder and the Second Novartis Shareholder (as defined in the Shareholders’ Agreement) carry out the actions they are required to do under clause 2.1 of the Shareholders’ Agreement prior to Closing.

1.3GlaxoSmithKline’s Obligations

In addition, GlaxoSmithKline shall, on or before Closing, procure that:

1.3.1a shareholder meeting of the Purchaser is held or a written resolution is passed at which it is resolved that:

(i)the articles of association in the Agreed Terms are adopted; and

(ii)the directors of the Purchaser are authorised to allot the Consideration A Shares and B Shares; and

(iii)the name of the Purchaser is changed to GlaxoSmithKline Consumer Healthcare Holdings Limited;

1.3.2the First GlaxoSmithKline Shareholder and the Second GlaxoSmithKline Shareholder (as defined in the Shareholders’ Agreement) carry out the actions they are required to do under clause 2.1 of the Shareholders’ Agreement prior to Closing,

and, if requested by the Purchaser by notice in writing not less than five Business Days prior to the Closing Date (it being the case that the Purchaser cannot issue a request of this nature to Novartis without making an equivalent request to GlaxoSmithKline, unless there are valid reasons for treating them differently):

1.3.3procure board meetings of the relevant GlaxoSmithKline Consumer Group Companies are held, or written resolutions of the board are passed, at or by which it shall be resolved that each of the transfers relating to the relevant Shares shall, so far as possible, be approved for registration; and

1.3.4procure any then present directors and officers (if any) of each GlaxoSmithKline Consumer Group Company that are not GlaxoSmithKline Employees resign their offices to take effect at the Closing Date as such and to relinquish any rights which they may have under any contract of employment with any GlaxoSmithKline Consumer Group Company or

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under any statutory provisions (including any right to damages or compensation for breach of contract, loss of office, redundancy or unfair dismissal or any other account whatsoever) and to confirm that no agreement or arrangement is outstanding under which any GlaxoSmithKline Consumer Group Company has or could have any obligation to any of them including in respect of remuneration or expenses.

1.4The Purchaser’s Obligations

On Closing, the Purchaser shall deliver or make available to each Seller the following:

1.4.1the Ancillary Agreements (other than the France SAPA and the Netherlands SAPA and, if they have not been agreed, the Transitional Services Agreements, the Manufacturing and Supply Agreements, the Transitional Distribution Services Agreements and the Support Services Agreement) duly executed by the relevant members of the Purchaser’s Group; and

1.4.2evidence reasonably satisfactory to the Seller that the Purchaser, and each of its relevant Affiliates, are authorised to execute this Agreement, the Ancillary Agreements and the Local Transfer Documents (including, where relevant, any notarial deeds referred to in this Schedule 11), in each case, to the extent that they are parties thereto.

In addition, subject to GlaxoSmithKline and Novartis having done or procured to be done those things set out in paragraphs 1.1, 1.2 and 1.3, as relevant, at Closing the Purchaser shall:

1.4.3allot and issue the A Shares to GlaxoSmithKline (or such other of GlaxoSmithKline’s Wholly-Owned Subsidiaries as GlaxoSmithKline may direct by notice in writing to the Purchaser at least five Business Days prior to the Closing Date, provided that no more than two members of GlaxoSmithKline’s Group shall be issued A Shares at Closing); and

1.4.4allot the B Shares to Novartis (or such other of Novartis’s Wholly-Owned Subsidiaries as Novartis may direct by notice in writing to the Purchaser at least five Business Days prior to the Closing Date, provided that no more than two members of Novartis’s Group shall be issued B Shares at Closing).

2.TRANSFER OF THE SHARES AND TARGET GROUP BUSINESSES

2.1General Transfer Obligations

On Closing or such other date as agreed between the parties, each Seller shall procure that its Share Sellers and its Business Sellers shall, and the Purchaser shall, execute and/or deliver and/or make available Local Transfer Documents and take such steps as are required to transfer the Shares and relevant Target Group Businesses in accordance with this Agreement.

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2.2Specific Transfer Obligations

For the purposes of compliance with paragraph 2.1, each Seller and the Purchaser shall, between the date of this Agreement and Closing, negotiate in good faith any and all Local Transfer Documents and other such steps as are required to transfer the Shares and Target Group Businesses in accordance with this Agreement.

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Schedule 12
Post Closing Adjustments

Part 1
Preparation of Closing Statement

1.PREPARATION

1.1No later than 60 days following Closing, each Seller shall deliver to the Purchaser a Draft Closing Statement. Prior to such delivery, each Seller shall so far as is practicable consult with the Purchaser with a view to reducing the potential areas of disagreement.

1.2In order to enable each Seller to prepare its Draft Closing Statement, the Purchaser shall keep up-to-date and, subject to reasonable notice, make available to that Seller’s representatives and to that Seller’s accountants all books and records relating to that Seller’s Target Group during normal office hours and co-operate with them with regard to the preparation, review and agreement or determination of that Draft Closing Statement. The Purchaser agrees to make available the services of the employees of that Seller’s Target Group to assist that Seller in the preparation, review and agreement or determination of that Draft Closing Statement.

1.3In order to allow the Purchaser to review the Draft Closing Statements, each Seller shall, subject to reasonable notice, make available to the Purchaser’s representatives and to the Purchaser’s accountants all books and records relating to the preparation of the relevant Draft Closing Statement during normal office hours and co-operate with them with regard to their review of that Draft Closing Statement. Each Seller agrees to make available the services of its employees and its Affiliates to assist the Purchaser in its review of that Draft Closing Statement.

1.4If the Purchaser does not within 60 days of presentation to it of a Draft Closing Statement give notice to the Seller that produced it that it disagrees with that Draft Closing Statement or any item thereof, such notice stating the reasons for the disagreement in reasonable detail and specifying the adjustments which, in the Purchaser’s opinion, should be made to that Draft Closing Statement (the “Purchaser’s Disagreement Notice”), that Draft Closing Statement shall be final and binding on that Seller and the Purchaser for all purposes. If the Purchaser gives a valid Purchaser’s Disagreement Notice within such 60 days, that Seller and the Purchaser shall attempt in good faith to reach agreement in respect of that Draft Closing Statement and, if they are unable to do so within 30 days of such notification, that Seller or the Purchaser may by notice to the other require that that Draft Closing Statement be referred to the Reporting Accountants (an “Appointment Notice”).

1.5Within 30 days of the giving of an Appointment Notice, the relevant Seller may by notice to the Purchaser indicate that, in the light of the fact that the Purchaser has not accepted the Draft Closing Statement in its entirety, it wishes the Reporting Accountants to consider matters relating to the Draft Closing Statement in addition to those specified in the Purchaser’s Disagreement Notice, provided that such matters as are related to the matters specified in the Purchaser’s Disagreement Notice and that the notice states

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in reasonable detail the reasons why and in what respects that Seller believes that the Draft Closing Statement should be altered in respect of such matters (the “Seller’s Disagreement Notice”).

1.6The Reporting Accountants shall be engaged jointly by that Seller and the Purchaser on the terms set out in this paragraph 1 and otherwise on such terms as shall be agreed; provided that neither that Seller nor the Purchaser shall unreasonably (having regard, inter alia, to the provisions of this paragraph 1) refuse its agreement to terms proposed by the Reporting Accountants or by the other party. If the terms of engagement of the Reporting Accountants have not been settled within 45 days of their identity having been determined (or such longer period as that Seller and the Purchaser may agree) then, unless that Seller or the Purchaser is unreasonably refusing its agreement to those terms, those accountants shall be deemed never to have become the Reporting Accountants and new Reporting Accountants shall be selected in accordance with the provisions of this Agreement.

1.7Except to the extent that the relevant Seller and the Purchaser agree otherwise, the Reporting Accountants shall determine their own procedure but:

1.7.1apart from procedural matters and as otherwise set out in this Agreement shall determine only:

(i)whether any of the arguments for an alteration to the relevant Draft Closing Statement put forward in the Purchaser’s Disagreement Notice or the Seller’s Disagreement Notice is correct in whole or in part; and

(ii)if so, what alterations should be made to that Draft Closing Statement in order to correct the relevant inaccuracy in it;

1.7.2shall apply the accounting principles, policies, procedures, practices and estimation techniques as set out in Part 2 of this Schedule 12;

1.7.3shall make their determination pursuant to paragraph 1.7.1 as soon as is reasonably practicable; and

1.7.4the procedure of the Reporting Accountants shall:

(i)give that Seller and Purchaser a reasonable opportunity to make written and oral representations to them;

(ii)require that each party supply the other with a copy of any written representations at the same time as they are made to the Reporting Accountants;

(iii)permit that Seller and the Purchaser to be present while oral submissions are being made by the other party; and

(iv)for the avoidance of doubt, the Reporting Accountants shall not be entitled to determine the scope of their own jurisdiction.

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1.8The Reporting Accountants shall send that Seller and the Purchaser a copy of their determination pursuant to paragraph 1.7.1 within one month of their appointment. Such determination:

1.8.1shall be made available to that Seller and the Purchaser in writing; and

1.8.2unless otherwise agreed by that Seller and the Purchaser, shall include reasons for each relevant determination.

1.9The Reporting Accountants shall act as experts and not as arbitrators and their determination of any matter falling within their jurisdiction shall be final and binding on that Seller and the Purchaser save in the event of manifest error (when the relevant part of their determination shall be void and the matter shall be remitted to the Reporting Accountants for correction). In particular, their determination shall be deemed to be incorporated into the relevant Draft Closing Statement.

1.10The expenses (including amounts in respect of VAT) of the Reporting Accountants shall be borne as they shall direct at the time they make any determination under paragraph 1.7.1(i) or, failing such direction, equally between the Purchaser and that Seller.

1.11That Seller and the Purchaser shall co-operate with the Reporting Accountants and comply with their reasonable requests made in connection with the carrying out of their duties under this Agreement. In particular, each other party shall keep up-to-date and, subject to reasonable notice, make available to that Seller’s representatives, that Seller’s accountants and the Reporting Accountants all books and records relating to the relevant Target Group during normal office hours as that Seller or the Reporting Accountants may reasonably request during the period from the appointment of the Reporting Accountants down to the making of the relevant determination.

1.12Nothing in this Schedule 12 shall entitle a party or the Reporting Accountants access to any information or document which is protected by legal professional or litigation privilege, provided that neither the relevant Seller nor the Purchaser shall be entitled to refuse to supply such part or parts of documents as contain only the facts on which the relevant claim or argument is based.

1.13Each party and the Reporting Accountants shall, and shall procure that its accountants and other advisers shall, keep all information and documents provided to them pursuant to this paragraph 1 confidential and shall not use the same for any purpose, except for disclosure or use in connection with the preparation of the Draft Closing Statement, the proceedings of the Reporting Accountants or another matter arising out of this Agreement.

Part 2
Closing Statement Principles

This Part 2 of Schedule 12 comprises the specific rules, principles, policies and practices, without limitation, for preparing each Closing Statement.

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Each Closing Statement sets out the Working Capital, the Working Capital Adjustment, the Target Group Companies’ Cash Balances, the Intra-Group Non-Trade Receivables, the Third Party Indebtedness, the Intra-Group Non-Trade Payables, the Employee Benefits Adjustment and the Tax Adjustment for the relevant Seller, in each case, as prepared in accordance with the specific rules, principles, policies and practices set forth in this Part 2 of Schedule 12.Each Closing Statement shall be prepared in the form of the Illustrative Closing Statement in Part A (in the case of GlaxoSmithKline) or Part B (in the case of Novartis) of Part 3 of this Schedule 12.

For the avoidance of doubt, each Closing Statement as referred to in this Part 2 of Schedule 12 shall inclusively apply to each of the Draft Closing Statement and the Closing Statement for each Seller.

1.CLOSING STATEMENT RULES

1.1Each Closing Statement shall be prepared as follows:

1.1.1in accordance with the specific accounting treatments set out in paragraph 2 of this Part 2 of Schedule 12; and, subject thereto

1.1.2adopting the same accounting principles, methods, procedures and practices utilized in preparing the Statement of Net Assets, as detailed in the Statement of Net Asset Rules, applied on a consistent basis using consistent estimation methodologies and judgments and with consistent classifications as were used to prepare the Statement of Net Assets; and subject thereto

1.1.3in accordance with IFRS.

1.2For the avoidance of doubt, paragraph 1.1.1 shall take precedence over paragraphs 1.1.2 and 1.1.3, and paragraph 1.1.2 shall take precedence over paragraph 1.1.3.

2.SPECIFIC REQUIREMENTS

2.1Cut-off

Each Closing Statement (including each Draft Closing Statement) shall not take into account any additional events or any additional information that becomes available after the date that such Closing Statement is agreed or, if earlier, such time as the Purchaser serves a Purchaser’s Disagreement Notice.

2.2Change of Ownership

No Closing Statement shall be adjusted for any charges, provisions, reserves or write-offs in respect of any costs, liabilities or charges that may be incurred by the relevant Contributed Business prior to or after the Closing as a consequence of the change of ownership of the relevant Target Group or any changes in the management strategy, direction or priority or possible closure of any part of that Target Group by the Purchaser after Closing, whether or not resulting from the change in ownership.

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2.3Deferred Tax

The Closing Statement (including the Draft Closing Statement) shall not take into account or provide for deferred Tax.

2.4Other Taxes

The Closing Statement (including the Draft Closing Statement) shall take account of or provide for all income taxes and sales taxes, to which, in the case of Novartis, lines BS14_120 Taxes other than income taxes (Liability account) and BS13_108 Value added tax receivable apply.

3.SUPPLEMENTARY WORKING CAPITAL RULES

3.1This paragraph 3 comprises supplementary specific rules, principles, policies and practices applicable to the preparation of the Working Capital to be set forth in each Closing Statement. For the avoidance of doubt, each of the specific rules, principles, policies and practices set out in paragraph 1 and 2 shall be equally applicable to the Working Capital.

3.2For each of the Sellers, the Working Capital of each of their Joint Venture Entities shall be included within the calculation of Working Capital only if such Joint Venture Entities are consolidated into the relevant Seller’s Group accounts, and the amount of any such Joint Venture Entities Working Capital shall be calculated as if such Joint Venture Entity is wholly-owned by a member of that Seller’s Group.

3.3In relation to the France Business for each Seller and, in respect of GlaxoSmithKline only, the Netherlands Business, if one or, in respect of GlaxoSmithKline only, both business(es) is (are) not transferred to the Purchaser under the terms of this Agreement at Closing, the Working Capital relating to such business (or businesses) shall not be included in the determination of Working Capital at the Effective Time.  If that France Business or, in respect of GlaxoSmithKline only, the Netherlands Business is (are) Transferred to the Purchaser after Closing, then a further adjustment shall be made to the Closing Statement on the assumption that the France Business and/or, in respect of GlaxoSmithKline only, the Netherlands Business were included in the Closing Statement taking the relevant items for the relevant business as of the date they transferred to the Purchaser.  Any adjustment arising as a result of including the France Business or, in respect of GlaxoSmithKline only, the Netherlands Business in the Closing Statement after the date of Closing shall be agreed and paid on the same basis as the Closing Statement was agreed and payment in respect thereof made.

3.4Part 3 of this Schedule 12 sets forth, for illustrative purposes only a computation of the Working Capital of Novartis’s and GlaxoSmithKline’s Working Capital as of the close of business on 31 December 2013.

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Part 3
Illustrative Closing Statement

[***]

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Part 4
Illustrative Working Capital Statement

[***]

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Schedule 13
Warranties given under Clause 9.1

1Authority and Capacity

1.1Incorporation

The Seller and each Share Seller and Business Seller is validly existing and is a company duly incorporated and registered under the law of its jurisdiction of incorporation.

1.2Authority to enter into Agreement

1.2.1The Seller and each Share Seller and Business Seller has the legal right and full power and authority to enter into and perform this Agreement, any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Ancillary Agreement.

1.2.2The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Seller and each Share Seller and Business Seller within that Seller’s Group in accordance with their respective terms.

1.2.3Except as referred to in this Agreement, the Seller:

(i)is not required to make any announcement, consultation, notice, report or filing; and

(ii)does not require any consent, approval, registration, authorisation or permit,

in each case in connection with the performance of this Agreement or any other document referred to in paragraph 1.2.1.

1.2.4The execution and delivery of the documents referred to in paragraph 1.2.1 and the performance by the Seller, each Share Seller and each Business Seller within that Seller’s Group of their respective obligations under them, will not:

(i)result in a breach of any provision of the memorandum or articles of association or by laws or equivalent constitutional document of the relevant member of the Seller’s Group; or

(ii)result in a breach of, or constitute a default under, any instrument or contract to which the relevant member of the Seller’s Group is party or by which the relevant member of the Seller’s Group is bound where such breach is material to their ability to perform their obligations under such documents;

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(iii)result in a breach of any existing order, judgment or decree of any court or Governmental Entity by which the relevant member of the Seller’s Group is bound and where such breach is material to their ability to perform their obligations under such documents.

1.3Authorisation

The Seller and each Share Seller and Business Seller within its Group has taken, or will have taken by Closing, all corporate action required by it to authorise it to enter into and to perform this Agreement, any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Ancillary Agreement.

2Target Group

2.1Organisation and Standing of the Target Group Companies

2.1.1All of the equity interests in each of the Target Group Companies (other than the Joint Venture Entities) are held by the Seller or another member of the Seller’s Group.

2.1.2Each Target Group Company is duly incorporated, validly existing and in good standing, under the laws of its jurisdiction of organisation and has all necessary corporate power under its constitutional documents to conduct its portion of its Contributed Business as at the date of this Agreement.

2.2The Shares

2.2.1Either the Seller or one of its Affiliates is the legal and beneficial owner of the GlaxoSmithKline Shares or the Novartis Shares, as the case may be (the “Relevant Shares”).

2.2.2There is no option, right to acquire, mortgage, charge, pledge, lien or other form of security or Encumbrance or equity on, over or affecting the Relevant Shares or any of them and there is no agreement or commitment to give or create any.

2.2.3All of the Relevant Shares have been duly authorised and validly issued and are fully paid and non-assessable. There are no options, warrants, rights, convertible, exercisable or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which any of the Target Group Companies is a party or by which it is bound obligating any of the Target Group Companies to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible into, or exercisable or exchangeable for, any capital stock of, or other equity interest in, such Target Group Company.

2.2.4There are no outstanding Contracts to which any of the Target Group Companies is a party or is otherwise bound to repurchase, redeem or otherwise

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acquire any shares, capital stock or other equity interest of such Target Group Company.

2.2.5None of the Relevant Shares is subject to and was not issued in violation of any purchase option, call option, right of first refusal, pre-emptive right, subscription right or similar right or any provision of Applicable Law or the constitutional documents of its Target Group Companies.

2.32012 Accounts

The 2012 Accounts of each Target Group Company:

2.3.1were prepared in accordance with accounting practices generally accepted in the jurisdiction of incorporation of that Target Group Company at the time they were audited; and

2.3.2show in accordance with applicable legal requirements:

(i)the assets and liabilities of that Target Group Company at the 2012 Accounts Date; and

(ii)the profits and losses of the relevant Target Group Company for the accounting period ended on the 2012 Accounts Date.

2.4Financial Information

2.4.1The annual consolidated financial statements of GlaxoSmithKline plc for the year ended 31 December 2013 fairly present the operating profit for its Consumer Healthcare Division (including, for this purpose, the Excluded Assets and the Ribena and Lucozade businesses that have been subsequently sold) in 2013, being £0.9 billion.

2.4.2The 2013 Operating Income (defined below) fairly presents the operating income of the Novartis OTC Group (which, for this purpose, includes the Novartis US NRT Business, the benefit of the Endo Excluded Contract, and any manufacturing, distributing, marketing, selling, promoting or otherwise Commercialising of Prescription Products in the United States of America carried out by the Novartis OTC Group Companies) for the year ended 31 December 2013.

“2013 Operating Income” means the operating income for 2013 annexed to the Disclosure Letter at Annex B.

2.5The Assets

Save in relation to the Transferred Intellectual Property Rights, either the Seller or another member of the Seller’s Group has good and valid title to the assets listed in Clause 2.3.1 free and clear of all Encumbrances other than Permitted Encumbrances.

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2.6Changes Since 31 December 2013

Except as a result of the execution and delivery of this Agreement from 31 December 2013 to the date of this Agreement:

2.6.1the Seller’s Contributed Business has been conducted in all material respects in the ordinary and usual course;

2.6.2the Seller’s Contributed Business has not entered into any material contract or commitment outside the ordinary course of business as conducted prior to 31 December 2013; and

2.6.3to the Seller’s knowledge, there has been no event or circumstance arising which is reasonably likely to have had a Material Adverse Effect (as if reference in the definition of Material Adverse Effect to the date of this Agreement were to 31 December 2013).

3Third Party Indebtedness and Financial Instruments

None of the Target Group Companies: (i) has any Third Party Indebtedness exceeding US$1million; or (ii) is a party to any financial instruments (including any swaps or derivatives).

4Real Property

4.1Company Properties

4.1.1The Company Properties are the only material freehold, leasehold or other immovable property in any part of the world owned, used or occupied by the Target Group Companies for the purpose of research and development, production or manufacturing facilities.

4.1.2Each of the Company Properties is used and occupied for the purpose of the business of a Target Group Company.

4.1.3A member of the Seller’s Group is solely legally and beneficially entitled to such Company Property.

4.1.4No person has or will have any right to possession, occupation or use of such Company Property in a manner that has or will have a material adverse effect on the use of, or operations at, such Company Property.

4.1.5There are no mortgages or charges affecting any of the Company Properties other than those registered in the relevant Land Register.

4.1.6There are no material outstanding disputes, actions, claims or demands in respect of any Company Property, nor has the Seller or any member of the Seller’s Group received any notice threatening the same.

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4.1.7In respect of each Company Leased Property, all material covenants and conditions contained in the Company Lease have been observed and performed to date.

4.2Transferred Properties

4.2.1The Transferred Leased Properties and the Transferred Owned Properties are the only material freehold, leasehold or other immovable property in any part of the world owned or occupied by the Target Group Business for the purpose of research and development, production or manufacturing facilities.

4.2.2Each of the Transferred Properties is used and occupied for the purposes of the Seller’s Contributed Business.

4.2.3A member of the Seller’s Group is solely legally and beneficially entitled to such Transferred Property.

4.2.4No person has or will have any right to possession, occupation or use of such Transferred Property in a manner that has or will have a material adverse effect on the use of, or operations at, such Transferred Property.

4.2.5There are no mortgages or charges affecting any of the Transferred Properties other than those registered in the relevant Land Register.

4.2.6There are no material outstanding disputes, actions, claims or demands in respect of any Transferred Property, nor has the Seller or any member of the Seller’s Group received any notice threatening the same.

4.2.7In respect of each Transferred Leased Property, all material covenants and conditions contained in the Lease have been observed and performed to date.

5Intellectual Property

5.1All renewal, application and other registry fees and steps required for the maintenance of the registrations of any of the Target Group Intellectual Property Rights that are Registered Intellectual Property Rights and relate to products that are material to the Seller’s Contributed Business have been paid or taken.

5.2Neither the Seller nor any of its Affiliates has given, or received, written notice to terminate any material Target Group Intellectual Property Contract, and neither the Seller nor any Affiliate of the Seller is in breach or default of any material Target Group Intellectual Property Contract, except for any such breach or default which would not be material to the Contributed Business. To the Seller’s Knowledge, no third party is in breach or default under any Target Group Intellectual Property Contract, except for any such breach or default which would not be material to the Business.

5.3The Seller and its Affiliates own all Registered Target Group Intellectual Property Rights free of all Encumbrances except Permitted Encumbrances. The Seller and its Affiliates have taken reasonable steps to protect the confidentiality of Proprietary Information.

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5.4To the Seller’s Knowledge: (i) the conduct of its Contributed Business as currently conducted does not infringe or misappropriate the Intellectual Property Rights of any third party; and (ii) there is no material judicial, administrative or arbitral action, suit, hearing, inquiry, investigation or other proceeding (public or private) before any Governmental Entity pending against the Seller or any of its Affiliates in which it is alleged that the conduct of its Contributed Business as currently conducted by the Seller and its Affiliates infringes or misappropriates any Intellectual Property Rights of any third party.

5.5To the Seller’s Knowledge, no third party is infringing or misappropriating any Target Group Intellectual Property Rights or Proprietary Information.

5.6To the Seller’s Knowledge, the Target Group Intellectual Property Rights, the Intellectual Property Rights licensed under the Target Group Intellectual Property Contracts, and the Intellectual Property Rights licensed under the Purchaser Intellectual Property Licence Agreement constitute all the material Intellectual Property Rights used in the conduct of the Contributed Business as currently conducted by the Seller and its Affiliates; provided however, that the foregoing is not a representation of non-infringement, non-misappropriation, or any other non-violation of Intellectual Property Rights of any third party, which representation is solely set out in paragraph 5.4 above.

5.7All Information Technology necessary for the Contributed Business to be conducted in all material respects as it is carried on at the date of this Agreement: (i) is Owned Information Technology; (ii) is Transferred Information Technology; or (iii) will be provided by the Seller and its Affiliates to the Purchaser and the Contributed Business under the Transitional Services Agreement.

5.8The Seller’s Contributed Business has not, in the 12 months prior to the date of this Agreement, experienced any material disruption in its operations as a result of any failure of its Information Technology.

6Contracts

6.1No Target Group Company or Business Seller is a party to or subject to any Contract, transaction, arrangement, understanding or obligation (other than in relation to any Property, lease, contract of employment, Information Technology or Intellectual Property Right) which is material to the Contributed Business and which:

6.1.1is not in the ordinary course of business;

6.1.2is not on an arm’s length basis;

6.1.3has an unexpired term or likely duration of five years or more;

6.1.4restricts its freedom to carry on its business in any part of the world in such manner as it thinks fit;

6.1.5involves an aggregate outstanding expenditure by it of more than US$50 million, exclusive of VAT;

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6.1.6can be terminated in the event of a change of underlying ownership or control of a Target Group Company; or

6.1.7involves the supply of goods and services, the aggregate sales value of which (exclusive of VAT) will be more than five per cent of turnover of the Contributed Business (exclusive of VAT) for the preceding financial year.

6.2All material supply contracts of the Contributed Business relating to ingredients are either contracts to which a Target Group Company is a party or are Transferred Contracts.

6.3Save in relation to any Target Group Intellectual Property Contract, no Target Group Company is in material default under any material Contract to which it is party and no third party is in material default under any material Contract to which a Target Group Company is party and, to the Seller’s Knowledge, there are no circumstances in either case likely to give rise to such a material default.

6.4Save in relation to any Target Group Intellectual Property Contract, no Business Seller is in material default under any material Contract to which it is a party and, to the Seller’s knowledge, no third party is in material default under any material Contract to which a Business Seller is a party and, to the Seller’s Knowledge, there are no circumstances in either case likely to give rise to such a material default.

7Joint Ventures etc.

No Target Group Company or Business Seller is, or has agreed to become, a member of any joint venture, consortium, partnership or other unincorporated association (other than a recognised trade association in relation to which the Target Group Purchaser or Business Seller has no liability or obligation except for the payment of annual subscription or membership fees).

8Agreements with Connected Parties

There are no existing contracts or arrangements material to the business of the Target Group between, on the one hand, any Business Seller or Target Group Company and, on the other hand, the Seller or any other member of the Seller’s Group (other than any Business Seller or Target Group Company), other than on normal commercial terms in the ordinary course of business.

9Sufficiency of Assets

9.1Each of the assets listed in Clause 2.3.1 is owned both legally and beneficially by the Seller or its Affiliates and each of those assets capable of possession is, save where in the possession of third parties in the ordinary course of business, in the possession of the Seller or its Affiliates.

9.2Save for Permitted Encumbrances, no option, right to acquire, mortgage, charge, pledge, lien or other form of security or Encumbrance (excluding licences of Intellectual Property or Know-How) or equity on, over or affecting the whole or any part of the

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assets listed in Clause 2.3.1 is outstanding and, save in relation to Permitted Encumbrances, there is no agreement or commitment entered into by any member of the Seller’s Group to give or create any and no claim has been made against any member of the Seller’s Group by any person entitled to any.

9.3The Target Group Businesses and the assets of the Target Group Companies, when taken together with the rights and services under the Ancillary Agreements and for the respective terms thereof:

(i)comprise all of the assets required to carry on the Contributed Business in substantially the same manner as it has been during the 12 months prior to the date of this Agreement and as it was reported in its December Presentation, save in relation to the Excluded Assets; and

(ii)are sufficient in all material respects to carry out the Contributed Business after the Closing in substantially the same manner as it has been conducted by the Seller and its Affiliates in the 12 months prior to the date of this Agreement and as it was reported in its December Presentation, save in relation to the Excluded Assets,

provided however, that the foregoing is not a warranty of non-infringement, non-misappropriation or any other non-violation of Intellectual Property Rights of any third party, which warranty is solely set out in paragraph 5.5.

10Compliance with Laws, Permits and Anti-Bribery

10.1None of the Seller or its Affiliates is in breach of any Applicable Law where such breach is reasonably likely to be material to the Target Group.

10.2Neither the Seller nor any of its Affiliates has received any written notice from any Governmental Entity that it is not in compliance (or any warning letter that it may not be in compliance) with any Applicable Law or is not in possession of any permits, licences, certificates or other authorisations or consents of a Governmental Entity in each case as is necessary for the conduct of the Contributed Business in all material respects as presently conducted (each a “Permit” and, collectively, the “Permits”), except where such non-compliance or non-possession does not remain outstanding or uncured as of Closing or would not reasonably be expected to have a material effect on the Business.

10.3With respect to its Contributed Business, since 1 January 2009, neither the Seller nor any of its Affiliates, nor any of their respective directors, officers or employees and, to the Seller’s Knowledge, no Seller Partner has, directly or indirectly: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity or to influence official action; (ii) made or offered to make any unlawful payment to any foreign or domestic government official or employee, or agent, political party or any official of such party, or political candidate from corporate funds; (iii) made or offered to make any bribe, rebate, payoff, influence payment, money laundering, kickback or other unlawful payment; or (iv) violated or is in violation of any provision of any applicable Anti-Bribery Law; and with respect to the Contributed

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Business, the Seller and its relevant Affiliates have instituted and maintain policies and procedures reasonably designed to ensure compliance with applicable Anti-Bribery Law.

10.4With respect to its Contributed Business, neither the Seller nor any of its Affiliates, nor any of their respective directors, officers or employees and, to the Seller’s Knowledge, no Seller Partner: (i) is currently the subject of, nor has been since 1 January 2009 the subject of, any action alleging a violation, or possible violation, of any Anti-Bribery Law, nor has been, since 1 January 2009, the recipient of a subpoena, letter of investigation or other document alleging a violation, or possible violation, of any Anti-Bribery Law, or (ii) has, since 1 January 2009, improperly or inaccurately recorded in any books and records (A) any payments, cash, contributions, gifts, hospitalities or entertainment to a foreign or domestic government official, employee of an enterprise owned or controlled in whole or in part by any foreign government, official of a foreign or domestic political party or campaign, or a foreign or domestic candidate for political office; or (B) other expenses related to political activity or lobbying.

10.5With respect to its Contributed Business, since 1 January 2009, neither the Seller nor any of its Affiliates, nor any of their respective directors or officers, and, to the Seller’s Knowledge, none of their respective employees has received notice that any such person is or has been alleged to be in violation of any sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or by the U.S. Department of State or equivalent measures of the United Kingdom, European Union, or the United Nations (the “Sanctions Law”). With respect to its Contributed Business, neither the Seller nor any of its Affiliates, nor any of their respective directors or officers, and, to the Seller’s Knowledge, none of their respective employees has conducted any of their business activities whatsoever with, or for the benefit of, a government, national or legal entity to the extent such actions would violate any Sanctions Law. None of the execution, delivery and performance of this Agreement and the direct or indirect use of proceeds from any transaction contemplated hereby or the fulfilment of the terms hereof will result in a violation by any person of any Sanctions Law.

10.6Each member of the Seller’s Group, in connection with any products of the relevant Seller’s Contributed Business, the Product Approvals, the Product Applications, the Transferred Contracts and the Transferred Intellectual Property Contracts requires its Service Providers to act in accordance with the requirements of applicable Anti-Bribery Law and uses all reasonable endeavours to procure that they do so.

11Product Approvals

11.1The Seller or one of its Affiliates is the registered holder of each of the Product Approvals.  All material Product Approvals held by Seller or its Affiliates are in full force and effect. No material deficiencies have been asserted by any applicable Government Entity with respect to any Product Approval or Product Filing, nor, to the Seller’s knowledge, are there any facts or circumstances that would be likely to lead to such assertions being made.

11.2Each Product was and is being researched, developed, manufactured, marketed or sold in all material respects in accordance with the specifications and standards contained in

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the relevant Product Approval and the related Marketing Authorisation Data and in accordance with Applicable Law.

11.3Neither the Seller or any of its Affiliates has received any written notice that any Governmental Entity with jurisdiction over the Products has commenced or will commence any action: (i) to withdraw the approval of any Product or otherwise revoke or materially amend any Product Approval or Marketing Authorisation Data; or (ii) enjoin production, marketing or sale of any Product and, to the Seller’s Knowledge, no such action has been threatened.

11.4All application and renewal fees due and payable with respect to all material Product Approvals have been paid.

11.5All preclinical and clinical investigations with respect to the Products are being and have been conducted in compliance with Applicable Law in all material respects. The Seller and its Affiliates have not, and to the Seller’s Knowledge, none of its Product Partners or any other third party under any Licensed Intellectual Property Contract has received since 1 January 2009, any written notices or other correspondence from any Governmental Entity with respect to any on-going clinical or pre-clinical studies or tests of any Product requiring the termination, suspension or material modification of such studies or tests.

11.6None of the Seller or its Affiliates or, to the Seller’s Knowledge, any Product Partner or any other third parties pursuant to any Licensed Intellectual Property Contract, has any knowledge of any adverse event, arising since the date three years prior to the date of this Agreement, reportable with respect to the safety or efficacy of any Product, which is reasonably expected to be material.

12Product Liability

The Products sold by the Contributed Business during the Relevant Period have complied in all material respects with all applicable product specifications and have been Manufactured in all material respects in accordance with applicable requirements of then current GMP and Applicable Law, except for any such non-compliance that has not had, and would not reasonably be expected to have a materially adverse impact on any of the Seller’s Products.

13Product Recall

13.1No Product (or any component thereof) has been recalled, suspended, withdrawn,  seized, discontinued or the subject of a refusal to file, clinical hold, deficiency or similar action letter (including any correspondence questioning data integrity) as a result of any action by any Governmental Entity, by the Seller or any of its Affiliates; nor are any such actions pending or under consideration (or any facts, conditions, or circumstance known) by the Seller or any of its Affiliates, or, to the Seller’s Knowledge, by any Governmental Entity.  There is not, to the Seller’s Knowledge, pending or threatened litigation anywhere in the world seeking the recall, withdrawal, suspension, seizure or discontinuance of any of the Products.

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14Taxes

14.1Each Target Group Company and each Tax Group to which it belongs has, and every member of the Seller’s Group with an interest in the Contributed Business has, in respect of the Contributed Business, duly, and within any appropriate time limits, filed all Tax Returns required to be filed and has maintained all records required to be maintained for Tax purposes in relation to the assets comprised in the Contributed Business; all such information was and remains complete and accurate in all material respects and all such Tax Returns were complete and accurate in all material respects and were made on the proper basis.

14.2There are no Tax liens on any asset comprised in the Target Group Business (other than Permitted Encumbrances).

14.3No Target Group Company and no Tax Group to which a Target Group Company belongs is currently under audit or examination by a Tax Authority that could result in the assessment of a material amount of Tax and neither the Seller nor any Target Group Company (nor any Tax Group to which a Target Group Company belongs) has received notice from a Tax Authority of any dispute or disagreement outstanding or contemplated at the date of this Agreement with any Tax Authority regarding liability or potential liability to any Tax recoverable from any Target Group Company or regarding the availability of any relief from Tax to any Target Group Company and, so far as the Seller is aware, there are no circumstances which make it likely that any such dispute or disagreement will commence.

14.5No Target Group Company, and no Tax Group to which a Target Group Company belongs, has received or requested any extension of time to file a Tax Return that remains unfiled or has granted or requested a waiver or extension of a limitation on any period for audit and examination or assessment and collection of Tax for any taxable period as to which Tax could be assessed.

14.6No member of the Seller’s Group with an interest in the Contributed Business has received notice from a Tax Authority of, and so far as the Seller is aware, there is not any dispute or disagreement outstanding at the date of this Agreement with any Tax Authority regarding the proper method of computing the profits of the Contributed Business (or any part of it) for Tax purposes or the proper treatment for VAT purposes of any supplies of goods or services made (or treated as made) in the course of the Contributed Business and, so far as the Seller is aware, there are no circumstances which make it likely that any such dispute or disagreement will commence.

14.7So far as the Seller is aware, no Target Group Company benefits from any preferential Tax regime, granted by law or by special authorisation issued by any Tax Authority or by any other authority, which would in whole or in part be withdrawn as a result of the signature of this Agreement.

14.8So far as the Seller is aware, no Tax Authority has within the past three years operated or agreed to operate any special arrangement (being an arrangement which is not based on relevant legislation or any published practice) in relation to any assets comprised in the Contributed Business.

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14.9In respect of all documents which establish or are necessary to establish the title of the relevant member of the Seller’s Group to each material asset comprised in the Contributed Business, or by virtue of which the relevant member of the Seller’s Group has any right in respect of each such asset, all applicable stamp duties, transfer taxes, registration charges or similar duties or charges have been duly paid.

14.10So far as the Seller is aware, other than any payments which are of a nature or type (such as expenditure on business entertainment or marketing) which are not deductible for Tax purposes by reason of a general restriction on deductibility applicable to payments of that nature or type under the laws of the jurisdiction in which the relevant Target Group Company is resident for Tax purposes or carries on its business, no Target Group Company is under any obligation to make any future payment which will not be deductible for Tax purposes in an amount which, if the payment were deductible for Tax purposes, would reduce the Tax liability of the relevant Target Group Company by an amount exceeding US$5 million.

15Environmental Matters

15.1To the Seller’s Knowledge, each Business Seller (with respect to its conduct of the Contributed Business and any Transferred  Property) and Target Group Company is in compliance in all material respects with all Environmental Laws.

15.2To the Seller’s Knowledge, each Target Group Company and each Business Seller (with respect to its conduct of the Contributed Business and any Transferred  Property) possesses all material Permits required under applicable Environmental Laws necessary to conduct its portion of the Contributed Business.

15.3To the Seller’s Knowledge, no Target Group Company nor any Business Seller (with respect to its conduct of the Contributed Business and any Transferred  Property) has received any written notice alleging a material violation of any Environmental Laws, other than matters that have been resolved in all material respects.

15.4To the Seller’s Knowledge, no Target Group Company nor any Business Seller (with respect to its conduct of the Contributed Business and any Transferred  Property) has received any written notice or claim alleging that it is or may be liable to any person in any material respect under any applicable Environmental Law as a result of a release or threatened release of any Hazardous Substance at any Transferred  Property, other than matters that have been resolved in all material respects.

15.5To the Seller’s Knowledge, no Target Group Company nor any Business Seller (with respect to its conduct of the Contributed Business and any Transferred Property) is a party to any pending proceedings relating to any Environmental Laws, other than proceedings that would not reasonably be expected to have a relevant Material Adverse Effect.

16Employees

16.1The Disclosure Letter contains a true, complete and correct list of the following information in respect of each Target Business Employee and each Target Company

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Employee as of 31 March 2014 (organised by country and, in relation to any Target Group Company, by legal employer): (A) employee identification details; (B) date of birth; (C) employment status (part-time or full-time); (D) employment start date; (E) base salary as at 1 January 2014; (F) target annual incentive for 2014 (and amounts and/or details of approach to the calculation of the 2013 bonus amounts); and (G) target long-term incentive for 2014 (and amounts and/or details of the approach to the calculations of the long-term incentive amounts for 2013).

16.2In each of the Material Employee Jurisdictions except as would not be reasonably expected to have a Material Adverse Effect:

16.2.1as of the date of this Agreement there is not, and in the two years prior to the date of this Agreement there has not been, nor to the Seller’s Knowledge is there pending or threatened, any labour strike, dispute, work stoppage or lockout by any group of either Target Business Employees or Target Company Employees;

16.2.2no trade union or works council is recognised in any way for bargaining, information or consultation purposes in relation to any of the Target Business Employees or Target Company Employees and no collective bargaining negotiations, whether voluntary or mandatory, are currently taking place with respect to any of the Target Business Employees or Target Company Employees and, as of the date of this Agreement, no Target Group Company or Business Seller is a party to any agreement (whether legally binding or not) with any such trade union or works council affecting any Target Business Employee or Target Company Employee and there is no existing dispute with any such representative body (or, to the Seller’s Knowledge, pending or threatened) in relation to the Target Group Business;

16.2.3there is no material litigation, claim or other dispute existing, nor to the Seller’s Knowledge, pending or threatened by or in respect of any Employees (or any former employees of the Target Group Companies) in respect of their employment or any matter arising from their employment; and

16.2.4no Target Group Company or Business Seller has, within the two years prior to the date of this Agreement, closed any plant or facility, effectuated any layoffs of employees or implemented any early retirement, separation or similar programme in each case in violation of the WARN Act, nor has any Target Group Company or Business Seller announced any such action or programme for the future.

16.3No Key Personnel has given notice terminating his or her contract of employment, nor is under notice of dismissal.

16.4To the Seller’s Knowledge, and subject to the next sentence, no Target Company Employee will, as a result of the entering into of this Agreement or Closing, be entitled to receive any payment or benefit which he would not otherwise be entitled to receive (including, without limitation, an enhanced severance package on a subsequent termination) or be entitled to treat either such event as amounting to a breach of his

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terms and conditions of employment or to treat himself as redundant or dismissed or released from any obligation. This warranty shall not apply to any retention arrangements (in the form of cash or shares) put in place by the Seller or any member of the Seller’s Group to retain key employees in connection with the matters contemplated by this Agreement as described in paragraphs 9 and 10 of Schedule 7 or any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 10 of Schedule 7.

16.5Since the Statement of Net Assets Date, no material change has been made, announced or proposed to the emoluments or other terms of employment of any Employee, and no such change, and no negotiation or request for such a change, is due or expected within 12 months from the date of this Agreement, and the employing company is under no obligation to make such a change (with or without retrospective operation) other than any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 10 of Schedule 7.

17Employee Benefits

17.1The Disclosure Letter contains a true, complete and correct list of all bonus, staff incentives (including any share-based incentive schemes), redundancy or other benefits payable on termination of employment (whether voluntary or involuntary but excluding arrangements required in accordance with Applicable Law), ill-health, Employee Benefits or other benefits which are the material benefits available to the Target Business Employees and the Target Company Employees in the Material Employee Jurisdictions. To the Seller’s Knowledge, other than any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 10 of Schedule 7, no Target Group Company or Business Seller has made any promises or commitments to make available any additional benefits to the Target Business Employees and the Target Company Employees in the Material Employee Jurisdictions, or to modify or change in any material way any existing benefits in the Material Employee Jurisdictions, or to continue or maintain the level of any existing benefits generally for any period, which in each case could reasonably be expected to have a Material Adverse Effect.

17.2The Disclosure Letter contains true and complete copies of all documents of any written benefit schemes, plans or arrangements referred to in paragraph 17.1 above applicable to either Target Business Employees or Target Company Employees in the Material Employee Jurisdictions containing material terms (including governing documents, and for benefit plans that are not share-based incentive schemes related trust agreements or other funding documents) and a true, complete and correct summary of the material terms of any unwritten benefit schemes, plans or arrangements referred to in paragraph 17.1 above.

17.3Benefit Plans

17.3.1In the Material Employee Jurisdictions all benefit and compensation schemes, plans, funds, contracts, policies, agreements or arrangements (other than the US Benefit Plans and any schemes, plans, funds, contracts, policies, agreements or arrangements operated by any Governmental Entity) (A) 

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operated by or on behalf of a Target Group Company or Business Seller, with respect to Target Company Employees or Target Business Employees or current or former employees or directors of a Target Group Company, (B) in respect of which any Target Group Company or Business Seller, with respect to Target Company Employees or Target Business Employees, the Seller or any member of the Seller’s Group contributes or has contributed or (C) in respect of which any Target Group Company or Business Seller, with respect to Target Company Employees or Target Business Employees, has any liability (whether actual or contingent), including, but not limited to, plans providing Employee Benefits or during periods of sickness or disablement, or any deferred or incentive compensation, welfare, healthcare, medical, stock or stock-related award plans, including individual pension commitments, “jubilee” pension benefits and retirement and termination indemnity arrangements and, in relation to Switzerland, all plans, funds, contracts, policies, agreements or arrangements providing pension or other benefits on retirement (such schemes, plans, funds, contracts, policies, agreements and arrangements hereinafter being referred to, for each Seller, as “Non-US Benefit Plans”) and the US Benefit Plans have been administered in accordance with their terms and are in compliance with Applicable Law, except for any failures to so administer or be in compliance that, individually and in the aggregate, would not reasonably be expected to have a Material Adverse Effect. All required filings for all Benefit Plans have been made on time and with the appropriate Governmental Entity, except for any failures to timely file that, individually and in the aggregate, would not reasonably be expected to have a Material Adverse Effect. As of the date of this Agreement, there is no existing, pending or, to the Seller’s Knowledge, threatened material litigation, claim or other dispute relating to the Benefit Plans.

17.3.2The Target Group Companies or Business Sellers, with respect to Target Company Employees or Target Business Employees in each Material Employee Jurisdiction: (A) are in material compliance with all Applicable Law respecting employment, employment practices, terms and conditions of employment, occupational health, safety, wages and hours; (B) have withheld all amounts required by Applicable Law, collective bargaining agreements or the Benefit Plans to be withheld from the wages, salaries or other payments to the Target Company Employees or the Target Business Employees and former employees of the Target Group Companies; (C) in respect of the Target Company Employees or Target Business Employees or former employees of the Target Group Companies, are not liable under any applicable provisions of the Benefit Plans and any Applicable Law for any arrears, wages, Taxes, other than payments not yet due, or any penalty for failure to comply with the foregoing; and (D) are not liable under any applicable provisions of the Benefit Plans and any Applicable Law for any payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation benefits, workers compensation, social security or other benefits for Target Company Employees or Target Business Employees or former employees of the Target Group Companies, other than payments not yet due, except, in each case, for any failures to comply, failures to withhold or liabilities that, individually and in

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the aggregate, would not reasonably be expected to have a Material Adverse Effect.

17.3.3All material contributions that the Target Group Companies or Business Sellers, with respect to Target Business Employees or the Target Company Employees in a Material Employee Jurisdiction and Switzerland, are required to make to any Benefit Plan in respect of the period on or before the date of this Agreement have been fully and timely paid when due.

18Litigation

18.1No Target Group Company or Business Seller is involved whether as claimant or defendant or other party in any claim or Proceeding (other than as claimant in the collection of debts arising in the ordinary course of its business none of which exceeds US$5 million) which is material to the Business.

18.2To the Seller’s Knowledge, no such claim or Proceeding of material importance is pending or threatened by or against any Target Group Company or Business Seller.

19Insolvency

19.1No order has been made and no resolution has been passed for the winding up of the Seller, any Share Seller or any Business Seller, or for the appointment of any administrator, receiver (including administrative receiver) or liquidator (provisional or otherwise) over the whole or any part of the property, assets and/or undertaking of the Seller, any Share Seller or any Business Seller.

19.2No petition has been presented or meeting convened for the purpose of considering a resolution or resolution circulated for the winding up of the Seller, any Share Seller or any Business Seller, or for the appointment of any administrator, receiver (including administrative receiver) or liquidator (provisional or otherwise) over the whole or any part of the property, assets and/or undertaking of the Seller, any Share Seller or any Business Seller.

19.3Neither the Seller, nor any Share Seller nor any Business Seller has stopped payment or suspended payment of its debts generally, is insolvent or deemed unable to pay its debts as they fall due.

20Insurance

All material insurance policies relating to the Contributed Business are in full force and effect and, to the Seller’s Knowledge, no notice of cancellation, termination or default has been received with respect to any such insurance policy. All premiums due and payable on such policies covering periods up to Closing have been paid in full or accrued.

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21Consents and Licences

21.1All governmental and quasi-governmental licences, consents, permissions, waivers, exceptions and approvals required for carrying on the Contributed Business, the absence of which, individually or in the aggregate, would be material to the Contributed Business, are in force and, to the Seller’s Knowledge, no written notice has been received by the Seller or any member of the Seller’s Group which indicates that any such licence, consent, permission, waiver, exception or approval is likely to be revoked or which may confer a right of revocation.

22Delinquent and Wrongful Acts

22.1To the Seller’s Knowledge, no member of the Seller’s Group has, during the Relevant Period, committed any criminal or illegal act which relates to the Target Group Companies or the Target Group Businesses.

22.2No member of the Seller’s Group has, during the Relevant Period, received notification that any investigation or inquiry is being or has been conducted by any supranational, national or local authority or governmental agency specifically related to the Contributed Business, which is material in respect of the Contributed Business.

23Compliance

23.1No member of the Seller’s Group has received in the Relevant Period any written notification or written claim (in each case, which remains outstanding) that it has conducted the Contributed Business  with respect to the research, development, manufacturing, distribution and sale of any products of the relevant Seller’s Contributed Business in a manner which does not in any respect comply with all Applicable Law, or which in any respect is defective or dangerous, where the pursuit of any such notification or claim is, or would reasonably be expected to be, material in respect of the Contributed Business.

23.2So far as the Seller is aware, the Contributed Business has, and has during the Relevant Period been, operated in all material respects in compliance with all Applicable Law or standards and to the Seller’s Knowledge there are no circumstances that could involve or lead to a material violation of any material Applicable Law or standards.

24Pipeline Products

24.1The Seller or one of its Affiliates is the registered holder of each of the Pipeline Product Approvals, and the benefit of each Pipeline Product Approval can be transferred to the Purchaser (or another member of the Purchaser’s Group) regardless as to whether such transfer occurs directly (whether by way of transfer, reissuance or any other equivalent mechanism under Applicable Law of the relevant jurisdiction) or indirectly (through the transfer of the Target Group Companies).

24.2All development activities in relation to the Pipeline Products have been conducted in the ordinary course and in accordance with all Applicable Law and standards and to the Seller’s Knowledge there are no circumstances relating to the development of the 

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Pipeline Products that could involve or lead to a material violation of any material Applicable Law or standards.

24.3No material regulatory, clinical or safety event has occurred in relation to the Pipeline Products and no member of the Seller’s Group has received any notification or claim from any person of any such event (or the possibility of any such event).

25Manufacturing Licences and Manufacture

25.1All Manufacturing Licences which are material to the Contributed Business, are in effect and are validly held by a member of the Seller’s Group and during the Relevant Period, to the Seller’s Knowledge, no member of the Seller’s Group has received any written notice of any suit, action or proceeding regarding the revocation or modification of any such Manufacturing Licence.

25.2No directive, order or notice has been given to the Seller or any member of the Seller’s Group by any relevant regulatory authority to update, modify, amend, vary, supplement or delete any process and/or methodology relevant to the manufacture at the Properties of any product currently manufactured at the Properties and, so far as the Seller is aware, no such directive, order or notice is pending.

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Schedule 14
Warranties given by the Purchaser under Clause 9.3

1.AUTHORITY AND CAPACITY

1.1Incorporation

The Purchaser is validly existing and is a Purchaser duly incorporated and registered under the law of its jurisdiction of incorporation.

1.2Authority to enter into Agreement

1.2.1The Purchaser has the legal right and full power and authority to enter into and perform this Agreement, any Local Transfer Document to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Local Transfer Document.

1.2.2The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Purchaser in accordance with their respective terms.

1.2.3Except as referred to in this Agreement, the Purchaser:

(i)is not required to make any announcement, consultation, notice, report or filing; and

(ii)does not require any consent, approval, registration, authorisation or permit,

(iii)in each case in connection with the performance of this Agreement or any other document referred to in paragraph 1.2.1.

1.2.4The execution and delivery of the documents referred to in paragraph 1.2.1 and the performance by the Purchaser and each member of the Purchaser’s Group of their respective obligations under them, will not:

(i)result in a breach of any provision of the memorandum or articles of association or by laws or equivalent constitutional document of the relevant member of the Purchaser’s Group;

(ii)result in a breach of, or constitute a default under, any instrument or contract to which the relevant member of the Purchaser’s Group is party or by which the relevant member of the Purchaser’s Group is bound where such breach is material to their ability to perform their obligations under such documents;

(iii)result in a breach of any existing order, judgment or decree of any court, Governmental Entity by which the relevant member of the Purchaser’s

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Group is bound and where such breach is material to their ability to perform their obligations under such documents.

1.3Authorisation

The Purchaser has taken, or will have taken by Closing, all corporate action required by it to authorise it to enter into and to perform this Agreement, any Local Transfer Document to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Local Transfer Document.

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Schedule 15
Pre-Closing Obligations

Part 1
Seller Restrictions

The actions for the purposes of Clause 5.1.2 are:

1.1amend or otherwise modify the constitutional documents of any Target Group Company other than minor or administrative amendments or modifications which are not adverse to its Contributed Business, the other Seller, or to the Purchaser in respect of its rights and obligations under this Agreement and the Ancillary Agreements;

1.2create, allot or issue, or grant an option or right to subscribe for or purchase, any share capital or other securities or loan capital of any Target Group Company;

1.3repay, redeem or repurchase any share capital, or other securities of any Target Group Company;

1.4make any acquisition or disposal which has a value in excess of US$150 million, in the case of GlaxoSmithKline, or US$85 million, in the case of Novartis, exclusive of VAT;

1.5grant any guarantee or indemnity for the obligations of any person (other than any Target Group Company) which has a value in excess of US$5 million (other than in the ordinary course of trading);

1.6dispose of, or agree to dispose of, any material asset or material stock at below market value other than in the ordinary course of business;

1.7acquire or agree to acquire any share, shares or other interest in any company, partnership or other venture, other than an investment of 5 per cent. or less of the total shares or interest in such company, partnership or venture;

1.8enter into, extend, amend, give notice to terminate or vary in any material respect any lease of real property or change the existing use of such property which is material to its Contributed Business;

1.9enter into any borrowing facility which constitutes Third Party Indebtedness which would not be repaid prior to Closing;

1.10enter into any off-balance sheet finance arrangements;

1.11sell, lease, license, transfer or dispose of, or create any Encumbrance over, any material assets of its Contributed Business other than (i) in the ordinary course of business (including any sale of inventory) or (ii) a Permitted Encumbrance;

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1.12amend, terminate or grant any waiver with respect to any Owned Intellectual Property Contract or Transferred Intellectual Property Contract other than in the ordinary course of business;

1.13fail to comply in all material respects with all Applicable Law, Product Approvals, Marketing Authorisations applicable to the operation of its Contributed Business;

1.14assign, licence or abandon any Owned Intellectual Property Rights or Transferred Intellectual Property Rights or rights in Proprietary Information, or cease to prosecute or otherwise dispose of, fail to maintain, defend or pursue applications for any of its registered Owned Intellectual Property Rights or registered Transferred Intellectual Property Rights material to any Product or Pipeline Product in each case other than in the ordinary course of business;

1.15save where requested in writing by the other Seller or required by any applicable Governmental Entity, amend (other than in the ordinary course of business), cancel or surrender any applications, submissions or filings with respect to its registered Owned Intellectual Property Rights or registered Transferred Intellectual Property Rights;

1.16instigate, cease, compromise or settle any litigation or arbitration proceedings related to its Contributed Business in relation to a claim for which the potential liability attaching thereto is in excess of US$150 million, in the case of GlaxoSmithKline, or US$85 million, in the case of Novartis;

1.17make any material amendment to any Marketing Authorisation, Manufacturing Licence or Environmental Permit, in each case except to the extent required by: (a) Applicable Law; (b) any Governmental Entity, or (c) the standards, policies and procedures of the Seller’s Group as then in force;

1.18enter into, terminate, grant any waiver in respect of or amend in any material respect any Transferred Contract, or incur any commitment, which is not capable of being terminated without compensation at any time with twelve months’ notice or less or which is not in the ordinary course of business, or which involves or may involve total annual expenditure in excess of US$150 million, in the case of GlaxoSmithKline, or US$85 million, in the case of Novartis, exclusive of VAT;

1.19enter into any contract which would materially restrict the freedom of its Target Group to operate in any part of the world;

1.20terminate (except for good cause) the employment of any Key Personnel;

1.21take any steps to increase or reduce the proportion of time spent working in its Contributed Business by any employee of any member of its Group or to transfer the employment of any Employee to another member of its Group or to employ or offer to employ or engage any new persons in its Contributed Business other than in ordinary course of business consistent with past practice and subject to an aggregate increase of not more than 2.5 per cent. in total staff costs of its Contributed Business per annum, provided that this restriction shall not apply to the redeployment of any Target Group

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Company Employee who is not wholly or substantially engaged in its Contributed Business before the Closing Date to employment with another member of its Group;

1.22make, or commit to make, any changes to the terms and conditions of employment (including pension fund commitments or any increase to remuneration) or to any employee benefit plan of any Employee, other than (a) those required by Applicable Law or (b) pursuant to normal annual pay reviews in the ordinary course of business consistent with past practice and subject to an aggregate increase of not more than 5 per cent. in total staff costs of the Contributed Business per annum or (c) retention arrangements (in the form of cash or shares) to retain key employees in connection with the matters contemplated by this Agreement as described in paragraphs 9 and 10 of Schedule 7 or (d) those changes to share-based incentive schemes made for the purpose of complying with paragraph 10 of Schedule 7;

1.23make any promises or commitment to any Employees or employee representative body concerning the matters contemplated by this Agreement or offer or otherwise give any assurances to any Employees as to the possibility of continued employment with the Purchaser’s Group after Closing;

1.24make any change or commitment to make any change to the terms of any redundancy policy or practice applying to the Employees (including amounts payable on redundancy);

1.25enter into (where there is no existing agreement) or materially amend any collective bargaining agreement or other contract with a labour organisation, works council or employee organisation to create new or additional obligations for any member of the Seller’s Group, in each case in relation to the Contributed Business or any Target Group Company; and

1.26undertake any recall or withdrawal of any Product (other than in the ordinary course of business or to comply with Applicable Law).

Part 2
Seller Obligations

1.OBLIGATIONS TO BE SATISFIED PRIOR TO THE CLOSING

1.1At least five Business Days prior to the Closing Date, each Seller shall provide the other Seller with a list of any required actions that must be taken within three months after Closing with respect to the payment of any registration, maintenance, or renewal fees or the filing of any documents, applications or certificates in order to maintain any Transferred Intellectual Property Rights that are Registered Intellectual Property Rights in full force and effect. Upon the other Seller’s reasonable request, the relevant Seller shall execute and deliver assignment agreements and other transfer documentation, including, where applicable, duly executed assignments of such Transferred Intellectual Property Rights for recording with the applicable Governmental Entity, and to take such further actions, in each case at the other Seller’s reasonable cost and expense and as may be required, to give effect to the foregoing assignments.

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2.OBLIGATIONS FROM THE DATE OF THE AGREEMENT TO THE CLOSING

The requirements for the purposes of Clause 5.1.3 are:

2.1so far as permitted by Applicable Law, procure that each member of the Seller’s Group informs the other Seller promptly if the Seller becomes aware of, or has reasonable grounds for suspecting any violation of Anti-Bribery Law which is reasonably likely to have an impact on the Target Group;

2.2carry out capital expenditure in relation to any site operated by the Target Group where Products are manufactured in a manner materially consistent (and within a variance of 10 per cent. in aggregate) with the Seller’s capital expenditure programme as at the date of this Agreement;

2.3maintain and keep any Transferred Intellectual Property Rights and ensure that all filings and notifications required to be made in respect of the same are made in accordance with past practice;

2.4progress, in accordance with past practice any applications, submissions, filings or other correspondence relating to the grant of new Transferred Intellectual Property Rights;

2.5progress, in accordance with past practice during the Relevant Period, any applications, submissions, filings or other correspondence initiated by such member of the Seller’s Group relating to the grant of new Manufacturing Licences and Environmental Permits in respect of the Contributed Business;

2.6continue to Commercialise products of the relevant Seller’s Contributed Business in accordance with past practice during the Relevant Period and do not materially accelerate or increase the quantity of such products distributed to the relevant distributors and/or wholesalers, in each case except in respect of a bona fide increase in demand for the relevant Product by the relevant distributor and/or wholesaler which has not been stimulated in any way by discounts, rebates, claw-backs or the like outside of the ordinary course of business or the grant of preferred terms offered by the Seller’s Group outside of the ordinary course;

2.7not discontinue or cease to operate or materially reduce the resources applied to any part of the Contributed Business;

2.8maintain the level of Manufacturing Stocks and Manufacturing Inventory held for use in its Contributed Business materially in accordance with the Seller’s Group’s operating policies as applied to its Contributed Business from time to time in force;

2.9maintain the level of In-Market Inventory held for use in its Contributed Business materially in accordance with the Seller’s Group’s operating policies as applied to its Contributed Business from time to time in force;

2.10use all reasonable efforts to ensure that the manufacture of all products of the relevant Seller’s Contributed Business by the Seller’s Group comply with Applicable Law;

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2.11use all reasonable efforts to ensure that the products sold by its Contributed Business comply with Applicable Law;

2.12continue to conduct the Ongoing Clinical Trials in accordance with GCP and the Seller Group’s policies and procedures; and

2.13notify the other Seller in writing of any actual safety or quality issue in respect of any Product or the manufacture of any Product (as soon as reasonably practicable after becoming aware of the same) which issue the relevant member of the Seller’s Group, acting reasonably and in good faith, considers material in the context of the manufacture or commercialisation of such Product.

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Schedule 16
Key Personnel

[***]

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Schedule 17
Reorganisations

1.Between signing of this Agreement and Closing, each Seller may carry out one or more Reorganisations, provided that:

1.1if a Seller proposes to carry out a Reorganisation, that Seller (the “Notifier”) shall notify the other Seller (the “Recipient”) no later than the end of 90 calendar days after the date of this Agreement (and at least three weeks in advance of the proposed Reorganisation being implemented) of its intention to carry out the proposed Reorganisation and the detailed steps proposed to be implemented to effect the Reorganisation and, in respect of each Target Group Company, the country of incorporation, the country or countries of residence for Tax purposes and the location of any permanent establishments of that Target Group Company;

1.2the Notifier shall provide the Recipient with copies of all relevant legal documentation required to implement the Reorganisation in draft a reasonable period prior to the Reorganisation being implemented and shall provide the Recipient with such other information as the Recipient may reasonably request regarding the implementation of the Reorganisation;

1.3the Notifier shall consult in good faith with, and take into account the views of, and any requests made by, the Recipient in relation to any Reorganisation steps; and

1.4without prejudice to Clause 15.9 of this Agreement, all fees, costs and expenses of implementing any Reorganisation (or any part thereof) are borne by GlaxoSmithKline’s Group in the case of a Reorganisation where GlaxoSmithKline is the Notifier of the Reorganisation and by Novartis’s Group in the case of a Reorganisation where Novartis is the Notifier of the Reorganisation.

2.GlaxoSmithKline undertakes to the Purchaser (for itself and as trustee for each GlaxoSmithKline Consumer Group Company) that, with effect from Closing, GlaxoSmithKline will indemnify on demand and hold harmless the relevant GlaxoSmithKline Consumer Group Company against and in respect of any and all Liabilities arising in connection with any Reorganisation (or part thereof) undertaken by GlaxoSmithKline, other than:

(A)any Liabilities of a GlaxoSmithKline Consumer Group Company in respect of Tax (which shall be dealt with under the Tax Indemnity); and

(B)any Liabilities in connection with any matter provided for or document entered into as provided by this Agreement (including the provisions of Clause 8.12, but excluding this Schedule 17) or any Ancillary Agreement.

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3.Novartis undertakes to the Purchaser (for itself and as trustee for each Novartis OTC Group Company) that, with effect from Closing, Novartis will indemnify on demand and hold harmless the relevant Novartis OTC Group Company against and in respect of any and all Liabilities arising in connection with any Reorganisation (or part thereof) undertaken by Novartis, other than:

(A)any Liabilities of any Novartis OTC Group Company in respect of Tax (which shall be dealt with under the Tax Indemnity); and

(B)any Liabilities in connection with any matter provided for or document entered into as provided by this Agreement (including the provisions of Clause 8.12, but excluding this Schedule 17 ) or any Ancillary Agreement.

4.In this paragraph 4 and in paragraph 5 below:

(A)“GlaxoSmithKline RoW Consumer Assets” means the GlaxoSmithKline Consumer Group excluding the GlaxoSmithKline Consumer Group in the US and excluding the GlaxoSmithKline Transferring UK Companies; and

(B)“GlaxoSmithKline Transferring UK Companies” means the GlaxoSmithKline Consumer Group Companies incorporated in the UK which are held (directly or indirectly) by Glaxo Group Limited.

5.GlaxoSmithKline intends to carry out a Reorganisation (the “GlaxoSmithKline Reorganisation”) between signing of this Agreement and Closing involving the following high-level steps:

5.1GlaxoSmithKline will procure that a Jersey incorporated but solely UK tax resident company is incorporated as a (direct or indirect) subsidiary of Glaxo Group Limited (the “Intermediate Holdco”);

GlaxoSmithKline Consumer Group in the US

5.2the GlaxoSmithKline Consumer Group in the US is currently primarily held (directly or indirectly) underneath GlaxoSmithKline Holdings Americas Inc and Stiefel Laboratories Inc;

5.3if GlaxoSmithKline concludes that the conditions of section 355 of the Code should be met in respect of the GlaxoSmithKline Reorganisation, the GlaxoSmithKline Consumer Group in the US will be distributed to GlaxoSmithKline Finance plc by way of a “qualifying spin-off” under section 355 of the Code prior to Closing.  The GlaxoSmithKline Consumer Group in the US will then be transferred to the Intermediate Holdco prior to Closing;

5.4in any other case, the GlaxoSmithKline Consumer Group in the US will be transferred to the Purchaser on Closing in return for an issue of a portion of the A Shares to the Second GlaxoSmithKline Shareholder (as defined in the Shareholders’ Agreement);

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GlaxoSmithKline Consumer Group outside the US

5.5the GlaxoSmithKline RoW Consumer Assets are primarily held (directly or indirectly) underneath Glaxo Group Limited, Stiefel Laboratories Inc and Setfirst Limited;

5.6the GlaxoSmithKline RoW Consumer Assets will be transferred to the Intermediate Holdco (or a direct or indirect subsidiary of the Intermediate Holdco) prior to Closing; and

5.7on Closing, the Intermediate Holdco and the GlaxoSmithKline Transferring UK Companies will be contributed to the Purchaser in return for an issue of A Shares to the First GlaxoSmithKline Shareholder (as defined in the Shareholders’ Agreement).

6.For the avoidance of doubt, the information set out in paragraph 5 shall not constitute notification by GlaxoSmithKline to Novartis of a Reorganisation in accordance with paragraph 1 above.

7.Novartis intends to achieve its contributions to the Purchaser through the following high-level steps:

7.1shares in Novartis OTC Group Companies held from Switzerland would be contributed to the Purchaser in return for the issue shares;

7.2an 80 per cent. shareholding in Novartis Consumer Health, Inc. will be contributed to the Purchaser for the issue of shares to Novartis Finance Corporation;

7.3shares in Novartis OTC Group Companies held by non-Swiss holding companies will be transferred to the Purchaser for cash;

7.4Intellectual Property Rights may be transferred to the Purchaser for cash, either by way of sale or by way of fully paid-up licence; and

7.5cash required by the Purchaser as envisaged in paragraphs 7.3 and 7.5 would be provided by Novartis AG, and possibly also Novartis Finance Corporation, subscribing cash for shares in the Purchaser.

8.For the avoidance of doubt, the information set out in paragraph 7 shall not constitute notification by Novartis to GlaxoSmithKline of a Reorganisation in accordance with paragraph 1.

9.The parties agree that although a Reorganisation may result in a change in the ownership structure of the relevant Target Group, it shall not, under any circumstances, result in a change in scope of that Target Contributed Business as defined in this Agreement.

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10.Between the date of this Agreement and Closing, the Purchaser shall be entitled to set up such wholly-owned (direct or indirect) subsidiary companies as it sees fit and, in accordance with Clauses 2.1, 2.2 and 2.3, may procure that such subsidiary companies purchase the relevant Shares and/or Target Group Businesses in accordance with such Clauses.

11.The parties agree that, notwithstanding the characterization of any transactions as sales, the transactions described in paragraphs 5 and 7 of this Schedule 17 relating to the transfer of assets to the Purchaser are intended to qualify for US federal income tax purposes as (i) a transfer to a controlled corporation within the meaning of section 351 of the Code and, in the case of any Novartis OTC Group Company organized under US law (ii) as a “reorganization” within the meaning of Section 368(a)(1)(B) of the Code, and further agree that the parties intend that this Agreement constitute a “plan of reorganization” for purposes of Sections 354, 361 and 368 of the Code.  The parties and their Affiliates shall report the transactions contemplated by this Agreement for US income tax purposes in a manner consistent with this intended treatment and shall not take an inconsistent position for US income tax purposes unless required by Applicable Law.

12.Upon reasonable request by another party, each party and Share Seller that is not incorporated in the US or resident for Tax purposes in the US shall provide to such party an “ownership statement” meeting the requirements of section 1.367(a)-3(c)(5)(i) of the US Treasury Regulations.

13.If, during the period ending on the earlier of 31 December 2020 and the date on which all the B Shares cease to be held by a member of Novartis’s Group, the Purchaser intends to transfer either the shares or substantially all of the assets of a Novartis OTC Group Company that is incorporated in the US or resident for Tax purposes in the US in one, or a series of connected, transactions, it shall ensure that Novartis is made aware of any such intended transactions in a timely manner, provide Novartis with any information about such transactions reasonably requested by Novartis and provide Novartis with written notification of such transactions prior to the consummation of such transactions.

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Schedule 18
Statement of Net Assets

Part 1
Statement of Net Assets Rules — GlaxoSmithKline

1.PREPARATION OF THE GLAXOSMITHKLINE STATEMENT OF NET ASSETS

1.1Period

The Statements of Net Assets is prepared as of the close of business on the final day of the relevant calendar month.

1.2Translation of Reporting Entity’s Statements of Net Assets

A reporting entity reports in local currency. All reports are translated into GBP by the Seller for reporting purposes. The GlaxoSmithKline Statement of Net Assets is translated at the period-end exchange rates which are the rates published on the Finance Community and are based on exchange rates published by Reuters and are published on the GlaxoSmithKline intranet.

1.3GlaxoSmithKline UNISON Reporting System and Materiality:

1.3.1Financial information has been obtained from GlaxoSmithKline’s UNISON reporting system and prepared in accordance with GlaxoSmithKline’s Finance Manual.

1.3.2The GlaxoSmithKline Statement of Net Assets contains the business of GlaxoSmithKline Consumer division as included in GlaxoSmithKline’s segment reporting (column A- “Per Annual Report”).  Excluded assets and liabilities related to GlaxoSmithKline’s business in India and Nigeria and related to Lucozade and Ribena (which products were sold on 31 December 2013) are shown in columns B and C (“Adjust out Nigeria and India” and Exclude Lucozade and Ribena”). A £5 million threshold was applied.

1.3.3The GlaxoSmithKline Statement of Net Assets has been prepared as follows:

(i)in accordance with the specific accounting treatments set out below; and, subject thereto;

(ii)adopting the same accounting principles, methods, procedures and practices utilized in preparing the consolidated financial statements of GlaxoSmithKline plc as described in the GlaxoSmithKline Finance Manual applied on a consistent basis using consistent estimation methodologies and judgments and with consistent classifications and, subject thereto; and

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(iii)in accordance with IFRS.

1.3.4For the avoidance of doubt, paragraph 1.3.3(i) shall take precedence over paragraphs 1.3.3(ii) and 1.3.3(iii), and paragraph 1.3.3(ii) shall take precedence over paragraph 1.3.3(iii).

2.SPECIFIC POLICIES

The adjustment for exclusion of Lucozade and Ribena in the illustrative statement Net Assets represents an estimate based on balances at 31 December 2012 inflated by 2.8% for sales growth of the divested products.  Other one-off adjustments relating to the divestment have also been excluded from other payables and receivables.

Part 2
Statement of Net Assets Rules — Novartis

Part 3 of this Schedule 18 sets forth, for illustrative purposes only, a computation of the statement of net assets as of the close of business on 31 December 2013 (the “Novartis Statement of Net Assets”).

1.PREPARATION OF THE NOVARTIS STATEMENT OF NET ASSETS

1.1Period

The Novartis Statement of Net Assets is prepared as of the close of business on the final day of the relevant calendar month.

1.2Translation of Reporting Entity’s Statements of Net Assets

A reporting entity reports in local currency. All reports are translated into US Dollars by the Seller for reporting purposes. The Novartis Statement of Net Assets is translated with the period-end exchange rates which are the rates provided by Novartis Group Treasury and are based on Bloomberg’s mid-morning CET exchange rates and are published in the Group Treasury section of the Novartis intranet.

1.3Novartis Reporting System and Materiality:

1.3.1Financial information is obtained from the Financial Consolidation & Reporting System of Novartis and the supporting general ledgers are prepared in accordance with Novartis’s Accounting Manual (the “NAM”). The Financial Consolidation & Reporting System is the system of record for Novartis external reporting. References in the Novartis Statement of Net Assets included as Part 2 of this Schedule 18 shown as “BS01 lines 010-671” relate to the groupings shown in Novartis’s monthly reporting form “BS01 — Balance sheet”.

1.3.2For the Seller’s reporting purposes, the financial reporting of a legal entity is separated into a divisional part, which includes operating items and a corporate part, which mainly captures the amounts related to taxes, post-employment benefit obligations and most of the financial assets and liabilities. The Novartis Statement of Net Assets contains the business of

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the OTC division as included in Novartis’s segment reporting (column A- “OTC Divisional Reported Statement of Net Assets”), and items of the corporate Statement of Net Assets for the Novartis Group Companies (Column B — “OTC Statement of Net Assets of the Corporate part of the Novartis Group Companies” as well as adjustments for certain items which are either excluded from or added to the transaction (columns C -”Excluded items”). A US$10 million threshold was applied.

1.3.3The Novartis Statement of Net Assets has been prepared as follows:

(i)in accordance with the specific accounting treatments set out below; and, subject thereto;

(ii)adopting the same accounting principles, methods, procedures and practices utilized in preparing the consolidated financial statements of Novartis AG as described in the Novartis Accounting Manual applied on a consistent basis using consistent estimation methodologies and judgments and with consistent classifications and, subject thereto; and

(iii)in accordance with IFRS.

1.3.4For the avoidance of doubt, paragraph 1.3.3(i) shall take precedence over paragraphs 1.3.3(ii) and 1.3.3(iii), and paragraph 1.3.3(ii) shall take precedence over paragraph 1.3.3(iii).

2.SPECIFIC POLICIES

The following supplement the description in the NAM for certain items included in the Novartis Group Statement of Net Assets:

2.1Non-Current assets

2.1.1Property, plant and equipment (BS01_010)

An amount of US$1.1m has been excluded as it relates to assets, which will be retained.

2.1.2Financial assets &— subsidiaries/JV (BS01_040)

This line reflects equity investments that Novartis Group Companies hold in other Novartis Group Companies. These relationships have been eliminated in the Novartis Statement of Net Assets (as reflected in Column C). The equity investment in an entity which is not supposed to transfer in a share deal is maintained.  Deferred tax assets (BS01_042).

2.1.3Deferred tax assets (BS01_042)

This line represents deferred tax assets included in the corporate part of Transferred Subsidiaries. In the US deferred taxes are recognized in a member

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of the Seller’s Group US corporate entity and have therefore been added (as reflected in column C) in the Novartis Statement of Net Assets.

2.2Current Assets:

2.2.1Receivables own BU (BS01_130)

Column B of the Novartis Statement of Net Assets represents receivables against other entities within the Novartis division, which are offset by an equivalent amount in the line Payables own BU. These amounts have been eliminated in Column C of the Novartis Statement of Net Assets.

2.2.2Prepaid share-based payments (BS01_161)

An asset for prepaid share-based compensation is recognized to reflect Novartis’s internal charge-out mechanism for its equity settled share-based compensation plans. For entities settling the charge for the shares at the beginning of the vesting period, it reflects the expense yet to be recognized for the unvested part of a share-based compensation plan. This asset has been excluded (as reflected in Column C) and is not reflected in the Novartis Statement of Net Assets.

2.3Long-term Liabilities:

2.3.1Deferred tax assets (BS01_535)

This line represents deferred tax liabilities included in the corporate part of Transferred Subsidiaries. In the US deferred taxes are recognized in a member of the Seller’s Group US corporate entity and have therefore been added (as reflected in column C) in the Novartis Statement of Net Assets.

2.3.2Other non-current liabilities (BS01_540)

Column C excludes net liabilities for post-employment benefits of US$88 million included in the corporate part of the Novartis Group Companies as their treatment is addressed separately in Schedule 8.

2.4Current Liabilities:

2.4.1Accrued share-based payments (BS01_671)

A liability for share-based compensation is recognized to reflect Novartis’s internal charge-out mechanism for its equity-settled share-based compensation plans. For entities settling the charge for the shares after the vesting period, it reflects the expense recognized for the vested part of a share based compensation plan. This liability has been excluded (as reflected in Column C) and is not reflected in the Novartis Statement of Net Assets.

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Part 3
GlaxoSmithKline Statement of Net Assets

[***]

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Part 4
Novartis Statement of Net Assets

[***]

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Schedule 19
Novartis International Assignees

[***]

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Schedule 20
Clearances, Approvals etc.

Regulatory Approvals

The following table provides the additional jurisdictions and applicable antitrust, merger control, or foreign investment rules referenced in Clause 4.1.3 of the Agreement.

This list of jurisdictions and statutes is not meant to be indicative of a known filing or approval requirement in these jurisdictions.  To the extent that clearances, approvals, waivers, no action letters or consents are not required to be obtained or not otherwise agreed by the parties to be appropriate and waiting periods are not required to have expired in these jurisdictions, prior to closing of the transactions contemplated by the Agreement, such clearances, approvals, waivers, no action letters, consents, and waiting period expirations will not be conditions precedent to closing of the transactions contemplated by the Agreement.

Country	Statute Under Which Filing/Approval Is Required
Australia	The Competition and Consumer Act of 2010
Austria	Part I, chapter 3 of the Austrian Cartel Act of 2005
Brazil	Law No. 12,529 of November 30, 2011
Canada	The Competition Act
China	The Chinese Anti-Monopoly Law
Germany	Chapter VII of the Act against Restraints of Competition of 1958
India	The Competition Act of 2002, as amended by The Competition (Amendment) Act of 2007
Israel	Restrictive Trade Practices Law, 5748-1988
Japan	The Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade No. 54 of 1947
Mexico	The Federal Law on Economic Competition
New Zealand	The Commerce Act of 1986
Russia	Federal Law No. 135-FZ of July 16, 2006 on Protection of Competition
South Africa	The Competition Act 89 of 1998
South Korea	The Monopoly Regulation and Fair Trade Act
Taiwan	The Fair Trade Law of 1991
Turkey	The Law on Protection of Competition No. 4054 of 1994
United Kingdom	The Enterprise Act of 2002

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Schedule 21
Seller Marks

Part 1
GlaxoSmithKline Seller Marks

[***]

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Schedule 22
Delayed Businesses

Part 1 — Delayed Businesses

1.

1.1In this Schedule:

“Audit Team”	has the meaning given in paragraph 3.3 of this Schedule;
“Accounting Standards”	means the most recent edition of the International Financial Reporting Standards as published by the International Accounting Standards Board at the time that any amount is to be calculated by reference to these standards;
“Controlled Business Instruction”	has the meaning given in paragraph 2.4.1 of this Schedule;
“Controlled Delayed Businesses”	means the Delayed Businesses other than the Non-Controlled Delayed Businesses;
“Delayed Assets”	means the assets listed in Appendix 3 to this Schedule;
“Delayed Businesses”	means the Delayed Target Group Companies, the Delayed Target Group Businesses, the Delayed Assets and the Delayed Liabilities;
“Delayed Business Employees”	has the meaning given in Schedule 7 (Employees);
“Delayed Business Representative”	has the meaning given in paragraph 2.3 of this Schedule;
“Delayed Closing”	means, in respect of a Delayed Business, completion of the transfer of legal ownership of that Delayed Business to the Purchaser in accordance with this Schedule;
“Delayed Closing Date”	has the meaning given in paragraph 1.4 of this Schedule;
“Delay Milestone”	means the milestone set out next to the relevant Delayed Business in Appendices 1 to 3 (inclusive) to this Schedule;
“Delayed Target Group Company”	means a Target Group Company listed in Appendix 1 to this Schedule;
“Delayed Target	means a Target Group Business listed in Appendix 2 to this

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Group Business”	Schedule;
“Disputed Items”	has the meaning given in paragraph 3.9 of this Schedule;
“Dispute Notice”	has the meaning given in paragraph 3.3 of this Schedule;
“Draft Economic Benefit Statement”	has the meaning given in paragraph 3.12.2 of this Schedule;
“Economic Benefit Amount”	has the meaning given to it in paragraph 4.2. of this Schedule;
“Economic Benefit Expert”	has the meaning given in paragraph 3.12.2 of this Schedule;
“Economic Benefit Statement”	has the meaning given in paragraphs 11 or 12.1, as applicable, of this Schedule;
“Economic Benefit Payment”	has the meaning given in paragraph 3.15 of this Schedule;
[***]	[***];
“Non-Controlled Delayed Business”	means, in respect of GlaxoSmithKline, the GlaxoSmithKline Bangladesh Business and the GlaxoSmithKline Pakistan Business, and, in respect of Novartis, the Novartis Indian Business;
“Protected Information”	has the meaning given in paragraph 3.7 of this Schedule;
“Reviewing Party”	has the meaning given in paragraph 3.3 of this Schedule; and
“Seller Involvement Instruction”	has the meaning given in paragraph 2.10 of this Schedule.

1.2The parties agree that legal ownership of the Delayed Businesses shall not be transferred by the relevant Seller to the Purchaser at Closing but that the Delayed Businesses shall be operated by the relevant Seller and that the benefit and burden of such Delayed Business shall be for the Purchaser with effect from the Effective Time on the terms set out in this Schedule.

1.3Each Seller and the Purchaser shall (and shall procure that their respective Affiliates shall) use all reasonable endeavours to procure the achievement of each Delay Milestone as soon as possible after the Closing Date.

1.4Delayed Closing in respect of a Delayed Business shall occur on the date which is the last Business Day of the month in which the relevant Delay Milestone has been achieved, except that:

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1.4.1where the last day of such month is not a Business Day, the Delayed Closing shall instead take place on the first Business Day of the following month; and

1.4.2where less than five (5) Business Days remain between achievement of the Delay Milestone and the last business day of the month, Delayed Closing shall take place:

(i)on the last Business Day of the following month;

(ii)where the last day of such month is not a Business Day, the Delayed Closing shall instead take place on the first Business Day of the month following the month referred to in paragraph (i) above; or

(iii)on such other date as may be agreed between the relevant Seller and the Purchaser,

such date (in each case) being the “Delayed Closing Date”.

Obligations on Delayed Closing Date

The Sellers’ Obligations

1.5On each Delayed Closing Date, the relevant Seller shall deliver to the Purchaser the Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents) duly executed by the relevant member of that Seller’s Group.

The Purchaser’s Obligations

1.6On each Delayed Closing Date, the Purchaser shall deliver to the relevant Seller the Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents) duly executed by the relevant member(s) of the Purchaser’s Group.

1.7For the purposes of compliance with paragraphs 1.5 and 1.6, each Seller and the Purchaser shall, between the date of this Agreement and the Delayed Closing Date, negotiate in good faith any and all Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents) such that they are consistent with equivalent Ancillary Agreements executed at Closing, and shall take all such other steps as are required to transfer the Delayed Businesses in accordance with this Agreement and the Ancillary Agreements.

Tax Indemnity

1.8References in paragraphs 1.5 to 1.7 above to Ancillary Agreements shall not include the Tax Indemnity, the execution and delivery of which shall be dealt with under Schedule 11.

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1.9This Schedule is without prejudice to the rights and obligations of the parties and their respective Groups under the Tax Indemnity.

1.10The Purchaser shall use reasonable endeavours to procure that any Delayed Business Instructions are consistent with the rights and obligations of the parties and their respective Groups under the Tax Indemnity.

1.11Nothing done or omitted to be done by a Seller in accordance with its rights and obligations under the Tax Indemnity shall constitute a breach by that Seller of Part 2 of this Schedule.

PART 2 — MANAGEMENT AND CONTROL OF DELAYED BUSINESSES

2.

2.1To the maximum extent permissible by Applicable Law, and the terms of any Product Approvals and Product Applications, the parties intend that, pursuant to this Schedule, all management and control rights and powers that a Seller (or any member of the Seller’s Group) has in relation to a Controlled Delayed Businesses shall transfer to the Purchaser with effect from Closing and, accordingly, that the Purchaser shall consolidate the Controlled Delayed Businesses into its accounts with effect therefrom in accordance with its accounting policies as applied from the Closing Date.

2.2As soon as reasonably practicable after Closing, the Purchaser shall notify each Seller of the names of its personnel permitted to provide Controlled Business Instructions (“Instructing Personnel”) and each Seller shall be entitled to rely on and act in accordance with Controlled Business Instructions from Instructing Personnel without further verification.  Instructions provided by or on behalf of the Purchaser shall not be required to be in writing if they are provided by the Instructing Personnel. The Purchaser shall be free to change its Instructing Personnel from time to time by providing 10 Business Days’ written notice to the Seller’s Delayed Business Representative.

2.3In order to cooperate in managing the implementation of the provisions set out in this Schedule, each Seller and the Purchaser shall notify each other of the identity of a senior member of management (the “Delayed Business Representative”) who shall be the primary point of contact in the event that there is any issue in connection with the operation of the provisions in this Schedule.  The parties shall notify each other in writing of the contact details for their respective Delayed Business Representatives from time to time.

2.4From Closing until the relevant Delayed Closing Date, in respect of any Controlled Delayed Business each Seller shall:

2.4.1subject to paragraph 2.11 and 2.12 and to the maximum extent permitted by Applicable Law and the terms of any relevant Product Approvals and Product Applications, act in accordance with any instructions provided to it by any of the Instructing Personnel in relation to any aspect of the management and operation of that Controlled Delayed Business or any part of it, whether in relation to sales, marketing, distribution,

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manufacturing, research and development or any other activities of that Controlled Delayed Business, the making (or otherwise) of expenditure, investments, employee matters (including the hiring or dismissal of any Delayed Employee), determining operating or financial policies of that Controlled Delayed Business, or otherwise, including developing that Controlled Delayed Business into new areas and undertaking activities not previously undertaken in relation to that Controlled Delayed Business, and in each case with the effect that the Purchaser shall have, to the maximum extent permissible by Applicable Law, and the terms of any relevant Product Approvals and Product Applications, the same powers in relation to the relevant Controlled Delayed Business as it would have following the Delayed Closing Date of that Controlled Delayed Business (a “Controlled Business Instruction”);

2.4.2comply with the provisions of Schedule 4 in relation to Product Approvals and Product Applications relating to the Controlled Delayed Business;

2.4.3except to the extent otherwise instructed by the Purchaser’s Instructing Personnel in accordance with this paragraph 2 or as required by Schedule 4, ensure that the Controlled Delayed Business is carried on in the ordinary course of business consistent with past practice in relation to that Controlled Delayed Business; and

2.4.4ensure that no Delayed Target Group Company shall, between the Closing Date and the relevant Delayed Closing Date for that Delayed Target Group Company:

(i)make any distribution, dividend or any return of value to any member of that Seller’s Group (whether in cash or in kind) or any return of capital (whether by reduction of capital or redemption or purchase of shares) other than dividends in the ordinary course of the business of GlaxoSmithKline Pakistan consistent with past practice; or

(ii)take any action which results in a reduction in its dividend capacity (other than the incurrence of trading losses in the ordinary course of business); or

(iii)make any payment to, or enter into any transaction with, any member of that Seller’s Group other than with the consent of the Purchaser or in accordance with the provisions of this Agreement or any of the Ancillary Agreements;

(iv)make any payment to, or enter into any transaction other than (in any case) on arm’s length terms in the ordinary course of business or otherwise in accordance with the provisions of this Agreement or any of the Ancillary Agreements;

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(v)permit any waiver, deferral or release by any Delayed Target Group Company of any amount or obligation owed or due to such Delayed Target Group Company; or

(vi)permit any guarantee, indemnity or security to be provided by any Delayed Target Group Company in respect of the obligations or liabilities of any Seller or any of its Affiliates;

and provided that the Seller shall not be required, pursuant to any Controlled Business Instruction, to take any action (or omit to take any action) in relation to any of its business (or the business of that Seller’s Group) that is not a Controlled Delayed Business.

2.5Each Seller shall indemnify on demand and hold harmless the Purchaser against and in respect of any and all Liabilities of the Purchaser’s Group and any Delayed Target Group Company arising directly or indirectly as a result of any breach of paragraph 2.4.4 above and, for the avoidance of doubt, any such Liability shall not constitute an Assumed Liability for the purposes of this Agreement.

2.6For the avoidance of doubt, the provisions of Clause 5 and Schedule 15 shall not apply in respect of any Controlled Delayed Business following Closing.

2.7The Purchaser shall (or shall procure that its Affiliates shall) supply such assistance and access (including the supply of products, the supply of services and access to Transferred Books and Records and Commercial Information, but excluding any access to Intellectual Property Rights except as referred to in paragraph 2.8 below) as shall be reasonably necessary to allow each Seller to operate each Controlled Delayed Business in accordance with this Schedule.

2.8The Purchaser shall (or shall procure that its Affiliates shall) grant each Seller from Closing a non-exclusive, fully paid up, royalty free and sub-licensable licence or sub-licence (as applicable) to use, notwithstanding any other provision of this Agreement or any of the Ancillary Agreements, the Target Group Intellectual Property Rights and Intellectual Property Rights licensed to the Purchaser (and its Affiliates) under any Ancillary Agreement (except the Purchaser Trademark Licence Agreements or the Purchaser Patent and Know-How Licence Agreements) for the sole purpose of operating each Delayed Business in accordance with the provisions of this Schedule 22. This licence shall continue on a country by country basis, in relation to each Delayed Business, until the date on which that Delayed Business has been transferred by the Seller to the Purchaser in accordance with this Schedule.

2.9Delayed Employees who are engaged in a Controlled Delayed Business shall report to the management of the Purchaser and shall be treated for such management and reporting purposes in the same way as any employee of the Purchaser’s Group. Controlled Business Instructions may, accordingly, be given by the Instructing Personnel directly to any Delayed Employee engaged in a Controlled Delayed Business.

2.10To the extent that the implementation of any Controlled Business Instruction requires an action or actions of a person employed by a Seller but who is not a Delayed Employee

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engaged in a Controlled Delayed Business (whether because Applicable Law prevents such Controlled Business Instruction from being given directly to a Delayed Employee or for any other reason) (a “Seller Involvement Instruction”), the Purchaser shall also provide the Controlled Business Instruction, in writing (which may include email), to that Seller’s Delayed Business Representative, specifying (i) that it is a Seller Involvement Instruction; (ii) the actions that are required to be taken by such person; and (iii) a reasonable time within which such actions are required to be taken.

2.11Each Seller and the Purchaser acknowledges that each Seller’s Delayed Employees shall continue to be bound by, and shall comply with, the employment policies and procedures (including terms and conditions and disciplinary procedures) of the relevant Seller’s Group that apply to employees of such Seller’s Group.

2.12Subject to paragraph 2.11, each Seller and the Purchaser acknowledges that each Seller’s Delayed Employees shall continue to be bound by, and shall comply with the policies of the relevant Seller’s Group, provided that:

2.12.1from the date on which the relevant Delayed Employees are given notice of the relevant restrictions and Anti-bribery and Corruption policies, Delayed Employees engaged in the Delayed Business in China shall be bound by and shall comply with any additional restrictions imposed on commercial practices and Anti-bribery and Corruption policies that the GlaxoSmithKline Group implements and which apply to employees of the GlaxoSmithKline Group in China, including (but not limited to) its policy related to payments to health care providers and such other policies as may be required by Applicable Law from time to time;

2.12.2from the date on which the relevant Delayed Employees are given notice of the requirements, Delayed Employees engaged in the Delayed Business in the US shall be bound by and shall comply with the requirements of the [***];

2.12.3the Sellers shall provide the Purchaser with copies of its operational and other policies that apply in relation to Controlled Delayed Businesses.  In respect of such policies, the Purchaser may give notice to a Seller that it wishes for a particular policy of the Purchaser’s Group to apply in respect of a Controlled Delayed Business and/or the applicable Delayed Employees in addition to the Seller’s equivalent policy. The Purchaser’s equivalent policy shall apply to the applicable Delayed Employees from the date on which such Delayed Employees are given reasonable notice of the relevant policy. If a policy of a Seller and a policy of the Purchaser apply at the same time, if and to the extent there is any inconsistency or conflict between the two policies, the policy which requires behaviour that is least likely to expose the parties to legal, regulatory and/or compliance risk shall prevail.

2.13The Purchaser hereby undertakes to each Seller (for itself and on behalf of each other member of such Seller’s Group (excluding, for the avoidance of doubt, the Delayed Target Group Companies) and their respective directors, officers, employees and agents

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(excluding any Delayed Employees) (the “Delayed Indemnity Parties”) that, with effect from the Effective Time, the Purchaser will indemnify on demand and hold harmless each of the Delayed Indemnity Parties against and in respect of any and all Liabilities, other than Liabilities in respect of Tax that are taken into account in calculating any Economic Benefit Payment, resulting directly or indirectly from any Controlled Delayed Business and/or from any Controlled Business Instruction to the extent that (i) such Liabilities are not Assumed Liabilities and (ii) the Delayed Indemnity Parties concerned would not have incurred such Liabilities if the Controlled Delayed Business in question had been transferred to the relevant member of the Purchaser’s Group at Closing (“Incremental Delay Liabilities”), but in any case excluding any such Liabilities to the extent they arise as a result of a breach of paragraph 2.16 of this Schedule.

2.14If a Seller is of the opinion that any Controlled Business Instruction may result in any Liability that would fall to be indemnified pursuant to paragraph 2.13, the Seller shall use its reasonable endeavours to inform (and procure that the members of the Seller’s Group shall inform) the Purchaser of that opinion and the reasons for it as soon as reasonably practicable after reaching that opinion.  The indemnity set out in paragraph 2.13 shall not be affected or limited in any way by any failure of any member of the Seller’s Group so to inform the Purchaser.

2.15The Purchaser shall not be entitled to make any claim for damages against a Seller in respect of a breach of Part 2 of this Schedule 22 otherwise than pursuant to a claim brought under paragraph 2.16.

2.16Each Seller shall procure that:

(A)for Controlled Business Instructions that are not Seller Involvement Instructions, neither it nor any of its Associated Persons shall act (or fail to act) fraudulently or with Gross Negligence in connection with the implementation of any Controlled Business Instruction.  “Gross Negligence” for these purposes means any act or failure to act by the Seller (or any of its Associated Persons that: (i) the Seller (or the relevant Associated Person) knew may create a risk of material harm to the relevant Controlled Delayed Business; (ii) was intended to cause such harm, or was done in reckless disregard of, or in wanton indifference to, such risk of harm; and (iii) in all the circumstances (having regard to both the probability and seriousness of such harm) was an unreasonable risk for the Seller (or the relevant Associated Person) to take; and

(B)for Seller Involvement Instructions, neither it nor any of its Associated Persons shall act (or fail to act) fraudulently or negligently or in wilful default in connection with the implementation of the Seller Involvement Instruction and shall take no step which is intended to prevent the implementation of a Seller Involvement Instruction,

but it shall not be a breach of this paragraph 2.16 (and shall accordingly not be acting with Gross Negligence or wilful default for the purposes of this paragraph) to carry out any act, or fail to act, if to do so is:

(i)required to implement a Controlled Business Instruction;

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(ii)required to comply with Applicable Law

(iii)required to implement or comply with the terms of this Agreement or any Ancillary Agreement; or

(iv)taken to mitigate any other loss or damage to the Controlled Delayed Business which the Seller (or the relevant Associated Person) believes, acting reasonably and in good faith, could be material in the context of that Controlled Delayed Business.

In any event, no claim shall be made by the Purchaser (and the Purchaser shall ensure that no member of the Purchaser’s Group shall make any claim) for any breach of any other provisions of this Agreement (or the provisions of any Ancillary Agreement) by a Seller (or any member of the Seller’s Group) that occurs in order to comply with any Controlled Business Instruction.

2.17Prior to the making of any claim under this Schedule 22, the parties shall use reasonable endeavours to escalate such matter first for consideration to the Delayed Business Representatives and then to Novartis’ and GlaxoSmithKline’s chief financial officers, for the purpose of seeking to resolve such matter within a period of 30 days following such escalation.

2.18Subject, in each case, to Applicable Law, each Seller shall, in the period between Closing and the relevant Delayed Closing Date, promptly upon request by the Purchaser provide (or procure that any member of its Group shall provide) the Purchaser and its representatives with access:

2.18.1to any books and records of the Seller’s Group to the extent relating to any Controlled Delayed Business of that Seller, and

2.18.2to any personnel of the Seller for the purposes of any requests for information from such personnel in relation to the Controlled Delayed Business.

For the avoidance of doubt, the parties shall take all steps necessary to ensure that no information is provided to the Purchaser or any person on behalf of the Purchaser which relates to any business of the Seller or any member of the Seller’s Group other than the Controlled Delayed Business.

2.19For the purposes of the Warranties deemed repeated by each Seller immediately before Closing pursuant to clause 9.1.5, ownership of the Delayed Businesses shall be deemed to have transferred to the Purchaser at Closing.

2.20During the period between the Closing Date and the Delayed Closing Date, funding for Delayed Businesses shall continue to be provided by the relevant Seller’s Group, save that in the event that any Delayed Business requires funds (for the purposes of working capital, acquisitions, capital expenditure or otherwise) during such period in excess of US$10 million and the Delayed Business does not have the required funding in place (including though any ordinary course cash pooling arrangements), then such funds

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shall promptly be provided by the Purchaser, on such terms as the relevant Seller and the Purchaser shall agree, acting reasonably, having regard to, amongst other things, the Tax effects of such funding.

NON-CONTROLLED DELAYED BUSINESSES

2.21From Closing until the relevant Delayed Closing Date:

2.21.1the provisions of Part 2 of this Schedule shall not apply in respect of the Non-Controlled Delayed Businesses, with the exception of paragraphs 2.4.4, 2.5 2.11, 2.19 and 2.20 which shall apply if and to the extent permitted by Applicable Law;

2.21.2subject to paragraph 2.22 of this Schedule, the provisions of Part 3 of this Schedule shall not apply in respect of the Non-Controlled Delayed Businesses; and

2.21.3if and to the extent permitted by Applicable Law, the provisions of Clause 5 and Schedule 15 will continue to apply to the Non-Controlled Delayed Businesses and each Seller shall exercise such interests, rights and powers that such Seller has in respect of that Non-Controlled Delayed Business to the maximum extent that it is able in order to procure that the Non-Controlled Business is operated in accordance with Clause 5 and Schedule 15.

2.22With effect from the relevant Delayed Closing Date, the provisions of Part 3 of this Schedule shall apply in respect of the Non-Controlled Delayed Businesses, save that the first Half Yearly Accounting Period shall be extended so that it commences at the Effective Time and ends on the relevant Delayed Closing Date.

2.23From Closing until 31 March 2015, Novartis shall provide the Purchaser with such assistance and information to which it does not otherwise have access as it reasonably requests in order for it to be able to calculate the necessary receivables to be recorded in respect of any payments that may be made under paragraph 2.22, including, such monthly profit and loss forecast information as already exists and is reasonably available to Novartis or its Affiliates in relation to the Non-Controlled Delayed Businesses for the period up to the estimated relevant Delayed Closing Date.

PART 3 — ECONOMIC BENEFIT TRANSFER

3.ECONOMIC BENEFIT

3.1Each Seller shall comply with the provisions of this Part 3, in relation to any Delayed Business (other than in relation to a Delayed Target Group Company in respect of which only paragraph 3.2 of this Schedule will apply), for each Half-Yearly Accounting Period (as defined in the Shareholders’ Agreement) in which such Delayed Business remains legally owned by it or any member of that Seller’s Group.  The first Half-Yearly Accounting Period for which the provisions of this Part 3 shall be extended so that it commences at the Effective Time and shall end on 31 December 2015.

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3.2Within 45 days of the relevant Delayed Closing Date for any Delayed Target Group Company, the relevant Seller shall provide the other Seller (with a copy to the Purchaser) with a cash flow statement (including opening and closing balances for cash and cash equivalents, and payables and receivables that would have fallen within the definitions of Intra-Group Non-Trade Receivables and Intra-Group Non-Trade Payables) for such Delayed Target Group Company for the period commencing at the Effective Time and ending on the Delayed Closing Date prepared using the Accounting Standards.

3.3Within 1 month following the end of each Half-Yearly Accounting Period, each Seller shall produce and provide to the internal audit team (or, at the other’s discretion, the external auditors) (the “Audit Team”) of the other Seller (the “Reviewing Party”) (with a copy to the Purchaser) a draft statement setting out, for each Delayed Business that had not transferred to the Purchaser by the start of that Half-Yearly Accounting Period, the Economic Benefit Amount in respect of such Delayed Business for such Half-Yearly Accounting Period (or, if applicable, such part of the Half-Yearly Accounting Period as falls prior to the Delayed Closing Date for such Delayed Business).  If the Delayed Business held by one member of a Seller’s Group carried on both Commercialisation and Manufacturing operations, such Seller may present separate calculations of the Economic Benefit Amount for each such operation provided that the amount of any cost may not be counted more than once in such calculations and the price at which Products are sold by one operation to another shall be identical in both calculations.  Each such statement shall be a “Draft Economic Benefit Statement”.

3.4It is intended that the Economic Benefit Amount shown in each Economic Benefit Statement is the amount that is necessary to be paid to the Purchaser by the relevant Seller or by the relevant Seller to the Purchaser, in order to put the Purchaser’s Group and the relevant Seller’s Group in the same economic position as they would have been in, taking into account any arrangements that would have been in place in respect of the relevant Delayed Businesses pursuant to any Ancillary Agreement, had such Delayed Businesses been transferred to the Purchaser at Closing (or, where clause 2.7 applies, the relevant Rx Spin-Out Business had not been owned by the Purchaser) before taking account, in each case, of any Tax effect for the Purchaser or the relevant Seller in respect of such payment (the “Economic Benefit Objective”).

3.5In the period prior to 31 December 2015, the Sellers and the Purchaser shall meet together to consider in good faith whether there are any adjustments required to the provisions of Part 4 of this Schedule in order for the Economic Benefit Statements to achieve the Economic Benefit Objective and (acting reasonably and in good faith) seek to agree such adjustments.

3.6The portion of the Economic Benefit Amount set out in the Draft Economic Benefit Statement in relation to each Delayed Business shall be calculated in the local currency for that Delayed Business but any Economic Benefit Payment shall be paid pursuant to paragraph 3.15 or 3.18 of this Schedule in pounds sterling, for which purpose each amount in a currency other than pounds sterling shall be converted into pounds sterling at the spot reference rate for those currencies as quoted by the European Central Bank (or if there is no such rate, as quoted by the nearest equivalent institution) on the Business Day immediately prior to the relevant payment date and the sum of such

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converted sterling amounts shall be the Economic Benefit Payment amount.  The calculation of the Economic Benefit Amount set out in an Economic Benefit Statement shall only be converted into pounds sterling in accordance with this paragraph 3.6 and aggregated after the Economic Benefit Statement has been agreed or determined in accordance with this Part 3.

3.7Each Seller shall, and shall procure that the members of that Seller’s Group (and, if applicable, its external accountants) shall, provide to the Reviewing Party’s Audit Team, without charge, such access to their personnel, books and records, calculations and working papers as the Audit Team may reasonably request in connection with its review of the Draft Economic Benefit Statement (and the parties acknowledge that local market information that is not contained on central consolidation systems will only be requested where material in the context of the Draft Economic Benefit Statement as a whole), subject (where applicable) to the Reviewing Party providing such undertakings as the relevant external accountants may reasonably request, and provided that each Seller hereby undertakes to the other that it shall procure that each member of its Audit Team shall (i) keep any such information which is commercially sensitive (the “Protected Information”) confidential and shall only disclose such information to, and discuss such information with, other members of that Audit Team; (ii) be expressly prohibited from communicating (in any form) any Protected Information to any other employee, agent, adviser or consultant of any member of the Reviewing Party’s Group; and (iii) be subject to the above requirements whilst employed or engaged by any member of that Reviewing Party’s Group in any capacity (whether or not as a member of that Audit Team).  The provisions of clause 12 (Confidentiality) of this Agreement shall apply mutatis mutandis to such information including, for the avoidance of doubt, to allow (where permitted by that clause) disclosure of information otherwise prohibited to be communicated to any agent, adviser or consultant of any party’s Group.

3.8No amendments shall be made to any Draft Economic Benefit Statement except in accordance with the provisions of paragraph 3.9 below.

3.9A Reviewing Party’s Audit Team may dispute a Draft Economic Benefit Statement by notice in writing (in this Schedule, a “Dispute Notice”) delivered to the other party by or on behalf of that Audit Team in accordance with clause 15.14 (Notices) of this Agreement within 3 weeks following receipt of the Draft Economic Benefit Statement.  Any Dispute Notice shall specify (i) which items of the Draft Economic Benefit Statement are disputed; (ii) the reasons therefor, making specific reference (where relevant and reasonably possible) to the parts of this Schedule which the Audit Team asserts have not been complied with in preparing the relevant statement; and (iii) to the extent practicable, any adjustments that the Reviewing Party’s Audit Team considers should be made to the Draft Economic Benefit Statement, and provided that a Dispute Notice may only be submitted if the aggregate impact of all disputed items comprised in that Economic Benefit Amount are greater than £500,000.

3.10Any Dispute Notice shall be accompanied by all relevant supporting documentation and working papers on which the Reviewing Party’s Audit Team wishes to rely, it being acknowledged by the Reviewing Party that it shall procure that its Audit Team shall provide further documentation to support its claims promptly on reasonable request by the other party or, where relevant, the Economic Benefit Expert.  Only those items or

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amounts specified in a Dispute Notice shall be treated as being in dispute (the “Disputed Items”) and no amendment may be made by any party, or any Economic Benefit Expert, to any items or amounts which are not Disputed Items.

3.11If the Reviewing Party’s Audit Team does not serve a Dispute Notice under and within the time period set out in paragraph 3.9 of this Part 3, the Draft Economic Benefit Statement shall constitute the “Economic Benefit Statement” for the relevant Seller (as applicable) in respect of the relevant Half-Yearly Accounting Period to which that Economic Benefit Statement relates.

3.12If the Reviewing Party’s Audit Team does serve a Dispute Notice under and within the time period set out in paragraph 3.9 of this Part 3, the Sellers shall use their reasonable endeavours to resolve the Disputed Items as soon as reasonably practicable (with the Reviewing Party acting through its Audit Team) and either:

3.12.1if the Sellers reach agreement on the Disputed Items within 10 Business Days of the service of the relevant Dispute Notice (or such longer period as they may agree in writing), the Draft Economic Benefit Statement shall be amended to reflect such agreement and shall then constitute the “Economic Benefit Statement” for the relevant Seller (as applicable) in respect of the relevant Half-Yearly Accounting Period to which that Economic Benefit Statement relates; or

3.12.2(B)if the Sellers do not reach agreement in accordance with paragraph 3.12.1 above, either Seller may refer the dispute to such individual at an independent firm of chartered accountants of international repute as the Sellers may agree or, failing such agreement (including such firm and/or individual not accepting such appointment), within 2 Business Days of expiry of the period described in paragraph 3.12.1 above, to such independent firm of chartered accountants of international repute in London as the President of the Institute of Chartered Accountants in England and Wales may, on the application of either Seller, nominate (the “Economic Benefit Expert”), on the basis that the Economic Benefit Expert is to make a decision on the dispute and notify the Sellers of its decision within 3 weeks of receiving the reference or such longer reasonable period as the Economic Benefit Expert may determine.

3.13The Purchaser shall bear the costs in relation to the preparation and certification of any Draft Economic Benefit Statement and in relation to the review of (and any dispute in relation to) any Draft Economic Benefit Statement.

3.14In any reference to the Economic Benefit Expert in accordance with paragraph 3.12 above:

3.14.1the Economic Benefit Expert shall act as expert and not as arbitrator and shall be directed to determine any dispute in accordance with the Accounting Standards and Part 4 of this Schedule and (if necessary) having regard to the Economic Benefit Objective;

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3.14.2the decision of the Economic Benefit Expert shall, in the absence of fraud or manifest error, be final and binding on the Sellers and the Draft Economic Benefit Statement shall be amended as necessary to reflect the decision of the Economic Benefit Expert and, as amended, shall be the “Economic Benefit Statement” for the relevant Seller (as applicable) in respect of the relevant Half-Yearly Accounting Period to which that Economic Benefit Statement relates;

3.14.3the costs of the Economic Benefit Expert shall be paid by the Purchaser; and

3.14.4the Sellers shall respectively provide or procure the provision of the Economic Benefit Expert of all such information as the Economic Benefit Expert shall reasonably require including access to their respective advisers and their respective books, records and personnel.

3.15As soon as reasonably practicable and in any event within 5 Business Days following the agreement or determination of its Economic Benefit Statement in respect of any Half-Yearly Accounting Period, each Seller shall procure the contribution of an amount equal to the Economic Benefit Amount as set out in its Economic Benefit Statement to the Purchaser in Readily Available Cash (as defined in the Shareholder’s Agreement), such payment being an “Economic Benefit Payment”.  Clause 3.4 of this Agreement shall apply to any Economic Benefit Payment as if such payment were made pursuant to an indemnity under this Agreement.

3.16If the Purchaser reasonably believes that an Economic Benefit Payment procured by GlaxoSmithKline to be made to the Purchaser in accordance with paragraph 3.15 will be subject to Tax in the Purchaser’s hands, the Purchaser may give GlaxoSmithKline written notice of such belief no later than 5 Business Days before the Economic Benefit Payment is due to be made.  If such notice is given to GlaxoSmithKline, GlaxoSmithKline shall procure that the Economic Benefit Payment is made by way of a payment by one holder of the A Shares to subscribe for one deferred ordinary share (other than an A Share or B Share) in the capital of the Purchaser.  On each occasion (if any) that a holder of A Shares is required to subscribe for one deferred ordinary share, immediately after such subscription, Novartis shall procure that one holder of the B Shares subscribes for one deferred ordinary share (other than an A Share or a B Share) in the capital of the Purchaser at nominal value.

3.17If the Purchaser reasonably believes that an Economic Benefit Payment procured by Novartis to be made to the Purchaser in accordance with paragraph 3.15 will be subject to Tax in the Purchaser’s hands, the Purchaser may give Novartis written notice of such belief no later than 5 Business Days before the Economic Benefit Payment is due to be made.  If such notice is given to Novartis, Novartis shall procure that the Economic Benefit Payment is made by way of a payment by one holder of the B Shares to subscribe for one deferred ordinary share (other than an A Share or B Share) in the capital of the Purchaser.  On each occasion (if any) that a holder of B Shares is required to subscribe for one deferred ordinary share, immediately after such subscription, GlaxoSmithKline shall procure that one holder of the A Shares subscribes for one

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deferred ordinary share (other than an A Share or a B Share) in the capital of the Purchaser at nominal value.

3.18If an Economic Benefit Amount in respect of GlaxoSmithKline or Novartis (the “Affected Party”) is a negative amount, the Purchaser shall (as soon as reasonably practicable and in any event within 5 Business Days following determination of the later of GlaxoSmithKline’s Economic Benefit Statement and Novartis’ Economic Benefit Statement (as the case may be)) procure the payment in cash to the Affected Party (or such member of the Affected Party’s Group as it may direct) of an amount equal to the absolute value of such Economic Benefit Amount.  Where any such amount is payable, the parties shall cooperate in good faith with a view to agreeing an appropriate arrangement for satisfying the obligation to make such payment in an efficient manner that does not prejudice the interests of any party (which may, by way of example only, involve the payment of a special dividend on the A Shares or the B Shares respectively).

3.19If any amount due from GlaxoSmithKline to the Purchaser in accordance with paragraph 3.15 is, on an after-Tax basis (as defined in Clause 1.9), less than the relevant Economic Benefit Amount, then, if (and only if) and to the extent that such amount may be deducted or otherwise allowed under the Tax laws of any territory by GlaxoSmithKline or any member of GlaxoSmithKline’s Group, the amount due from GlaxoSmithKline shall be increased by such amount as will, taking account of the amount and timing of any Tax benefit available by virtue of such deduction or allowance, leave GlaxoSmithKline’s Group no worse and no better off than it would have been if no deduction or allowance had been available, provided that the amount of the payment on an after-Tax basis shall not exceed the relevant Economic Benefit Amount.

3.20If any amount due from Novartis to the Purchaser in accordance with paragraph 3.15 is, on an after-Tax basis (as defined in Clause 1.9), less than the relevant Economic Benefit Amount, then, if (and only if) and to the extent that such amount may be deducted or otherwise allowed under the Tax laws of any territory by Novartis or any member of Novartis’s Group, the amount due from Novartis shall be increased by such amount as will, taking account of the amount and timing of any Tax benefit available by virtue of such deduction or allowance, leave Novartis’s Group no worse and no better off than it would have been if no deduction or allowance had been available, provided that the amount of the payment on an after-Tax basis shall not exceed the relevant Economic Benefit Amount.

3.21If any amount due from the Purchaser to GlaxoSmithKline or Novartis under paragraph 3.18 above is, on an after-Tax basis (as defined in Clause 1.9), less than the absolute value of the relevant Economic Benefit Amount, then the amount due from the Purchaser shall be increased so that the amount of the payment on an after-Tax basis is equal to such absolute value.

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Part 4 — Forms of Economic Benefit Statement and Delayed Business Accounting Statements

4.

Definitions

4.1For the purposes of this Part 4:

“Bad Debt”	has the meaning given in paragraph 4.2.9;
“CHH Trading Partner Entity”	means an Affiliate of the Purchaser which acts as a principal trading company or trading partner, including GlaxoSmithKline Consumer Trading Services Limited;
“Cost of Goods Sold”	means, in respect of products Manufactured by the Delayed Business, the fully-absorbed actual costs of that Manufacturing business as calculated in accordance with the Accounting Standards (as defined in paragraph 1.1 above) and the costing methodology employed by the Delayed Business, including (without limitation) the costs of materials, direct labour, ordinary course quality assurance costs, equipment maintenance costs, and other costs variable with production, including the cost of freight into the Delayed Business and related insurance, plus an allocation of the Delayed Business’ fixed overhead consistent with such costing methodology (including, but not limited to, depreciation of the assets of the relevant Delayed Business);
“Customer”	means any person or entity that acquires and/or intends to acquire any of the Products or services provided by the Delayed Business (including any members of the relevant Seller’s Group or the Purchaser’s Group);
“Deemed Sales to the Local Seller Entity”	means sales that, if the Delayed Business had transferred to the Purchaser’s Group at Closing, would have been made by the Delayed Business to the relevant Local Seller Entity, which shall be deemed to have been made at the pricing (including margin) that would have applied to such sales pursuant to a Relevant MSA (as defined in paragraph 1.1);
“Employee Costs”	means the FTE costs incurred by the Seller’s Group in connection with the employment of the Delayed Employees of the relevant Delayed Business by the Seller’s Group, as provided in paragraph 11.3 of Schedule 7, other than to the extent that such costs are incorporated in Cost of Goods Sold in the relevant period;
“Landed Cost”	means, in respect of each Product, any costs incurred by the relevant Local Seller Entity in relation to that Product in respect of freight, insurance, duty, import and transportation costs;

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“Local Seller Entity”	means, in respect of a Delayed Business, the member of the relevant Seller’s Group that owns and operates such Delayed Business;
“MSA Price”	means, the applicable Supply Price (as that term is defined in the Relevant MSA) for such Products under the Relevant MSA;
“Net Sales”	means (i) net sales received from the sale and distribution of Products or the provision of services, in each case, by the relevant Local Seller Entity to any Customer, plus (ii) Deemed Sales to the Local Seller Entity and plus (iii) any other revenue received in respect of the Delayed Business, but excluding (for the avoidance of doubt and in either (i), (ii) or (iii)) any amounts received by Seller, any other member of Seller’s Group or any sub-contractor in respect of Sales Tax for which any member of Seller’ Group is liable to account to any Tax Authority. For these purposes, net sales shall be determined in accordance with Accounting Standards. The deductions booked by a Seller to calculate the recorded net sales from gross sales shall include the following: (a)normal trade, quantity and cash discounts; (b)Sales Taxes and other taxes levied from Customers in relation to the sale of Products to the extent included in the gross amount invoiced; (c)amounts repaid or credited by reasons of defects, rejections, recalls or returns, excluding amounts in respect of Sales Tax included in the amounts so repaid or credited, unless Seller or a member of Seller’s Group is unable (having used reasonable diligent commercial endeavours) to recover such amounts in respect of Sales Tax by way of repayment or credit; (d)rebates and chargebacks to Customers and Third Parties (including, without limitation, Medicare, Medicaid, Managed Healthcare and similar types of rebates), excluding amounts in respect of Sales Tax included in such rebates and chargebacks, unless Seller or a member of Seller’s Group is unable (having used reasonable diligent commercial endeavours) to recover such amounts in respect of Sales Tax by way of repayment or credit);

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(e)any amounts recorded in gross sales associated with goods provided to customers for free, with the exception of samples; (f)amounts provided or credited to customers through coupons, other discount programs and co-pay assistance programs; (g)delayed ship order credits, discounts or payments related to the impact of price increases between purchase and shipping dates; and (h)fees for service payments to customers for any non-separate services (including compensation for maintaining agreed inventory levels and providing information) and any associated Sales Tax to the extent Seller (or a member of Seller’s Group) is unable (having used reasonable diligent commercial endeavours) to recover such amounts in respect of Sales Tax by way of repayment or credit, and with respect to the calculation of Net Sales: (i)Net Sales shall only include the value charged or invoiced on the first sale to a Customer; (j)if a Product is delivered to the Customer before being invoiced (or is not invoiced), Net Sales will be calculated at the time all the revenue recognition criteria under Accounting Standards are met; (k)Net Sales of a Product by the Delayed Business to a member of the Seller’s Group (other than another Delayed Business), shall be deemed to have been made at the pricing (including margin) that would have applied to such sales pursuant to a Relevant MSA (as defined in paragraph 1.1) if the Delayed Business had transferred to the Purchaser’s Group at Closing; and (l)revenue deduction adjustments which relate toany event prior to Closing shall be excluded.

“Product”

means any of the products Manufactured or Commercialised by the relevant Delayed Business, and “Products” shall be construed accordingly;

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“Purchaser Nyon Entity”	means the Purchaser’s Affiliate which owns the Purchaser manufacturing site at Nyon, from time to time;
“Relevant MSA”	means the manufacturing and supply agreement dated on or around the date of this Agreement between Seller (or one of its Affiliates) (as supplier) and Purchaser (or one of its Affiliates) (as purchaser);
“Sales Tax”	means any turnover, value-added, sales, use, goods and services or similar Tax (excluding, for the avoidance of doubt, any capital gains or similar Tax);
“Third Party”	means any person other than (i) Purchaser and members of Purchaser’s Group and (ii) Seller and members of Seller’s Group;
“Third Party Distributor”	means a Third Party distributor of the Seller’s Group;
“Transfer Price”	means: (a)in respect of each Product supplied to the Local Seller Entity by the Purchaser Nyon Entity or the CHH Trading Partner Entity (as applicable) for distribution, any amount to be paid by the relevant Seller (or its Affiliate) for the Product, as agreed between the relevant Seller (or its Affiliate) and the Purchaser in writing from time to time; (b)in respect of each Product supplied to the Local Seller Entity by the Seller Excluded Businesses for distribution, the MSA Price of such Product; and (c)in respect of each Product provided to the Local Seller Entity by a Local Purchaser Entity for distribution, any amount paid by the Local Seller Entity for the Product, as agreed between the relevant Seller (or its Affiliate) and the Purchaser in writing from time to time; and (d)in respect of each Product provided to the Local Seller Entity by a Third Party supplier for distribution, any amount paid by the Local Seller Entity for the Product to such Third Party; and (e)in respect of each Product manufactured by the relevant Delayed Business the Cost of Goods

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	Sold for the Product;
“Working Hours”	means 9 a.m. to 5 p.m. on a Business Day at the relevant working location.

4.2The “Economic Benefit Amount” of a Delayed Business in respect of a given period shall be calculated as:

4.2.1the Net Sales of the relevant Delayed Business in that period;

4.2.2minus the Transfer Price (exclusive of Sales Taxes) paid in respect of the Products covered by those Net Sales;

4.2.3minus the Landed Cost (exclusive of Sales Taxes) of the Products covered by those Net Sales;

4.2.4minus the Employee Costs (exclusive of Sales Taxes);

4.2.5minus any other costs (exclusive of Sales Taxes) incurred by the relevant Local Seller Entity in relation to the relevant Delayed Business other than the Employee Costs, Landed Costs and any costs of acquiring Products for sale (including, but not limited to, the Transfer Price);

4.2.6minus, where the relevant Local Seller Entity carried out any action that would, after Delayed Closing, be provided to the Delayed Business under a Transitional Services Agreement or the Support Services Agreement, the amount payable for such services (exclusive of Sales Taxes) at the rates that will apply under such Transitional Services Agreement;

4.2.7plus any foreign exchange gains and minus any foreign exchange losses arising in relation to the accounts receivable and accounts payable of the Delayed Business;

4.2.8minus a sales and distribution charge of 2 per cent (2%) of Net Sales in the period (excluding any Sales Tax thereon);

4.2.9minus any undisputed sum (exclusive of Sales Taxes) payable by any Third Party to the relevant Local Seller Entity in relation to any Products sold on or after the Closing Date which has not been paid by the earlier of sixty (60) days of the due date for such payment and the Delayed Closing Date for the relevant Delayed Business (“Bad Debt”); and

4.2.10plus any Bad Debt (exclusive of Sales Taxes) deducted pursuant to paragraph 4.2.9 in any prior period to the extent that such Bad Debt is recovered in the relevant period;

4.2.11minus the amount of:

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(i)any expense of the relevant Local Seller Entity or a member of the relevant Local Seller Entity’s Sales Tax group in connection with or as a result of the Delayed Business which consists of an amount in respect of Sales Tax in respect of the period for which neither the relevant Local Seller Entity nor a member of the relevant Local Seller Entity’s Sales Tax group is entitled to credit or repayment; and

(ii)any Sales Tax in respect of the period for which the relevant Local Seller Entity or the relevant Local Seller Entity’s Sales Tax group is liable to account to any Tax Authority in connection with or as a result of the Delayed Business;

save, in each case, to the extent otherwise deducted or excluded in the calculation of the Economic Benefit Amount;

4.2.12minus an amount equal to the product of (i) the amount resulting from the calculation at paragraphs 4.2.1 to 4.2.11 above, and (ii) the statutory local Tax rate applicable in respect of profits of the relevant Delayed Business, expressed as a percentage (the “Headline Tax Rate”), as at the last day of the relevant period,

PROVIDED THAT, if and to the extent that any costs incurred by a Local Seller Entity are subject to reimbursement under any indemnity or equivalent covenant to pay in this Agreement or in an Ancillary Agreement are included in any Economic Benefit Statement, such costs shall not also be recoverable under such indemnity or covenant to pay.

4.3The Economic Benefit Statement for a Delayed Target Group Business will detail the following:

4.3.1Net Sales (which will be reported in accordance with the relevant Seller’s Group’s group reporting system) for the relevant Half-Year by brand, which shall show:

(i)gross sales;

(ii)returns and allowances;

(iii)on-invoice discounts;

(iv)off-invoice discounts;

(v)any other deduction; and

(vi)Net Sales; and

4.3.2each line item forming part of the calculation of the Economic Benefit Amount in accordance with paragraph 4.2 above (and including, in respect of costs, the itemisation of those costs as between categories of costs),

295

and the relevant Seller will provide the Draft Economic Benefit Statement together with such supporting information as is reasonably required to enable the other Seller to review the Economic Benefit Statement, and prior to 31 December 2015, the Sellers shall meet together to agree the scope of such supporting information, including the information required to distinguish between Manufacturing and Commercialisation operations of any Delayed Business.

5.COMBINED COMMERCIALISATION AND MANUFACTURING BUSINESSES

Where any Delayed Business comprises both a Commercialisation business and a Manufacturing business, the Economic Benefit Statement shall be prepared such that there shall be no double counting of the components of the aggregate Economic Benefit Amount in respect of that Delayed Business.

6.RX SPIN-OUT BUSINESSES

The provisions of paragraphs 3, 4, 5 and 6 shall apply equally in respect of the calculation of any Economic Benefit Amount in respect of Rx Spin-out Businesses, mutatis mutandis, as if the Purchaser was the relevant Seller for the purposes of applying those paragraphs to the Rx Spin-out Businesses and shall be responsible for preparing the relevant Economic Benefit Statement and as if GlaxoSmithKline was the Purchaser for the purposes of applying those paragraphs to the Rx Spin-out Businesses.  Any positive Economic Benefit Amount in respect of such Rx Spin-out Businesses shall be paid by the Purchaser to GlaxoSmithKline and any negative Economic Benefit Amount shall be paid by GlaxoSmithKline to the Purchaser, in each case in a manner consistent with the provisions of this Schedule.

296

Appendix 1
Delayed Target Group Companies

Territory	Delayed Target Group Company	Delay Milestone
Germany	GSK Healthcare GmbH (DE18) GSK Consumer Healthcare GmbH & Co. KG (DE19) Panadol GmbH (DE25)	Receipt of the binding ruling requested by the GlaxoSmithKline Group from the German Tax Authorities confirming that transfer of the minority interests in Glaxo Wellcome GmbH & Co.KG (DE27) and GSK Services GmBH & Co. KG (DE12) can be undertaken at book value.
Kenya	GlaxoSmithKline Limited	Completion of the transfer of all business and operations other than the GlaxoSmithKline Consumer Healthcare Business to GlaxoSmithKline Pharmaceutical Kenya Limited or another member of GlaxoSmithKline’s Group.
Panama	GlaxoSmithKline Panama S.A.	Completion of the transfer of all business and operations other than the GlaxoSmithKline Consumer Healthcare Business from GlaxoSmithKline Panama S.A. to another member of GlaxoSmithKline’s Group.
Sri Lanka	SmithKline Beecham (Private) Limited	The incorporation of a Local Purchasing Entity, the receipt by such entity of all business licences and regulatory approvals required by Applicable Law and the operationalization of such entity to the minimum standard required to enable the transfer of the Contributed Business in Sri Lanka
	Glaxo Wellcome Ceylon Limited	The incorporation of a Local Purchasing Entity, the receipt by such entity of all business licences and regulatory approvals required by Applicable Law and the operationalization of such entity to the minimum standard required to enable the transfer of the Contributed Business in Sri Lanka

297

Appendix 2
Delayed Target Group Businesses

Territory	Delayed Target Group Business	Delay Milestone
Argentina	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline Argentina SA	The receipt by GlaxoSmithKline Consumer Healthcare Argentina of all business licences required by Applicable Law in respect of the operation of the Contributed Business in Argentina.
	Novartis OTC Business conducted by Novartis Argentina SA	The receipt by GlaxoSmithKline Consumer Healthcare Argentina of all business licences required by Applicable Law in respect of the operation of the Contributed Business in Argentina.
Bangladesh	the GlaxoSmithKline Bangladesh Business	Completion of the de-merger of GlaxoSmithKline Bangladesh Limited.
Brazil	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline Brazil Ltda	GlaxoSmithKline Brasil Produtos para Consumo e Saude Ltda being duly incorporated and satisfying the minimum operational requirements for the transfer of the Contributed Business and Transferred Employees.
	Novartis OTC Business conducted by Novartis Biociencias S.A.	GlaxoSmithKline Brasil Produtos para Consumo e Saude Ltda being duly incorporated and satisfying the minimum operational requirements for the transfer of the Contributed Business and Transferred Employees.
China	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline (China) Investment Co Ltd	(i)the receipt by the parties of all necessary approvals, consents and filings required from or with the State Administration of Industry and Commerce in respect of the transfer of the Contributed Business in China; (ii)the incorporation of a Local Purchasing Entity; (iii)the receipt by such entity of

298

		all other business licences required by Applicable Law in respect of the Contributed Business in China; and (iv)operational readiness of such entity to the minimum standard required by Applicable Law.
	Novartis OTC Business in China	(i)the receipt by the parties of consent from [***] to acquire the Novartis OTC Business in China; and (ii)receipt by the parties of all necessary approvals, consents and filings required from or with the State Administration of Industry and Commerce in respect of the transfer of the Contributed Business in China.
Czech Republic	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline s.r.o.	The payroll and compensation systems of GlaxoSmithKline Consumer Healthcare Czech Republic s.r.o. being operational to the minimum standard required by Applicable Law.
	Novartis OTC Business conducted by Novartis s.r.o.	The payroll and compensation systems of GlaxoSmithKline Consumer Healthcare Czech Republic s.r.o. being operational to the minimum standard required by Applicable Law
Greece	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline A.E.B.E	The payroll and compensation systems of GlaxoSmithKline Consumer Healthcare A.E.B.E. being operational to the minimum standard required by Applicable Law.
	Novartis OTC Business conducted by Novartis (Hellas) S.A.C.I.	The payroll and compensation systems of GlaxoSmithKline Consumer Healthcare A.E.B.E. being operational to the minimum standard required by Applicable Law.
Hungary	GlaxoSmithKline Consumer Business	The payroll and compensation systems

299

	conducted by GlaxoSmithKline Medical and Healthcare Products Limited	of GlaxoSmithKline Consumer Kft being operational to the minimum standard required by Applicable Law.
	Novartis OTC Business conducted by Novartis Hungary Healthcare LLC	The payroll and compensation systems of GlaxoSmithKline Consumer Kft being operational to the minimum standard required by Applicable Law.
India	Novartis OTC Business conducted by Novartis Healthcare Private Limited	The receipt by the parties of all necessary approvals, consents and filings from or with the Indian Foreign Investment Promotion Board (“FIPB”) in respect of the transfer of the Novartis OTC Business in India and the related Commencement Certificate being issued by the FIPB.
	Novartis OTC Business conducted by Novartis India Limited	The receipt by the parties of all necessary approvals, consents and filings from or with the FIPB in respect of the transfer of the Contributed Business in India and the related Commencement Certificate being issued by the FIPB.
Mexico	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline Mexico S A de C.V.	The GlaxoSmithKline employee payroll data being uploaded to the “GSK Workday” systems to the minimum standard required by Applicable Law.
	Novartis OTC Business conducted by Novartis Farmaceutica, S.A de C.V.	The Novartis employee payroll data being uploaded to the “GSK Workday” systems to the minimum standard required by Applicable Law.
Pakistan	the GlaxoSmithKline Pakistan Business	Completion of the de-merger of GlaxoSmithKline Pakistan Limited and required external approvals received.
	Novartis OTC Business conducted by Novartis (Pharma) Pakistan Limited	The incorporation of a Local Purchasing Entity in respect of the Novartis OTC Business conducted by Novartis (Pharma) Pakistan Limited and receipt by such entity of all business licences required by Applicable Law in respect of the operation of the Contributed Business in Pakistan and satisfying the minimum

300

		operational requirements for the transfer of the Contributed Business and Transferred Employees.
Philippines	GlaxoSmithKline Landholding Company, Inc.	Completion of the disposal of premises used by the GlaxoSmithKline Pharmaceutical Division and extraction of the proceeds of such sale
Slovakia	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline Slovakia s.r.o.	The receipt by GlaxoSmithKline of the expert valuation in respect of the GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline Slovakia s.r.o., as required by Applicable Law.
Thailand	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline (Thailand) Limited	The receipt by GlaxoSmithKline Consumer Healthcare (Thailand) Limited of the business licences required by Applicable Law in connection with the operation of the Contributed Business in Thailand.
Thailand	Novartis OTC Business conducted by Novartis (Thailand) Limited	The receipt by GlaxoSmithKline Consumer Healthcare (Thailand) Limited of the business licences required by Applicable Law in connection with the operation of the Contributed Business in Thailand.
Turkey	GlaxoSmithKline Consumer Business conducted by GlaxoSmithKline İlaçları San. Ve Tic. A.Ş.	The GlaxoSmithKline employee payroll data being uploaded to “GSK Workday” systems to the minimum standard required by Applicable Law and GlaxoSmithKline İlaçları San. Ve Tic. A.Ş. being duly incorporated and satisfying the minimum operational requirements for the transfer of the Contributed Business and Transferred Employees.
	Novartis OTC Business conducted by Novartis Sağlık, Gıda ve Tarım Ürünleri Sanayi ve Ticaret A.Ş.	The Novartis employee payroll being uploaded to “GSK Workday” systems to the minimum standard required by Applicable Law and GlaxoSmithKline İlaçları San. Ve Tic. A.Ş. being duly incorporated and satisfying the minimum operational requirements for the transfer of the Contributed

301

		Business and Transferred Employees.
Manufacturing Businesses
South Africa	GlaxoSmithKline’s manufacturing business at Cape Town	Finalisation and implementation of agreed separation plan for asset transfer to ensure continuity of supply in all markets supplied by the manufacturing site including regulatory compliance, alignment to Product License transfer and distribution cutover plan and artwork change scheduling.
Mexico	GlaxoSmithKline’s manufacturing business at Civac	Finalisation and implementation of agreed separation plan for asset transfer to ensure continuity of supply in all markets supplied by the manufacturing site including regulatory compliance, alignment to Product License transfer and distribution cutover plan and artwork change scheduling.
Australia	GlaxoSmithKline’s manufacturing business at Ermington	Finalisation and implementation of agreed separation plan for asset transfer to ensure continuity of supply in all markets supplied by the manufacturing site including regulatory compliance, alignment to Product License transfer and distribution cutover plan and artwork change scheduling.
Ireland	GlaxoSmithKline’s manufacturing business at Sligo	Finalisation and implementation of agreed separation plan for asset transfer to ensure continuity of supply in all markets supplied by the manufacturing site including regulatory compliance, alignment to Product License transfer and distribution cutover plan and artwork change scheduling.
UK	GlaxoSmithKline’s manufacturing business at Maidenhead GlaxoSmithKline’s manufacturing business at Slough (Excluding employees)	Finalisation and implementation of agreed separation plan for asset transfer to ensure continuity of supply in all markets supplied by the manufacturing site including regulatory compliance, alignment to Product License transfer and distribution cutover plan and artwork change scheduling.

302

US GlaxoSmithKline’s manufacturing business at Oak Hill GlaxoSmithKline’s manufacturing business at St Louis GlaxoSmithKline’s manufacturing business at Aiken (Excluding employees) Finalisation and implementation of agreed separation plan for asset transfer to ensure continuity of supply in all markets supplied by the manufacturing site including regulatory compliance, alignment to Product License transfer and distribution cutover plan and artwork change scheduling.

Appendix 3
Delayed Assets

Territory	Delayed Asset	Delay Milestone
Interests in Shares
China	the Chinese JV Interests	The receipt by the parties of all necessary approvals, consents and filings required from or with the State Administration of Industry and Commerce in respect of the transfer of the Chinese JV Interests.
Delayed Employee Only Transfers
Mexico	Delayed employee transfer from Estrategicos Darier, S. de R.L de C.V. and Novartis Corporativo SA de CV	The GlaxoSmithKline employee payroll data being uploaded to the “GSK Workday” systems to the minimum standard required by Applicable Law.
Ivory Coast	Delayed employee transfer from Novartis Pharma Services AG	Identification of an appropriate entity to transfer the employees to.
Ethiopia	Delayed employee transfer due to delay in GSK Kenya Ltd transfer	Completion of the transfer of all business and operations other than the GlaxoSmithKline Consumer Healthcare Business to GlaxoSmithKline Pharmaceutical Kenya Limited or another member of GlaxoSmithKline’s Group.
Mauritius	Delayed employee transfer due to delay in GSK Kenya Ltd transfer	Completion of the transfer of all business and operations other than the GlaxoSmithKline Consumer Healthcare Business to GlaxoSmithKline Pharmaceutical Kenya Limited or another

303

		member of GlaxoSmithKline’s Group.
Tanzania	Delayed employee transfer due to delay in GSK Kenya Ltd transfer	Completion of the transfer of all business and operations other than the GlaxoSmithKline Consumer Healthcare Business to GlaxoSmithKline Pharmaceutical Kenya Limited or another member of GlaxoSmithKline’s Group.
Uganda	Delayed employee transfer due to delay in GSK Kenya Ltd transfer	Completion of the transfer of all business and operations other than the GlaxoSmithKline Consumer Healthcare Business to GlaxoSmithKline Pharmaceutical Kenya Limited or another member of GlaxoSmithKline’s Group.

304

Schedule 23
Ukraine Business

“Novartis Ukraine Business”          means the Novartis OTC Business in Ukraine

1.Prior to Closing, Novartis shall procure that Novartis Consumer Health SA, Novartis Consumer Health Services SA and Novartis Holding AG shall enter into a business sale and purchase agreement in respect of the Novartis Ukraine Business, in the Agreed Form (the Ukrainian SPA).

2.If “Completion” occurs as defined under the Ukrainian SPA, then:

(i)with effect from such Completion, the Novartis’ Ukraine Business shall constitute a Novartis Excluded Business for the purposes of this Agreement;

(ii)Novartis and the Purchaser shall negotiate in good faith to put in place any transitional supply, service, manufacturing, distribution, supply or similar arrangements as may be reasonably necessary to allow the Purchaser (as defined in the Ukrainian SPA) to operate the Novartis Ukraine Business on a standalone basis on terms based, to the extent relevant, on the Ancillary Agreements.

3.From Closing, the Purchaser and each Seller shall ensure, to the extent each is legally able, that no competitively sensitive information in relation to the Novartis Ukraine Business shall be provided to anybody other than: (i) any Relevant Novartis Company Employees located in the Ukraine; and (ii) those Relevant Novartis Company Employees located outside of the Ukraine who strictly need access to such competitively sensitive information in order to operate the Novartis Ukraine Business.

4.The parties agree that from Closing until the date on which Antimonopoly Committee of Ukraine has approved the concentrations which are intended to be effected through (i) the acquisition by GlaxoSmithKline plc (through its wholly owned subsidiary GlaxoSmithKline Consumer Healthcare Holdings Limited of the shares and assets of Novartis AG’s subsidiaries related to the consumer healthcare business; and (ii) the acquisition by Novartis AG of shares in Consumer Healthcare JV, allowing Novartis AG to exceed 25% of votes in the highest management body of GlaxoSmithKline Consumer Healthcare Holdings Limited (such date, the “Delayed Closing Date” in respect of the Novartis Ukraine Business):

(i)the provisions of Part 2 Schedule 22 (Delayed Businesses) shall not apply in respect of the Novartis Ukraine Business;

(ii)the provisions of Part 3 of Schedule 22 (Delayed Businesses) shall not apply in respect of the Novartis Ukraine Business; and

305

(iii)if and to the extent permitted by Applicable Law the provisions of Clause 5 and paragraphs 1.4 to 1.6, 1.8, 1.11, 1.12, 1.14, 1.15, 1.16, 1.17, 1.18, 1.19, and 1.26 of Schedule 15 will continue to apply to the Novartis Ukraine Business.

5.For the avoidance of doubt, the parties agree that during the period from Closing until the Ukraine Clearance Date, Novartis shall not exercise any control over, or derive any economic benefit from, the GlaxoSmithKline Transferred Intellectual Property Rights or any Intellectual Property Rights licensed under the Purchaser Trademark Licence Agreement or the Purchaser Patent and Know-How Licence Agreement by GlaxoSmithKline or its Affiliates to the Purchaser or its Affiliates relating to the GlaxoSmithKline Consumer Business in Ukraine.

306

Schedule 24
Local Payments

[***]

307

Schedule 25

Global TDSA Jurisdictions

[***]

308

Schedule 26

Novartis Excluded Employees

[***]

309

Schedule 27

Anti-bribery and corruption

[***]

310

EX-4.3

Exhibit 4.3

Confidential portions of this exhibit have

been omitted and filed separately with the

Securities and Exchange Commission

EXECUTION VERSION

1 March 2015

NOVARTIS AG

and

GLAXOSMITHKLINE PLC

DEED OF AMENDMENT AND RESTATEMENT

relating to the

SHARE AND BUSINESS SALE AGREEMENT
relating to the Vaccines Group,
dated 22 April 2014 (as amended)

This Deed (the “Deed”) is made on 1 March 2015 between:

(1)NOVARTIS AG, a corporation (Aktiengesellschaft) incorporated in Switzerland whose registered office is at Lichtstrasse 35, 4056 Basel, Switzerland (the “Seller”); and

(2)GLAXOSMITHKLINE PLC, a public limited company incorporated in England and Wales whose registered office is at 980 Great West Road, Brentford, Middlesex, TW8 9GS, United Kingdom (the “Purchaser”),

each a “party” and together the “parties”.

Whereas:

(A)The Seller and the Purchaser entered into the Share and Business Sale Agreement relating to the Vaccines Group on 22 April 2014 (the “SAPA”).

(B)The SAPA was subsequently amended and restated on 29 May 2014, and further amended on 9 October 2014 (the “Original Agreement”).

(C)The Seller and the Purchaser now wish to further amend and restate the Original Agreement, in the form of the Amended Agreement (as defined below).

It is agreed as follows:

1.DEFINITIONS AND INTERPRETATION

In this Deed, unless the context otherwise requires, the provisions of this clause 1 apply.

1.1Incorporation of defined terms

Unless otherwise stated, terms defined in the Original Agreement shall have the same meaning in this Deed.

1.2Definitions

“Amended Agreement” means the Original Agreement, as amended and restated in the form set out in the Schedule to this Deed; and

“Signing Date” means 22 April 2014.

1.3Interpretation clauses

(A)The principles of interpretation set out in Clause 1 of the Original Agreement shall have effect as if set out in this Deed, save that references to “this Agreement” shall be construed as references to “this Deed”.

(B)References to this Deed include the Schedule.

2

2.AMENDMENT

2.1In accordance with Clauses 16.4.3 and 16.5.1 of the Original Agreement, the parties agree that the Original Agreement shall be amended and restated as set out in the Schedule to this Deed.

2.2The amendment and restatement of the Original Agreement pursuant to clause 2.1 shall take effect from the Signing Date, as if the Amended Agreement had been entered into on the Signing Date.

2.3Upon this Deed being entered into, the Amended Agreement shall supersede the Original Agreement in its entirety.

3.MISCELLANEOUS

3.1Each party represents and warrants that it has full power and authority to enter into this Deed and to perform its obligations under it.

3.2The provisions of Clauses 14, 17.2 to 17.5 and 17.11 to 17.15 of the Amended Agreement shall apply to this Deed as if set out in full in this Deed and as if references in those Clauses to “this Agreement” are references to this Deed and references to “party” or “parties” are references to parties to this Deed.

3

In witness whereof this Deed has been delivered on the date first stated above.

Executed as a DEED by	)
GLAXOSMITHKLINE PLC acting by	)
its duly appointed attorney	)	/s/ Edgar B. Cale
	)	(Signature of attorney)
	)

In the presence of:
Witness’ signature:	/s/ Richard Hilton
Name (print):	Richard Hilton
Occupation:	Solicitor
Address:	1 Bunhill Row, EC1Y 8YY

4

In witness whereof this Deed has been delivered on the date first stated above.

Executed as a DEED by	)
	)
Roy Papatheodorou As Attorney and	)	/s/ Roy Papatheodorou
	)
Bernard Cornuejols As Attorney	)
	)	/s/ Bernard Cornuejols
on behalf of NOVARTIS AG	)

5

SCHEDULE

Amended Agreement

6

Dated 22 April 2014

as amended and restated on 29 May 2014, amended on 9 October 2014 and further
amended and restated on 1 March 2015

NOVARTIS AG

and

GLAXOSMITHKLINE PLC

SHARE AND BUSINESS SALE AGREEMENT

relating to the Vaccines Group

Linklaters LLP
One Silk Street

London EC2Y 8HQ

United Kingdom

Telephone  (+44 20) 7456 2000

Facsimile  (+44 20) 7456 2222

Ref L-220595

Table of Contents

Contents		Page
1	Interpretation	4
2	Sale and Purchase of the Vaccines Group	38
3	Consideration	45
4	Conditions	47
5	Pre-Closing	53
6	Closing	56
7	Post-Closing Adjustments	60
8	Post-Closing Obligations	62
9	Transitional Trademark Use	74
10	Warranties	78
11	Limitation of Liability	79
12	Claims	83
13	Restrictive Covenants	84
14	Confidentiality	86
15	Insurance	88
16	France Business and Netherlands Business	89
17	Other Provisions	91
Schedule 1 Details of the Share Sellers, Shares etc. (Clause 2.1)		104
Schedule 2 Companies, Subsidiaries and Minority Interest Entities		105
Schedule 3 The Properties Part 1 (Company Real Property)		110
Schedule 3 The Properties Part 2 (Transferred Real Property)		111
Schedule 3 The Properties Part 3 Terms relating to the Company Real Property		112
Schedule 3 The Properties Part 4 Terms relating to the Transferred Real Property		116

1

Schedule 4 Vaccines Group Intellectual Property Rights and Vaccines Group Intellectual Property Contracts (Clause 2.3)	128
Schedule 5 Excluded Employees (Clause 1.1)	129
Schedule 6 International Assignees (Clause 1.1)	130
Schedule 7 Permitted Encumbrances (Clause 1.1)	131
Schedule 8 Product Approvals and Product Applications Part 1 Terms relating to the Product Approvals and Product Applications	132
Schedule 8 Product Approvals and Product Applications Part 2 Transfer of Marketing Authorisations	134
Schedule 8 Product Approvals and Product Applications Part 3 List of Products, Products Under Registration and Pipeline Products	142
Schedule 8 Product Approvals and Product Applications Part 4 Tenders	143
Schedule 9 Certificate (Clause 1.1)	145
Schedule 10 Shared Business Contracts, Mixed Contracts and Transferred Contracts	146
Schedule 11 Employees (Clause 2.4.1)	154
Schedule 12 Employee Benefits (Clause 2.4.2)	173
Schedule 13 Allocation of Purchase Price (Clauses 3.3 and 7.6)	184
Schedule 14 VAT (Clause 3.4)	185
Schedule 15 Closing Obligations (Clause 6)	187
Schedule 16 Post Closing Adjustments (Clause 7)	189
Schedule 17 Milestone and Royalty Payments	196
Schedule 18 Warranties given under Clause 10.1	203
Schedule 19 Warranties given by the Purchaser under Clause 10.3	221
Schedule 20 Pre-Closing Obligations (Clause 5.2)	223
Schedule 21 Key Employees (Clause 1.1)	229
Schedule 22 Ongoing Clinical Trials (Clause 1.1)	230
Schedule 23 Statement of Net Assets (Clause 1.1)	231

2

Schedule 24 Regulatory Approvals	236
Schedule 25 Delayed Jurisdictions	237
Schedule 26 Local Payments	256
Schedule 27 Vaccines Group Information Technology	257
Schedule 28 Global TDSA Jurisdictions	258
Schedule 29 Surviving Affiliate Contracts	259
Schedule 30 [***]	260
Schedule 31 Anti-bribery and corruption	261

TABLE OF SCHEDULES

(The following schedules and exhibits to the agreement identified above have been omitted in reliance upon Rule 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish such schedules and exhibits to the Commission supplementally upon request.)

Schedule No.	Schedule Name
Schedule 3, Part 1	Company Real Property
Schedule 3, Part 2	Transferred Real Property
Schedule 5	Excluded Employees
Schedule 6	International Assignees
Schedule 8, Part 3	List of Products, Products under Registration and Pipeline Products
Schedule 16, Part 3	Illustrative Closing Statement
Schedule 16, Part 4	Illustrative Working Capital Statement
Schedule 21	Key Employees
Schedule 22	Ongoing Clinical Trials
Schedule 23, Part 2	Statement of Net Assets
Schedule 26	Local Payments
Schedule 27	Vaccines Group Information Technology
Schedule 28	Global TDSA Jurisdictions
Schedule 29	Surviving Affiliate Contracts
Schedule 31	Anti-bribery and corruption

3

Share and Business Sale Agreement

This Agreement is made on 22 April 2014, amended and restated on 29 May 2014, amended on 9 October 2014 and further amended and restated on 1 March 2015

between:

(1)NOVARTIS AG, a corporation (Aktiengesellschaft) incorporated in Switzerland whose registered office is at Lichtstrasse 35, 4056 Basel, Switzerland (the “Seller”); and

(2)GLAXOSMITHKLINE PLC, a public limited company incorporated in England and Wales whose registered office is at 980 Great West Road Brentford, Middlesex, TW8 9GS, United Kingdom (the “Purchaser”),

each a “party” and together the “parties”.

Whereas:

(A)the Seller and certain of the Seller’s Affiliates, including the Vaccines Group Companies (as defined below), are engaged in the Business;

(B)as of the date of this Agreement, the Seller and certain of the Seller’s Affiliates directly or indirectly own shares and other equity interests in the Vaccines Group Companies;

(C)the Seller has agreed to sell (or procure the sale of) the Vaccines Group (as defined below) and to assume the obligations imposed on the Seller under this Agreement;

(D)the Purchaser has agreed to purchase (or procure the purchase of) the Vaccines Group and to assume the obligations imposed on the Purchaser under this Agreement;

(E)the Seller and certain of the Seller’s Affiliates are also engaged in the Influenza Business, and shall retain the Influenza Business following the date hereof (such Influenza Business not to be the subject of the transactions between the Seller and the Purchaser contemplated by this Agreement). The Seller may carry out a Re-organisation (as defined below) on or prior to Closing to facilitate separation of the business from the Influenza Business; and

(F)in connection with the transactions contemplated by this Agreement, the Purchaser and the Seller, or certain of their respective Affiliates, have entered into or will enter into the Ancillary Agreements.

It is agreed as follows:

1Interpretation

In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:

1.1Definitions

“2013 DCOGS” means the highlighted sections of the COGS analysis in the Agreed Terms;

“2013 Gross Profit” means US$274 million (being the difference between net sales (excluding other revenue) of US$935 million and cost of goods sold of US$661 million);

“2013 Income Statement” means the 2013 income statement of the Vaccines Group and the Influenza Business in the Agreed Terms;

4

“Abandoned Patents” means any Patent Exclusively Related to the Business abandoned by a member of the Seller’s Group before Closing from which a Vaccines Patent can claim priority, or from the priority chain of which a right to priority can be claimed in respect of a Vaccines Patent;

“Accounts” means, for each Vaccines Group Company, the audited financial statements of that Vaccines Group Company, prepared in accordance with legislation as in force and applicable to that Vaccines Group Company for the accounting reference period ended on the Accounts Date, comprising the balance sheet, the profit and loss account and the notes to the accounts;

“Accounts Date” means in respect of:

(i)Chiron Behring Vaccines Private Limited, 31 March 2013; and

(ii)each other Vaccines Group Company, 31 December 2012;

“Action” means the taking of any steps by any Governmental Entity to seek a Judgment which would have the effect of preventing the consummation of the transactions contemplated by this Agreement by the Purchaser;

“Affiliate” means:

(i)with respect to any person (other than a party to this Agreement), any other person that Controls, is Controlled by or is under common Control with such person; or

(ii)with respect to a party to this Agreement, any other person that is Controlled by such party,

provided that any Delayed Vaccines Group Company shall not constitute an “Affiliate” of the Purchaser unless, and until, the relevant Delayed Closing Date in respect of such Delayed Vaccines Group Company, and “Affiliates” shall be interpreted accordingly;

“Affiliate Contract” means a Contract between or among any member of the Seller’s Group (other than the Vaccines Group Companies) on the one hand, and any Vaccines Group Company on the other hand, but excluding:

(i)any Ancillary Agreement;

(ii)any Affiliate Quality Agreement;

(iii)any Mixed Affiliate Quality Agreement; and

(iv)those Contracts listed in Schedule 29;

“Affiliate Quality Agreement” means any quality agreement in respect of GMP, quality and safety matters relating to the Products in respect of the Vaccines Business between or among one or more members of the Seller’s Group, other than any such agreement exclusively between or among Vaccines Group Companies;

“Agreed Terms” means, in relation to a document, such document in the terms agreed between the Seller and the Purchaser and signed for identification purposes by the Seller’s Lawyers and the Purchaser’s Lawyers, with such alterations as may be agreed in writing between the Seller and the Purchaser from time to time;

“Agreement” means this share and business sale agreement;

“Allocation” has the meaning given to it in paragraph 1 of Schedule 13;

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“Allowance” means any amount payable or repayable to customers in respect of a contractual allowance or discount due on the sales of products;

“Ancillary Agreement Liabilities” means the Liabilities of any member of the Seller’s Group to any member of the Purchaser’s Group and, the Liabilities of any member of the Purchaser’s Group to any member of the Seller’s Group, in each case arising under any Ancillary Agreement;

“Ancillary Agreements” means the Implementation Agreement, the Local Transfer Documents, the Disclosure Letter, the Tax Indemnity, the France Offer Letter, the France SPA, the Netherlands Offer Letter, the Netherlands APA, the Transitional Services Agreement, the Transitional Distribution Services Agreement, the Influenza Business Agreements, the Influenza Business Global Quality Agreement, the Influenza Business Pharmacovigilance Agreement, the Vaccines Business Manufacturing and Supply Agreements, the Vaccines Business Pharmacovigilance Agreement, the Purchaser Intellectual Property Licence Agreement, the Intellectual Property Assignment Agreements, the Claims Management Agreement and the Secondment Agreement;

“Anti-Bribery Law” means any Applicable Law that relates to bribery or corruption, including the US Foreign Corrupt Practices Act of 1977 and the UK Bribery Act 2010, in each case as amended, re-enacted or replaced from time to time;

“Applicable Law” means any supra-national, federal, national, state, municipal or local statute, law, ordinance, regulation, rule, code, order (whether executive, legislative, judicial or otherwise), judgment, injunction, notice, decree or other requirement or rule of law or legal process (including common law), or any other order of, or agreement issued, promulgated or entered into by, any Governmental Entity or any rule or requirement of any national securities exchange, including all Healthcare Laws, and GCP, GLP, and GMP, each as may be amended from time to time;

“Appointment Notice” has the meaning given to it in paragraph 1.3 of Schedule 16;

“Associated Person” means, in relation to the Seller’s Group, a person (including any director, officer, employee, agent or other intermediary) who performs services for or on behalf of any member of the Seller’s Group or who holds shares of capital stock, partnership interests, limited liability company membership interests and units, shares, interest and other participations in any member of the Seller’s Group (in each case when performing such services or acting in such capacity);

“Assumed Liabilities” means all Liabilities relating to the Vaccines Group Businesses (including, for the avoidance of doubt, any Delayed Vaccines Group Businesses) other than: (i) the Excluded Liabilities; (ii) any Relevant Pension and Employment Liability; (iii) any Liabilities in respect of Tax (other than Tax which has been provided for or reflected in the Closing Statement and Tax which has been assumed by the Purchaser’s Group under an express provision of this Agreement); (iv) any Ancillary Agreement Liabilities; and (v) any Liabilities relating to the Abandoned Patents;

“Base Working Capital” means, in respect of the Vaccines Group Companies and Vaccines Group Businesses, the amount shown in paragraph 4 of Part 2 of Schedule 16;

“Benefit Plans” means the US Benefit Plans and the Non-US Benefit Plans;

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“Beta Interferon Patent Rights” means the Patents listed in Part 3 of Schedule 4 (the “Beta Interferon Patents”) together with the rights of Novartis Vaccines and Diagnostics, Inc. under the Merck 2012 Licence;

“Business” means the research, development, manufacture, sales, marketing and commercialisation of Vaccines for human use by the Seller’s Group as recorded and reported by the Seller’s Group from time to time under the “Vaccines and Diagnostics” segment as described in and consistent with the Novartis 2013 Annual Report and, with respect only to the Vaccines Institute for Global Health, through the Novartis Institutes for BioMedical Research, and including the fill-finish process undertaken at the Rosia Site and, to the extent relevant, the Siena Site, but excluding:

(i)the Influenza Business;

(ii)the Diagnostics Business; and

(iii)any Non-strategic Assets if and to the extent disposed of or transferred otherwise than to the Purchaser or a member of the Purchaser’s Group in accordance with this Agreement;

“Business Day” means a day which is not a Saturday, a Sunday or a public holiday in the canton of Basel-Stadt (Switzerland) or London;

“Business Information” means: (i) Commercial Information; (ii) Medical Information; and (iii) any other information Predominantly Related to the Business;

“Business Sellers” means the members of the Seller’s Group (other than the Vaccines Group Companies) that own assets of or otherwise conduct any of the Vaccines Group Business;

“Call for New Tender” means any calls for a tender (including any tender for a basket of products), whether a new tender or the renewal of an existing tender, which includes the Products and which is published after Closing of which the Seller and/or any of the Seller’s Affiliates become aware and which relates in whole or in part to the sale of Products;

“Cash Balances” means cash in hand or credited to any account with a financial institution and securities which are readily convertible into cash;

“Cash Pooling Arrangements” means the cash pooling arrangements of members of the Seller’s Group in which the Vaccines Group Companies participate;

“Cell-based Influenza Business” means:

(i)the business conducted by the Seller’s Group from time to time of research, development, manufacture, sales, distribution, marketing and commercialisation of:

(a)influenza Vaccines using cell-based technologies, including such business conducted at the Holly Springs Site;

(b)adjuvants conducted at the Holly Springs Site; and

(c)other Vaccines products to the extent that such business is conducted or contemplated to be conducted by the Seller’s Group at the Holly Springs Site in accordance with its obligations to, or as requested by, the US government or regulatory authorities; and

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(ii)technical development, manufacturing and supply of Enoxaparin, Copaxone or any other pharmaceutical or biological products (other than Vaccines) at the Holly Springs Site, including, but not limited to, pursuant to agreements or arrangements with Sandoz Inc. or its Affiliates;

“Certificate” means a certificate signed by a director, officer or an authorised signatory of the Seller in the form set out in Schedule 9, to be provided to the Purchaser immediately prior to Closing;

“CFIUS” means the Committee on Foreign Investment in the United States;

“CFIUS Approval” means written notice from CFIUS that any review or investigation of the Transaction under Section 721 of the Defense Production Act of 1950, as amended (50 U.S.C. App. Section 2170), has been concluded and there are no unresolved national security concerns with respect to the Transaction or the President shall have determined not to take action with respect to the Transaction;

“Chinese JV Partner” means Mr. Ding Xiaohang (丁晓航), a resident of [***], whose residential address is [***] and whose identity card number is [***], being the joint venture partner of the Tianyuan JV;

“Claims Management Agreement” means the agreement between the Seller and the Purchaser, to be negotiated in good faith between the parties and entered into at Closing, in respect of the management of claims or investigations by or against third parties (including by any Governmental Entity) which constitute or may constitute an Assumed Liability or an Excluded Liability;

“Clinical Trials/Data Liability” means any Liability arising out of, relating to or resulting from any breach of Applicable Law in connection with the conduct of, or reporting or data in relation to, clinical studies or trials (including post-approval studies) in relation to the Vaccines Group;

“Closing” means the completion of the sale of the Shares and the Vaccines Group Businesses pursuant to this Agreement, and Closing shall be deemed to have taken place notwithstanding that some of the Shares only or other parts of the Vaccines Group Businesses have not transferred to the Purchaser pursuant to Schedule 25, in each case which the provisions of Schedule 25 shall then apply in respect thereof;

“Closing Date” means the date on which Closing takes place;

“Closing Statement” means the statement setting out the Working Capital, the Working Capital Adjustment, the Vaccines Group Companies’ Cash Balances, the Intra-Group Non-Trade Receivables, the Third Party Indebtedness, the Intra-Group Non-Trade Payables and the Tax Adjustment, to be prepared by the Seller and agreed or determined in accordance with Clause 7 and Schedule 16;

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985 of the United States, as amended, section 4980B of the Code, Title I Part 6 of ERISA, and any similar US state group health plan continuation law, together with its implementing regulations;

“Code” means the U.S. Internal Revenue Code of 1986, as amended, together with its implementing regulations;

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“Commercial Information” means information that is, as of the Closing Date, or, in respect of any Delayed Business, the Delayed Closing Date as applicable, owned by the Seller and/or its Affiliates and relates predominantly to the Commercialisation of any Products;

“Commercial Practices Liability” means any Liability arising out of, relating to or resulting from any breach of Applicable Law in connection with the Commercialisation of any product;

“Commercialise” means to promote, market, distribute and/or sell a Product and “Commercialising” and “Commercialisation” shall be construed accordingly;

“Companies” means the companies, details of which are set out in paragraph 1 of Schedule 2, and “Company” means any one of them;

“Company Lease” has the meaning given to it in paragraph 1.1 of Part 3 of Schedule 3;

“Company Leased Real Properties” has the meaning given to it in paragraph 1.1 of Part 3 of Schedule 3;

“Company Owned Real Properties” has the meaning given to it in paragraph 1.1 of Part 3 of Schedule 3;

“Company Real Properties” means the Company Owned Real Properties and the Company Leased Real Properties, and “Company Real Property” means any one of them;

“Composite” has the meaning given to it in Clause 9.3.2(iv);

“Consumer Contribution Agreement” means the contribution agreement dated 22 April 2014, as amended from time to time, between Leo Constellation Limited, the Purchaser and the Seller, relating to the establishment of a joint venture between the Purchaser and the Seller;

“Contract” means any binding contract, agreement, instrument, lease, licence or commitment, excluding: (i) any lease or other related or similar agreements, undertakings and arrangements with respect to the leasing or ownership of the Properties (to which the provisions set out in Schedule 3 shall apply); and (ii) any contract with any Employee;

“Contracts Liabilities” means Liabilities relating to the: (i) Transferred Contracts; (ii) Transferred Intellectual Property Contracts; and (iii) all other contracts or parts thereof transferred, assigned, novated or assumed by the Purchaser pursuant to this Agreement or to which a Vaccines Group Company is or was a party or under which a Vaccines Group Company has any Liability, and a “Contracts Liability” shall mean any one of them;

“Control” means the power to direct the management and policies of a person (directly or indirectly), whether through ownership of voting securities, by Contract or otherwise (and the term “Controlled” shall be interpreted accordingly);

“Co-Owned Vaccines Group Intellectual Property Right” means any Vaccines Group Intellectual Property Right that is owned in part by a third party;

“Copyright” means any works of authorship, copyrights, database rights, mask work rights and registrations and applications therefor;

[***];

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“Decision” means the issuing of any decision by a competition, antitrust, foreign investment, national, local, supranational or supervisory or other government, governmental, quasi-governmental, trade, or regulatory body, agency, branch, subdivision, department, commission, official or authority, including any Tax Authority and any governmental department and any court or other tribunal, that would have the effect of prohibiting the acquisition of the Vaccines Group by the Purchaser;

“Deferred Employee” means any person to whom the Seller, any Vaccines Group Company or any other member of the Seller’s Group has made an offer of employment for a role in the Business (as carried on by the Vaccines Group) in compliance with Clause 5 and whose employment in the Business (as carried on by the Vaccines Group) will take effect on a date following the Closing Date, save that no person shall become a Deferred Employee unless and until the Seller has provided to the Purchaser a copy of the offer letter setting out the agreed principal terms of employment and/or employment agreement (if executed) applicable to such person;

“Delayed Businesses” has the meaning given in Schedule 25;

“Delayed Closing” has the meaning given to it in Schedule 25;

“Delayed Closing Date” has the meaning given in Schedule 25;

“Delayed Contract” has the meaning given to it in Schedule 10;

“Delayed Contract Transfer Date” has the meaning given to it in Schedule 10;

“Delayed Local Payment Amount” has the meaning given to it in Clause 6.6;

“Delayed Vaccines Group Business” has the meaning given in Schedule 25;

“Delayed Vaccines Group Company” has the meaning given in Schedule 25;

“Designated Purchaser” means an entity within the Purchaser’s Group acquiring part of the Business;

“Diagnostics Business” means the human blood and blood products diagnostics business (and certain related activities) sold by Novartis Vaccines and Diagnostics Inc. and its Affiliates to G-C Diagnostics Corp. pursuant to a share and asset purchase agreement dated 10 November 2013;

“Diagnostics GESA” means the Global Employee Services Agreement and Amendment No. 3 to Share and Asset Purchase Agreement dated as of 9 January 2014 by and between Novartis Vaccines and Diagnostics, Inc., Novartis Corporation, G-C Diagnostics Corp., and Grifols, S.A.;

“Disclosure Letter” means the letter dated 22 April 2014 from the Seller to the Purchaser disclosing information constituting exceptions to the Seller’s Warranties;

“Distribution Contract” has the meaning given to it in Schedule 10;

“Distribution Transfer Date” has the meaning given to it in the Transitional Distribution Services Agreement;

“Draft Closing Statement” has the meaning given to it in Clause 7.1.1;

“Effective Time” means 11.59 p.m. (local time in the relevant location) on the Closing Date or, if the Closing Date is not the last day of a month but the first Business Day of a month, 11.59 p.m. on the last day of the immediately preceding month;

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“Egg-based Influenza Business” means the business conducted by the Seller’s Group from time to time of research, development, manufacture, sales, distribution, marketing and commercialisation of influenza Vaccines and other products using egg-based technologies and related adjuvant technologies;

“Employee Adjustment Payment” has the meaning given to it in Clause 3.1.1(ii);

“Employee Benefit Indemnification Amount” has the meaning given to it in paragraph 3 of Schedule 12;

“Employee Benefits” has the meaning given to it in Schedule 12;

“Employees” means the Vaccines Business Employees and the Vaccines Group Company Employees, and “Employee” means any one of them;

“Encumbrance” means any claim, charge, mortgage, lien, option, equitable right, power of sale, pledge, hypothecation, usufruct, retention of title, right of pre-emption, right of first refusal or other security interest of any kind or an agreement, arrangement or obligation to create any of the foregoing, and for the avoidance of doubt, shall exclude any licences of or claims of infringement relating to, Intellectual Property Rights;

“Environmental Laws” means any and all Applicable Law regulating or imposing Liability or standards of conduct concerning pollution or protection of the environment (including surface water, groundwater or soil);

“Environmental Liabilities” means any Liability arising out of, relating to or resulting from any Environmental Law or environmental, health or safety matter or condition, including natural resources, but excluding any Product Liability;

“Environmental Permit” means any permit, licence, consent or authorisation required by Environmental Laws issued by any relevant competent authority and used in relation to the operation or conduct of Manufacturing at each Property, and “Environmental Permit” shall be construed accordingly;

“ERISA” means the Employee Retirement Income Security Act of 1974 of the United States, as amended, together with its implementing regulations;

“Estimated Employee Benefit Adjustment” means the amount by which the Seller’s reasonable estimate (in so far as practicable), made in good faith after consulting with the Purchaser, of 95 per cent. of the anticipated aggregate of the Employee Benefit Indemnification Amounts exceeds US$60,000,000, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Intra-Group Non-Trade Payables” means the Seller’s reasonable estimate of the Intra-Group Non-Trade Payables, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Intra-Group Non-Trade Receivables” means the Seller’s reasonable estimate of the Intra-Group Non-Trade Receivables, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Tax Adjustment” means the Seller’s reasonable estimate of the Tax Adjustment, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

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“Estimated Third Party Indebtedness” means the Seller’s reasonable estimate of the Third Party Indebtedness, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Vaccines Group Companies’ Cash Balances” means the Seller’s reasonable estimate of the aggregate of the Vaccines Group Companies’ Cash Balances, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Working Capital” means the Seller’s reasonable estimate of the Working Capital, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Working Capital Adjustment” means the amount by which the Estimated Working Capital is greater or less than the Base Working Capital, any such excess amount being treated as a positive number and any shortfall being treated as a negative number;

“Excluded Assets” means the property, rights and assets referred to in Clause 2.3.2 or Schedule 5;

“Excluded Contracts” means, collectively, each Contract which is not Predominantly Related to the Business;

“Excluded Employees” means the employees of any member of the Seller’s Group (including the Vaccines Group Companies) (i) who are referred to in Schedule 5, and (ii) any Vaccines Group Company Employees who do not work wholly or substantially in the Business (as carried on by the Vaccines Group), save for those employees referred to in paragraph 2.1.2 of Schedule 11;

“Excluded Liabilities” means (in each case excluding any Ancillary Agreement Liability and any Liabilities relating to Abandoned Patents):

(i)all Liabilities:

(a)relating to the Vaccines Group Businesses (including, for the avoidance of doubt, any Delayed Vaccines Group Businesses) other than to the extent taken into account in the Closing Statement;

(b)of the Vaccines Group Companies (including, for the avoidance of doubt, any Delayed Vaccines Group Companies) other than to the extent taken into account in the Closing Statement and other than Liabilities in respect of Tax,

in either case, to the extent that they have arisen or arise (whether before or after the applicable Liability Cut-off Time for that Liability) as a result of, or otherwise relate to, an act, omission, fact, matter, circumstance or event undertaken, occurring, in existence or arising before the applicable Liability Cut-off Time, and in each case, other than (a) any Relevant Pension and Employment Liability and (b) any Liabilities in respect of Tax provided for or reflected in the Closing Statement; and

(ii)all Liabilities relating to the Seller’s Group Retained Business and the Excluded Assets; and

(iii)any Seller Allowance Rebate and Royalty Amount;

“Exclusively Related to the Business” means exclusively related to, or exclusively used or held for use exclusively, in connection with the Business;

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“FCA” means the Financial Conduct Authority;

“FCC Vaccines” means bulk influenza Vaccines produced using cell-based technologies;

“FDA” means the United States Food and Drug Administration (or its successor);

“Final Allocation Schedule” has the meaning given to it in paragraph 4 of Schedule 13;

“Final Payment Date” means five Business Days after the date on which the process described in Part 1 of Schedule 16 for the preparation of the Closing Statement is complete;

“France Assumed Liabilities” means the Assumed Liabilities to the extent they relate to the France Business;

“France Business” means that part of the Vaccines Group, comprising:

(i)Novartis Vaccines and Diagnostics S.A.S. and the part of the Business conducted by Novartis Vaccines and Diagnostics S.A.S.;

(ii)the France Assumed Liabilities;

(iii)the France Employees; and

(iv)any other assets that are exclusively related to the France Business;

“France Closing” has the meaning given to it in the France SPA;

“France Employees” means the Employees employed by Novartis Vaccines and Diagnostics S.A.S.;

“France Offer Letter” means the letter from the Purchaser to the Seller in respect of the binding offer from the Purchaser to acquire the France Business dated on or around the date hereof;

“France Put Option Exercise” has the meaning given to it in the France Offer Letter;

“France SPA” has the meaning given to it in the France Offer Letter;

“FSMA” means the Financial Services and Markets Act 2000;

“Full Disclosure” means disclosure by the Seller to the Purchaser of the material terms, including financial terms, of the Relevant Part of a Shared Business Contract;

“Full Title Guarantee” means on the basis that the covenants implied under Part 1 of the Law of Property (Miscellaneous Provisions) Act 1994 where a disposition is expressed to be made with full title guarantee are deemed to be given by the Seller (on behalf of the relevant Share Seller or Business Seller) on Closing;

“German Influenza Operations” means the operations for the manufacture of FCC Vaccines and MF59® adjuvant located at the Marburg Site;

“Good Clinical Practices” or “GCP” means the then-current standards, practices and procedures promulgated or endorsed by (i) the ICH Harmonised Tripartite Guidelines for Good Clinical Practice (CPMP/ICH/135/95) and any other guidelines for good clinical practices for trials on medicinal products in the European Union; (ii) the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” including related regulatory requirements imposed by the FDA; and (iii) the equivalent Applicable Law in any relevant country;

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“Good Laboratory Practices” or “GLP” means the then-current standards, practices and procedures promulgated or endorsed by: (i) the European Commission Directive 2004/10/EC relating to the application of the principles of good laboratory practices as well as “The rules governing medicinal products in the European Union,” Volume 3, Scientific guidelines for medicinal products for human use (ex - OECD principles of GLP); (ii) the then-current standards, practices and procedures promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58; and (iii) the equivalent Applicable Law in any relevant country;

“Good Manufacturing Practices” or “GMP” means the then-current standards, practices and procedures promulgated or endorsed by: (i) the European Commission Directive 91/356/EEC, as amended by Directive 2003/94/EC and 91/412/EEC respectively, as well as “The rules governing medicinal products in the European Union,” Volume 4, Guidelines for good manufacturing practices for medicinal products for human and veterinary use; (ii) the FDA and the provisions of 21 C.F.R. Parts 210 and 211; (iii) the principles detailed in the ICH Q7A guidelines; and (iv) all Applicable Law with respect to each of (i) through (iii);

“Governmental Entity” means any supra-national, federal, national, state, county, local, municipal or other governmental, regulatory or administrative authority, agency, commission or other instrumentality, any court, tribunal or arbitral body with competent jurisdiction, or any national securities exchange or automated quotation service including, any governmental regulatory authority or agency responsible for the grant approval, clearance, qualification, licensing or permitting of any aspect of the research, development, manufacture, marketing distribution or sale of the Products including the FDA, the European Medicines Agency, or any successor agency thereto;

“Governmental Liability” means any Liability arising out of, relating to or resulting from any claim, demand, action, suit, proceedings or investigation by a Governmental Entity (other than a Tax Authority) brought or undertaken in connection with products sold or developed by, or operations or practices of, the Vaccines Group prior to Closing;

“Gross Negligence” has the meaning given to it in paragraph 3.16 of Schedule 25;

“GSK Break Fee” has the meaning given to it in the Implementation Agreement;

“Hazardous Substance” means any gasoline or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, hazardous wastes, toxic substances, asbestos, pollutants, or contaminants defined as such in or regulated under any applicable Environmental Law;

“Headline Price” has the meaning given to it in Clause 3.1.1(i);

“Healthcare Laws” means the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)); the Anti-Inducement Law (42 U.S.C. § 1320a-7a (a)(5)); the civil False Claims Act (31 U.S.C. §§ 3729 et seq.); the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)); the Exclusion Laws (42 U.S.C. § 1320a-7); the Medicare statute (Title XVIII of the Social Security Act), including Social Security Act §§ 1860D-1 to 1860D-43 (relating to Medicare Part D and the Medicare Part D Coverage Gap Program); the Medicaid statute (Title XIX of the Social Security Act); the Physician Payment Sunshine Act (42 U.S.C. § 1320a-7h) and any analogous state laws; the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and any other similar law, including the price reporting requirements and the requirements relating to the processing of any applicable rebate, chargeback or adjustment, under applicable rules and regulations relating to the

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Medicaid Drug Rebate Program (42 U.S.C. § 1396r-8), any state supplemental rebate program, Medicare average sales price reporting (42 U.S.C. § 1395w-3a), the Public Health Service Act (42 U.S.C. § 256b), the Veterans Health Care Act (38 U.S.C. § 8126), regulatory requirements applicable to sales on the Federal Supply Schedule or under any state pharmaceutical assistance program or United States Department of Veterans Affairs agreement, all legal requirements relating to the billing or submission of claims, collection of accounts receivable, underwriting the cost of, or provision of management or administrative services in connection with, any and all of the foregoing, by the Seller’s Group and any successor government programs, and all foreign equivalents of the foregoing;

“Holly Springs Site” means properties located in Holly Springs, North Carolina, United States of America at which the Influenza Business undertakes Manufacturing activities;

“HSR Act” means the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, together with its implementing regulations;

“IFRS” means International Financial Reporting Standards, comprising the accounting standards and interpretations issued, adopted and/or approved by the International Accounting Standards Board;

“Illustrative Working Capital Statement” has the meaning given to it in Part 2 of Schedule 16;

“Implementation Agreement” means the implementation agreement dated 22 April 2014 between the Seller and the Purchaser relating to, amongst other things, the implementation of the Transaction;

“In-Market Inventory” means all inventory of Products for Commercialisation that, at any particular time: (i) is beneficially owned by a member of the Seller’s Group; and (ii) is in finished packed form and released for Commercialisation; and (iii) is located: (a) in (or in transit to) the relevant Market; or (b) in (or in transit to) a multi-market warehouse owned or operated by a member of the Seller’s Group or by a third party; or (c)at a Property pending despatch following release by the relevant qualified person to the relevant market or multi-market warehouse;

“Indebtedness” means all loans and other financing liabilities and obligations in the nature of borrowed moneys and overdrafts and moneys borrowed, but excluding trade debt and liabilities arising in the ordinary course of business;

“Influenza Business” means the Cell-based Influenza Business, the Egg-based Influenza Business and the German Influenza Operations, taken together;

“Influenza Business Agreements” means:

(i)Influenza Business Manufacturing and Supply Agreement;

(ii)Influenza Business Manufacturing, Supply and Distribution Agreement;

(iii)Influenza Business Transitional Services Agreement;

(iv)Marburg Support Services Agreement;

(v)Influenza Business Global Quality Agreement;

(vi)Influenza Business Pharmacovigilance Agreement; and

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(vii)any local services agreements to be entered into pursuant to the agreements referred to in paragraphs (i) and (iii) above,

each as amended or restated from time to time;

“Influenza Business Global Quality Agreement” means the agreement to be entered into between the Seller and the Purchaser on Closing, pursuant to which the quality agreements applicable to the Influenza Business Manufacturing and Supply Agreement, Influenza Business Manufacturing, Supply and Distribution Agreement and Influenza Business Transitional Services Agreement are identified;

“Influenza Business Manufacturing and Supply Agreement” means the manufacturing and supply agreement in respect of the Influenza Business dated 23 October 2014 between the Seller and the Purchaser;

“Influenza Business Manufacturing, Supply and Distribution Agreement” means the manufacturing, supply and distribution agreement in respect of the Influenza Business dated 23 October 2014 between the Seller and the Purchaser;

“Influenza Business Pharmacovigilance Agreement” means the pharmacovigilance agreement between the Seller or a member of the Seller’s Group and the Purchaser or a member of the Purchaser’s Group, to be entered into at Closing, in respect of pharmacovigilance and regulatory matters relating to certain Influenza Business products;

“Influenza Business Transitional Services Agreement” means the transitional services agreement in respect of the Influenza Business dated 23 October 2014 between the Seller and the Purchaser;

“Information Technology” means computer, hardware, software and network;

“Intellectual Property Assignment Agreements” means the assignments between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates on terms consistent with the Agreed Terms, to be entered into at Closing, in respect of the transfer of certain Intellectual Property Rights in each of the relevant jurisdictions;

“Intellectual Property Rights” means all: (i) Patents; (ii) Know-How; (iii) Trademarks; (iv) internet domain names; (v) Copyrights; (vi) rights in designs; (vii) database rights; and (viii) all rights or forms of protection, anywhere in the world, having equivalent or similar effect to the rights referred to in paragraphs (i) to (vii) above, in each case whether registered or unregistered and including applications for registration of any such thing;

“International Assignees” means the employees of any member of the Seller’s Group (including the Vaccines Group Companies) who are referred to in Schedule 6;

“Intra-Group Non-Trade Payables” means all outstanding loans or other financing liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends declared or payable but not paid) owed by a Vaccines Group Company to a member of the Seller’s Group (other than a Vaccines Group Company) as at the Effective Time as derived from the Closing Statement, but excluding: (i) Intra-Group Trading Balances; and (ii) any item which falls to be included in calculating the Vaccines Group Companies’ Cash Balances or the Third Party Indebtedness;

“Intra-Group Non-Trade Receivables” means all outstanding loans or other financing liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends

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declared or payable but not paid) owed by a member of the Seller’s Group (other than a Vaccines Group Company) to a Vaccines Group Company as at the Effective Time as derived from the Closing Statement, but excluding: (i) Intra-Group Trading Balances; and (ii) any item which falls to be included in calculating the Vaccines Group Companies’ Cash Balances or the Third Party Indebtedness;

“Intra-Group Trading Balances” means all trade accounts and notes receivable or payable arising in the ordinary course between any two members of the Seller’s Group, in each case to the extent related to the Vaccines Group, to which lines “BS01_630 Payables Other BU’s”, “BS01_140 Receivables Other BU’s”, “BS01_620 Payables Own BU” and “BS01_130 Receivables Own BU” of the Statement of Net Assets apply, together with any unpaid financing charges accrued thereon;

“IP Liability” means any Liability arising out of, relating to or resulting from any actual or alleged infringement, misappropriation or other violation of Intellectual Property Rights of third parties;

“Judgment” means any order, writ, judgment, injunction, decree, stipulation, determination, decision or award entered by or with any Governmental Entity of competent jurisdiction;

“Key Personnel” means the Employees listed in Schedule 21;

“Key Sites” means the Marburg Site, the Rosia Site and the Siena Site;

“Know-How” means all existing and available technical information, know-how and data, including inventions (whether patentable or not), discoveries, trade secrets, specifications, instructions, processes and formulae, including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data;

“Lease” has the meaning given to it in paragraph 1.1 of Part 4 of Schedule 3;

“Liabilities” means all liabilities, claims, damages, proceedings, demands, orders, suits, costs, losses and expenses of every description, whether deriving from contract, common law, statute or otherwise, whether present or future, actual or contingent, ascertained or unascertained or disputed and whether owed or incurred severally or jointly or as principal or surety;

“Liability Cut-off Time” means (i) Closing in respect of any Liability that is a Clinical Trials/Data Liability, Commercial Practices Liability, Environmental Liability, Governmental Liability, IP Liability, Manufacturing Liability or Product Liability; (ii) Delayed Closing in respect of any Liability that relates to a Non-Controlled Delayed Business and is a Clinical Trials/Data Liability, Commercial Practices Liability, Environmental Liability, Governmental Liability, IP Liability, Manufacturing Liability or Product Liability (but, in respect of any such Environmental Liability, IP Liability or Product Liability that arises as a result of, or otherwise relates to, any act, omission, fact, matter or circumstance or event undertaken, occurring, in existence or arising between Closing and Delayed Closing, only to the extent that such Liability arises due to the wilful default or Gross Negligence of the relevant Seller or any of its Associated Persons); or (iii) the Effective Time in respect of any other Liability;

“LIBOR” means the London interbank offered rate, being the interest rate offered in the London inter-bank market for three month US dollar deposits as displayed on pages

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LIBOR01 or LIBOR02 of the Reuters screen at 11 a.m. (London) on the second Business Day prior to the Closing Date;

“Licensed Intellectual Property Contract” means any Vaccines Group Intellectual Property Contract constituting or containing a licence of Intellectual Property Rights in respect of the Business or Products;

“Listing Rules” means the listing rules made by the FCA under section 73A of FSMA;

“Local Payment Amount” has the meaning given to it in Clause 6.5;

“Local Transfer Document” has the meaning given to it in Clause 2.6.1;

“Long Stop Date” has the meaning given to it in Clause 4.3;

“Long Stop Expiry Date” has the meaning given to it in Clause 9.1.6;

“Losses” means all losses, liabilities, costs (including legal costs and experts’ and consultants’ fees), charges, expenses, actions, proceedings, claims and demands;

“MA Costs” has the meaning given to it in paragraph 4 of Part 2 of Schedule 8;

“MA Documentation” has the meaning given to it in paragraph 1.4 of Part 2 of Schedule 8;

“Manufacture”, “Manufacturing” or “Manufactured” means the planning, purchasing of materials for, production, processing, compounding, storage, filling, packaging, labelling, leafleting, warehousing, quality control testing, waste disposal, quality release, sample retention and stability testing of products;

“Manufacturing Inventory” means any packed inventory of Products and/or products for Commercialisation that is: (i) in finished form (save for any secondary packaging undertaken outside of a Property); (ii) beneficially owned by any member of the Seller’s Group; (iii) held at a Property; and (iv) not yet released by the qualified person at a Property; and excluding in each case, for the avoidance of doubt, any In-Market Inventory and Manufacturing Stocks;

“Manufacturing Liability” means any Liability arising out of, relating to or resulting from any breach of Applicable Law in connection with the manufacturing of products;

“Manufacturing Licences” means any certificates, permits, licences, consents and approvals issued by any Governmental Entity, used in the operation or conduct of Manufacturing at each Property, and “Manufacturing Licence” shall be construed accordingly;

“Manufacturing Stocks” means, as at Closing, all stocks of raw materials, active pharmaceutical ingredients, ingredients, adjuvants, drug substances, intermediates, packaging materials, components, devices and other production and pre-production consumables and work-in-progress that are beneficially owned by any member of the Seller’s Group for use in the Manufacture of Products or Pipeline Products and held at a Property;

“Marburg Site” means the Properties located in Marburg (Germany) at which the Vaccines Group undertakes Manufacturing activities;

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“Marburg Support Services Agreement” means the Marburg support services agreement in respect of the Influenza Business dated 23 October 2014 between the Seller and the Purchaser;

“Marketing Authorisation Data” means the existing and available dossiers containing the relevant Know-How used by the Seller and/or its Affiliates to obtain and maintain the Marketing Authorisations;

“Marketing Authorisation Holder” means the holder of the relevant Marketing Authorisation;

“Marketing Authorisation Re-registration” has the meaning given to it in paragraph 1.1.2 of Part 2 of Schedule 8;

“Marketing Authorisation Re-Registration Date” means the date on which the relevant Governmental Entity approves, or is deemed to approve, the relevant Marketing Authorisation Re-registration;

“Marketing Authorisation Transfer” has the meaning given to it in paragraph 1.1.1 of Part 2 of Schedule 8;

“Marketing Authorisation Transfer Date” means the date on which the relevant Governmental Entity approves, or is deemed to approve, the relevant Marketing Authorisation Transfer;

“Marketing Authorisation Transferee” means the member of the Purchaser’s Group or, where no member of the Purchaser’s Group satisfies the requirements under Applicable Law to be transferred the relevant Marketing Authorisation, such Third Party as is nominated by the Purchaser, in either case to whom the relevant Marketing Authorisation is to be transferred;

“Marketing Authorisations” means the marketing authorisations issued or applications for marketing authorisations with respect to the Products and all supplements, amendments and revisions thereto;

“Markets” means the markets in which the Products are marketed and sold under the relevant Marketing Authorisation, and “Market” shall be construed accordingly;

“Material Adverse Effect” means any matter, change, event or circumstance arising or discovered on or after the date of this Agreement and prior to Closing (including a breach of the Seller’s obligations under Clause 5 or Clause 10.1) (a “Relevant Matter”) that, individually or in the aggregate with other Relevant Matters, if known to the Purchaser prior to the date of this Agreement, could reasonably have expected to have resulted in the Purchaser offering to acquire the Vaccines Group on the terms of this Agreement at a discount to the Headline Price of 30 per cent. or more and, in determining such reduction, regard shall be had to the actual basis on which the Purchaser determined the Headline Price. A Relevant Matter shall not constitute or count towards a “Material Adverse Effect” to the extent resulting or arising from:

(i)any change that is generally applicable to, or generally affects, the industries or markets in which the Vaccines Group operates (including changes arising as a result of usual seasonal variations) or arises from or relates to changes in Applicable Law or accounting rules or changes in any authoritative interpretation of any Applicable Law by any Governmental Entity;

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(ii)any change in financial, securities or currency markets or general economic or political conditions or changes in prevailing interest rates or exchange rates;

(iii)the execution of this Agreement, the public announcement thereof or the pendency or consummation of the transactions contemplated hereby (including any cancellations of or delays in customer orders or other decreases in customer demand, any reduction in revenues and any disruption in supplier, distributor, customer or similar relationships); or

(iv)the taking of any action expressly required by this Agreement or by any Ancillary Agreement or otherwise taken with the advance written consent of the Purchaser,

except, in relation to either paragraph (i) or paragraph (ii) above, if that change adversely affects the Vaccines Group in a disproportionate manner relative to other comparable businesses operating in the same industry and geographic markets as the Vaccines Group (in which case it may constitute or count towards a “Material Adverse Effect”);

“Material Employee Jurisdictions” means China, Germany, India, Italy, the United Kingdom and the United States of America;

“Medical Information” means information relating to clinical and technical matters, such as therapeutic uses for the approved indications, drug-disease information, and other product characteristics Predominantly Related to the Business which is available to or used by the Seller and/or its Affiliates as of the Closing Date, or, in respect of any Delayed Business, the Delayed Closing Date, as applicable;

“MenA Fill Finish Manufacturing and Supply Agreement” means the manufacturing and supply agreement, and the quality agreement relating thereto, to be entered into between the Seller or a member of the Seller’s Group and the Purchaser or a member of the Purchaser’s Group on Closing, pursuant to which Novartis Pharma Stein AG will manufacture and supply certain products to the Vaccines Business in connection with Meningococcal serogroup A vaccines;

“MenACWY Fill Finish Clinical Supply Agreement” means the clinical supply agreement, and the quality agreement relating thereto, to be entered into between the Seller or a member of the Seller’s Group and the Purchaser or a member of the Purchaser’s Group on Closing, pursuant to which Novartis Pharma Stein AG will manufacture and supply certain products to the Vaccines Business in connection with clinical trials of quadrivalent Meningococcal vaccines;

“MenB Manufacturing and Supply Agreement” means the manufacturing and supply agreement, and the quality agreement relating thereto, to be entered into on or before Closing between Sandoz GmbH and Novartis Vaccines and Diagnostics S.r.l. with the written consent of the Purchaser, pursuant to which Sandoz GmbH will manufacture and supply certain products to the Vaccines Business in connection with Meningococcal serogroup B vaccines;

“Merck 2012 Licence” means the Settlement and Licence Agreement between Novartis Vaccines and Diagnostics Inc. and Merck KGaA and Ares Trading SA dated 14 November 2012;

“Milestone Payments” has the meaning given to it in paragraph 10 of Schedule 17;

“Minority Interest Entities” means the entities, details of which are set out in paragraph 3 of Schedule 2, and “Minority Interest Entity” means any one of them;

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“Mixed Affiliate Quality Agreement” means any Affiliate Quality Agreement which relates both:

(i)to the Business or any part of the Business to be transferred to the Purchaser at Closing; and

(ii)to any part of the Seller’s Group Retained Business, any product other than the Products, or any Excluded Asset;

“Mixed Contract” means any Contract which relates both:

(i)to the Business or any part of the Business to be transferred to the Purchaser at Closing; and

(ii)to any part of the Seller’s Group Retained Business, any product other than the Products, or any Excluded Asset,

and which is either a Transferred Contract or a Contract to which a Vaccines Group Company is party;

“Mixed Contracts Separation” has the meaning given to it in Schedule 10;

“MOFCOM” means the Ministry of Commerce in the PRC or its local counterparts;

“Moratorium Date” has the meaning given to it in Schedule 10;

“Multi-Basket Tender” means any Tender other than a Products-Only Tender;

“NDRC” means the National Development and Reform Commission in the PRC or its local counterparts;

“Netherlands APA” has the meaning given to it in the Netherlands Offer Letter;

“Netherlands Assumed Liabilities” means the Assumed Liabilities to the extent they relate to the Netherlands Business;

“Netherlands Business” means that part of the Vaccines Group, comprising:

(i)the Vaccines Group Businesses that relate predominantly to the part of the Business conducted in the Netherlands;

(ii)the Netherlands Assumed Liabilities;

(iii)the Netherlands Employees; and

(iv)any other assets that are exclusively related to the Netherlands Business;

“Netherlands Closing” has the meaning given to it in the Netherlands APA;

“Netherlands Employees” means the Employees employed in the Netherlands;

“Netherlands Offer Letter” means the letter from the Purchaser to the Seller in respect of the binding offer from the Purchaser to acquire the Netherlands Business dated on or around the date hereof;

“Netherlands Put Option Exercise” has the meaning given to it in the Netherlands Offer Letter;

“Non-Controlled Delayed Business” has the meaning given to it in Schedule 25;

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“Non-strategic Assets” means the assets of the Vaccines Group exclusively related to the Products Encepur and Ixiaro and any Liabilities relating to those Products;

“Non-Transferring Tender” means:

(i)any Products-Only Tender which is subject to public procurement law and regulation in the relevant Market and cannot be transferred under Applicable Law; and

(ii)any Multi-Basket Tender;

“Non-US Benefit Plans” has the meaning given to it in paragraph 16.3.1 of Schedule 18;

“Notice” has the meaning given to it in Clause 17.11.1;

“Novartis 2013 Annual Report” means the 2013 annual report of Novartis AG, including the consolidated financial statements of the Seller’s Group for the financial year ending on 31 December 2013;

“Novartis Branded Inventory” has the meaning given to it in Clause 9.1.1(iii);

“Novartis Branded Literature” has the meaning given to it in Clause 9.1.1(v);

“Novartis Branded Products” has the meaning given to it in Clause 9.1.1(iv);

“Novartis Branded Websites” has the meaning given to it in Clause 9.1.1(ii);

“Novartis Break Fee” has the meaning given in the Implementation Agreement;

“NTT Multi-Basket Tender” has the meaning given to it in Schedule 10;

“NTT Products-Only Tender” has the meaning given to it in Schedule 10;

“Ongoing Clinical Trials” means the ongoing clinical studies sponsored or supported by the Seller’s Group (including post-approval studies) or otherwise recommended by a Governmental Entity, and regulatory commitments in respect of the Products and the Pipeline Products, listed in Schedule 22 and “Ongoing Clinical Trial” shall mean any one of them;

“Out-Licensing Programme” means the out-licensing and enforcement of Intellectual Property Rights that are not used in or developed for the Business and generally relate to base technology useful in drug discovery and/or manufacturing processes, including any contracts or Intellectual Property Rights related thereto but excluding the Beta Interferon Patent Rights;

“Out-Licensing Programme Intellectual Property Rights” means the Intellectual Property Rights used in relation to the Out-Licensing Programme;

“Out of Scope Patent” means any Patent of the Seller’s Group at the Closing Date, but excluding (i) the Transferred Intellectual Property Rights; (ii) any Patents licensed under the Purchaser Intellectual Property Licence Agreement; (iii) Out-Licensing Programme Intellectual Property Rights; and (iii) any Patents in any Non-strategic Assets;

“Owned Information Technology” means:

(i)in the case of Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd, all of the Information Technology owned by it;

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(ii)in the case of Novartis Vaccines and Diagnostics GmbH, the Site Specific Information Technology that is located in the datacentres at the building “H1” located at Emil-von-Behring-Straße 76, 35041 Marburg, Germany and the building “N310” located at Emil-von-Behring-Straße 200, 35041 Marburg, Germany;

(iii)in the case of Chiron Behring Vaccines Private Limited, the Site Specific Information Technology that is located in the datacentre at Plot Nos. 3501/A, 3502 & 3503/A, Post Box No. 94, GIDC Estate, Ankleshwar — 393 002. Dist: Bharuch, Gujarat, India (First Floor of admin building); and

(iv)in the case of Novartis Vaccines and Diagnostics S.r.l, the Site Specific Information Technology that is located in the datacentre at Building 15, Via Fiorentina,1, 53100 Siena Italy and Building 53, Località Bellaria Rosia, 53018 Sovicille (Si) Italy,

including the Information Technology set out in Part 2 of Schedule 27;

“Owned Intellectual Property Contracts” means the Contracts Exclusively Related to the Business which relate to Intellectual Property Rights and that are held by the Vaccines Group Companies, including any such Contracts set out in Part 2 of Schedule 4;

“Owned Intellectual Property Rights” means the Intellectual Property Rights of any Vaccines Group Company to the extent Exclusively Related to the Business, including the Intellectual Property Rights of any Vaccines Group Company set out in Part 1 of Schedule 4;

“Patent Term Extensions” means any and all extensions of a term of a Patent granted under the Patent laws or regulations of any country, the European Union (including any supplementary protection certificate), or any other Governmental Entity;

“Patents” means patents, design patents, patent applications, and any reissues, re-examinations, divisionals, continuations, continuations-in-part, provisionals, and extensions thereof or any counterparts to any of the foregoing (including rights resulting from any post-grant proceedings relating to any of the foregoing);

“PA Transfer Date” means, in relation to a Product or Product Application, the date upon which the relevant Governmental Entity approves and notifies the Product Approval or Product Application (as applicable) naming the Purchaser or the relevant Affiliate of the Purchaser (or designee thereof) as the holder of such Product Approval or Product Application in the relevant country or territory covered by that Product Approval or Product Application;

“Payables and Receivables Plan” has the meaning given to it in Clause 8.6;

“Payment” has the meaning given to it in Clause 1.9;

“Permit” has the meaning given to it in paragraph 9.2 of Schedule 18;

“Permitted Encumbrance” means:

(i)Encumbrances imposed by Applicable Law;

(ii)Encumbrances imposed in the ordinary course of business which are not yet due and payable or which are being contested in good faith;

(iii)Encumbrances which are listed in Schedule 7;

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(iv)pledges or deposits to secure obligations under Applicable Law relating to workers’ compensation, unemployment insurance or to secure public or statutory obligations; and

(v)liens, title retention arrangements or deposits to secure the performance of bids, trade contracts (other than for borrowed money), conditional sales contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of the Business;

“Personal Property” means all tangible personal property legally and beneficially owned by the Seller’s Group which is Predominantly Related to the Business and is located at a Property at Closing;

[***];

[***];

“Pipeline Product” means:

(i)each product in development by the Business set out under the heading “Pipeline Products” in Part 3 of Schedule 8; and

(ii)any other product in development Exclusively Related to the Business;

“Pipeline Product Approvals” means the approvals in relation to the Pipeline Products;

“PRC” means the People’s Republic of China which, for the purpose of this Agreement, shall exclude the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan;

“PRC Transfer Documents” means the Local Transfer Agreement in respect of the transfer of the Tianyuan Shares from the relevant Share Seller to the Purchaser, the amended joint venture contract and amended articles of association of Tianyuan JV, each to be submitted to the NDRC and MOFCOM in connection with the approval of (i) each of those documents and (ii) the sale and transfer of the Tianyuan Shares from the relevant Share Seller to the Purchaser;

“Predominantly Related to the Business” means exclusively or predominantly related to, or used or held for use exclusively or predominantly, in connection with the Business;

“Proceedings” means any legal actions, proceedings, suits, litigations, prosecutions, investigations, enquiries, mediations or arbitrations;

“Product Applications” means all applications for Product Approval filed with respect to Products Under Registration, with each individual application being a “Product Application”;

“Product Approvals” means all permits, licences, certificates, clearances, registrations or other authorisations or consents issued by any Governmental Entity to the Seller or one of its Affiliates with respect to the Products or the use, research, development, marketing, distribution or sale thereof, including the Marketing Authorisations;

“Product Filings” means all filings, written representations, declarations, listings, registrations, reports or submissions with or to any Governmental Entity, including adverse event reports and all submitted data relating to each Product;

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“Product Liabilities” means any Liability arising out of, relating to or resulting from actual or alleged harm, injury, damage or death to persons in connection with the use of any product (including in any clinical trial or study);

“Product Packaging” means (i) the primary packaging in which the Novartis Branded Products and Novartis Branded Inventory are packaged (e.g., blister packs, bottles with labels); (ii) the secondary packaging in which Novartis Branded Products and Novartis Branded Inventory are packaged (e.g., boxes containing blister packs or bottles); and (iii) any leaflets contained inside the secondary packaging;

“Product Partners” means any third parties which pursuant to a Contract with the Seller or any Affiliate of the Seller co-develop, co-promote, co-market, or otherwise have a licence or other right to research, develop, manufacture, promote, distribute, market, or sell any Product, including all manufacturers and suppliers of any such Product;

“Products” means:

(i)the products set out under the heading “Products” in Part 3 of Schedule 8; and

(ii)any other products Exclusively Related to the Business;

“Products-Only Tender” means any Tender that relates solely to the Products;

“Products Under Registration” means:

(i)the products set out under the heading “Products Under Registration” in Part 3 of Schedule 8, which are pending Product Approval as of the date hereof; and

(ii)any other products under registration Exclusively Related to the Business;

“Properties” means the Company Real Properties and the Transferred Real Properties and “Property” means any one of them;

“Proprietary Information” means all confidential and proprietary information of the Seller or its Affiliates that is Predominantly Related to the Business, including confidential Medical Information, confidential Know How and confidential Commercial Information;

“Purchase Price” has the meaning given to it in Clause 3.1.1;

“Purchase Price Bank Account” means the account notified by the Seller to the Purchaser no later than two Business Days prior to the Closing Date;

“Purchaser Articles of Association” means the articles of association of the Purchaser in force and effect from time to time;

“Purchaser Intellectual Property Licence Agreement” means the agreement between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates on terms consistent with the Agreed Terms, to be entered into at Closing, in respect of the grant of licences from the Seller to the Purchaser of certain Intellectual Property Rights;

“Purchaser’s Disagreement Notice” has the meaning given to it in paragraph 1.3 of Schedule 16;

“Purchaser’s Group” means the Purchaser and its Affiliates from time to time;

“Purchaser’s Lawyers” means Slaughter and May of One Bunhill Row, London EC1Y 8YY, United Kingdom;

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“Purchaser Shareholder Meeting” has the meaning given to it in Clause 4.1.6;

“Purchaser Shareholder Resolution” has the meaning given to it in Clause 4.1.6;

“Purchaser Shareholders” means the holders of ordinary shares in the capital of the Purchaser from time to time;

“Rebate” means any amount payable or repayable to customers or Governmental Entities in respect of a contractual rebate or other rebate including under applicable Healthcare Laws (or under similar laws or regulations) due on sales of products;

“Registered Intellectual Property Rights” means Intellectual Property Rights that are registered, issued, filed, or applied for under the authority of any Governmental Entity;

“Registered Transferred Intellectual Property Rights” means all Transferred Intellectual Property Rights that are Registered Intellectual Property Rights;

“Registered Vaccines Group Intellectual Property Rights” means all Vaccines Group Intellectual Property Rights that are Registered Intellectual Property Rights;

“Registration” has the meaning given to it in Clause 9.3.2(ii);

“Regulation” has the meaning given to it in Clause 4.1.1;

“Relevant Employees” means the Relevant Vaccines Business Employees and the Relevant Vaccines Group Company Employees and “Relevant Employee” means any one of them;

“Relevant Employers” means the Business Sellers and such other members of the Seller’s Group who employ the Relevant Vaccines Business Employees;

“Relevant Matter” has the meaning given to it in the definition of Material Adverse Effect;

“Relevant Part” means:

(i)with respect to any Shared Business Contracts or Mixed Affiliate Quality Agreement, the relevant part of such Shared Business Contract or Mixed Affiliate Quality Agreement (as the case may be) which relates exclusively to the Vaccines Group; and

(ii)with respect to any Mixed Contract, the relevant part of such Mixed Contract which relates exclusively to the Seller’s Group Retained Business, any product other than the Products or any Excluded Asset;

“Relevant Parties” has the meaning given to it in paragraph 1.1.1 of Schedule 17;

“Relevant Pension and Employment Liability” means (i) any Liabilities assumed by the Purchaser or a member of the Purchaser’s Group as contemplated by Schedule 11; and (ii) any Transferred Employee Benefit Liabilities (as defined in Schedule 12) which the Purchaser agrees to assume in accordance with Schedule 12;

“Relevant Period” means the period of two years prior to the date of this Agreement;

“Relevant Persons” has the meaning given to it in Clause 8.2.2;

[***];

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“Relevant Vaccines Business Employees” means the Vaccines Business Employees immediately prior to the Closing Date and “Relevant Vaccines Business Employee” means any one of them;

“Relevant Vaccines Group Company Employees” means the Vaccines Group Company Employees immediately prior to the Closing Date (excluding any who do not work wholly or substantially in the Business (as carried on by the Vaccines Group)) and “Relevant Vaccines Group Company Employee” means any one of them;

“Relevant Working Day” means a normal working day in the relevant jurisdiction and excludes a Saturday or Sunday or public holiday in the relevant jurisdiction;

“Reorganisation” has the meaning given to it in Clause 2.3.5;

“Reporting Accountants” means the London office of Ernst & Young or, if that firm is unable or unwilling to act in any matter referred to them under this Agreement, the London office of Deloitte or, if that firm is also unable or unwilling to act in any matter referred to them under this Agreement, an internationally recognised and independent firm of accountants who does not act as auditor to the Seller or the Purchaser, to be agreed by the Seller and the Purchaser within seven days of a notice by one to the other requiring such agreement or, failing such agreement, to be nominated on the application of either of them by or on behalf of the Institute of Chartered Accountants of England and Wales;

“Representatives” means, in relation to any party, any of its and/or any other member of the Purchaser’s Group’s or Seller’s Group’s directors, officers, employees, agents, representatives, bankers, auditors, accountants, financial advisers, legal advisers and any other professional advisers;

“Required Item” has the meaning given to it in paragraph 2 of Schedule 13;

“Required Notifications” has the meaning given to it in Clause 4.2.1;

“Restricted Vaccines Group Employee” means any Transferred Employee who is at or above grade GG5 or GJFA3 (or, in either case, the Purchaser’s equivalent from time to time);

“Retained Information Technology” means all Information Technology of the Vaccines Group, excluding the Transferred Information Technology and the Owned Information Technology;

“Retained Inventory” has the meaning given to it in Clause 2.7.1;

“Rosia Site” means the Properties located in Rosia (Italy) at which the Vaccines Group undertakes Manufacturing activities;

“Royalty” means any royalty payable in respect of sales of Products;

“Royalty Payments” has the meaning given to it in paragraph 10 of Schedule 17;

“Sanctions Laws” has the meaning given to it in paragraph 9.5 of Schedule 18;

“Secondment Agreement” means the secondment agreement made between Novartis Vaccines and Diagnostics, Inc., Novartis Pharma AG and GlaxoSmithKline LLC dated on or about the Closing Date relating to the secondment of [***];

“Seller Allowance Rebate and Royalty Amount” means any Allowance, Rebate or Royalty payable after the Effective Time by the Purchaser or any member of the

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Purchaser’s Group (including any Delayed Vaccines Group Company), to the extent it relates to the sales of any products made prior to the Effective Time;

“Seller Marks” means any of the marks (including in either or both logo and local script form) “Novartis”, “Sandoz”, “Alcon” and “Ciba Vision” used alone or in combination with other words or marks;

“Seller Restricted Marks” means any of the marks (including in either or both logo and local script form) “Novartis”, “Sandoz”, “Alcon” and “Ciba Vision”;

“Seller Partner” means any counterparty to a development, contract research, commercialisation, manufacturing, distribution, sales, marketing, supply, consulting or other collaboration Contract with the Seller or any Affiliate of the Seller;

“Seller’s Disagreement Notice” has the meaning given to it in paragraph 1.4 of Schedule 16;

“Seller’s Group” means the Seller and its Affiliates from time to time;

“Seller’s Group Insurance Policies” means all insurance policies (whether under policies maintained with third party insurers or any member of the Seller’s Group), other than Vaccines Group Insurance Policies, maintained by the Seller or any member of the Seller’s Group in relation to the Vaccines Group or under which, immediately prior to Closing, any Vaccines Group Company or the Seller or member of the Seller’s Group in relation to the Vaccines Group Businesses is entitled to any benefit, and “Seller’s Group Insurance Policy” means any one of them;

“Seller’s Group Retained Business” means, from time to time, all businesses of the Seller’s Group, including, the Influenza Business, but excluding the Business;

“Seller’s Knowledge” has the meaning given to it in Clause 10.1.4;

“Seller’s Lawyers” means Linklaters LLP of One Silk Street, London EC2Y 8HQ, United Kingdom;

“Seller’s Warranties” means the warranties given by the Seller pursuant to Clause 9 and Schedule 18, and “Seller’s Warranty” means any one of them;

“Separation” has the meaning given to it in paragraph 3.4 of Schedule 10;

“Service Provider” means an Associated Person who is a legal person;

“Share Seller” means, in relation to each of the Companies and Minority Interest Entities referred to in column (2) of Schedule 1, the company whose name is set out opposite that Company or Minority Interest Entity in column (1);

“Shared Business Contracts” means any Contract which:

(i)is not a Transferred Contract; and

(ii)relates both:

(A)to the Business or any part of the Business to be transferred to the Purchaser at Closing; and

(B)to any part of the Seller’s Group Retained Business, any product other than the Products, or any Excluded Asset,

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and to which a member of the Seller’s Group (excluding any Vaccines Group Company) is a party or in respect of which a member of the Seller’s Group (excluding any Vaccines Group Company) has any right, liability or obligation at Closing (including the Multi-Basket Tenders), and “Shared Business Contract” shall mean any of them;

“Shared Employees” means employees of any member of the Seller’s Group who work wholly or substantially in the Business (as carried on by the Vaccines Group) pursuant to service level agreements with the Vaccines Group Companies and other members of the Seller’s Group but excluding, for the avoidance of any doubt, any Vaccines Group Company Employee and any employees included on the list of employees provided pursuant to paragraph 15.2 of Schedule 18;

“Shares” means the shares in the capital of the Companies and the Minority Interest Entities specified in Schedule 1;

“Siena Site” means the Properties located in Siena (Italy) at which the Vaccines Group undertakes Manufacturing activities;

“Site Specific Information Technology” means Information Technology that is owned by a member of the Seller’s Group and located at a Property which is used for research and development or Manufacturing activities conducted at that Property or the removal of which would compromise the research and development or manufacturing activities or the integrity of the local network and Information Technology operations at such Property, but shall exclude any devices or application based infrastructure;

“Specified Excluded Businesses” means the businesses and activities of: (i) Roche Holding AG which, for the avoidance of doubt, is not an Affiliate and (ii) Novartis Institutes for BioMedical Research (and other activities of a similar type to those currently conducted by Novartis Institutes for BioMedical Research);

“Statement of Net Assets” means the statement of net assets as at the Statement of Net Assets Date, as set out in Part 2 of Schedule 23;

“Statement of Net Assets Date” means 31 December 2013;

“Statement of Net Assets Rules” means the rules in accordance with which the Statement of Net Assets was prepared, as set out in Part 2 of Schedule 23;

“Subsidiaries” means the companies listed in paragraph 2 of Schedule 2 and “Subsidiary” means any one of them;

“Target Asset Agreements” has the meaning given to it in the Implementation Agreement;

“Taxation” or “Tax” means all supra-national, federal, state, county, local, municipal, foreign and other taxes, assessments, duties or similar charges of any kind whatsoever (other than deferred tax), including all corporate franchise, income, gross receipts, sales, use, ad valorem, receipts, value added, profits, licence, withholding, payroll, employment, excise, premium, property, net worth, capital gains, transfer, stamp, documentary, social security, alternative minimum, occupation, recapture and other taxes regardless as to whether any such taxes, assessments, duties or similar charges are chargeable directly or primarily against or attributable directly or primarily to a Vaccines Group Company or any other person, and including all interest, penalties and additions imposed with respect to such amounts by any Tax Authority or with respect to any failure to file any Tax Return;

“Tax Adjustment” means the amount by which:

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(a)the aggregate amount of the income taxes and sales taxes payable by the Vaccines Group Companies, as at the Effective Time and as derived from the Closing Statement;

exceeds or is less than

(b)the aggregate amount of the current income tax and sales tax receivables of the Vaccines Group Companies as at the Effective Time as derived from the Closing Statement,

and any such excess amount shall be treated as a positive number and any shortfall shall be treated as a negative amount;

“Tax Authority” has the meaning ascribed to it in the Tax Indemnity;

“Tax Consolidation” has the meaning ascribed to it in the Tax Indemnity;

“Tax Group” has the meaning ascribed to it in the Tax Indemnity;

“Tax Indemnity” means the deed of covenant against taxation, in the Agreed Terms, to be entered into on the Closing Date between the Seller and the Purchaser;

“Tax Return” has the meaning ascribed to it in the Tax Indemnity;

“Tax Warranties” means the Seller’s Warranties set out in paragraph 13 of Schedule 18;

“Tender” means any Contract or arrangement to which a member of the Seller’s Group is a party (itself or through an agent) with a third party, entered into following a call for a tender by the relevant third party, for the supply by the Seller’s Group of products including the Products in a Market and pursuant to which Products may be sold after Closing;

“Third Party” has the meaning given to it in Clause 17.4.2;

“Third Party Claim” has the meaning given to it in Clause 12.4;

“Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from third parties for (i) the assignment or transfer to a member of the Purchaser’s Group of any of the Transferred Contracts, Transferred Intellectual Property Contracts or Shared Business Contracts or Co-Owned Vaccines Group Intellectual Property Rights or Transferred Plant and Equipment or Mixed Contracts (ii) the Mixed Contracts Separation of the Mixed Contracts and (iii) Separation, as the case may be, and “Third Party Consent” means any one of them;

“Third Party Indebtedness” means the aggregate amount as at the Effective Time of all outstanding Indebtedness owed by the Vaccines Group Companies to any third party less any Indebtedness owed by any third party to any Vaccines Group Company as derived from the Closing Statement (but excluding any item included in respect of any Vaccines Group Companies’ Cash Balances or Intra-Group Non-Trade Payables), and, for the purposes of this definition, third party shall exclude any member of the Seller’s Group;

“Threshold Amount” means, in the case of Ixiaro, US$ 50 million, and in the case of Encepur, US$ 200 million;

“Tianyuan JV” means Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd., whose particulars are specified in Paragraph 1 of Schedule 2;

[***];

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“Tianyuan Shares” means the 85 per cent. of the equity interests in Tianyuan JV which are specified in Schedule 1;

[***];

“Time-Limited Excluded Liability” means an Excluded Liability which is:

(i)a Contracts Liability;

(ii)an Environmental Liability;

(iii)a Manufacturing Liability; or

(iv)a Commercial Practices Liability;

“Trademarks” means trademarks, service marks, trade names, certification marks, service names, industrial designs, brand names, brand marks, trade dress rights, identifying symbols, logos, emblems, and signs or insignia and all goodwill of the business in relation to which any of the foregoing are used (but no other or greater goodwill);

“Transaction” has the meaning given to it in Clause 4.1.1;

“Transfer Regulations” means the relevant national measure by which the employment of a Relevant Vaccines Business Employee automatically transfers to the Purchaser or a relevant member of the Purchaser’s Group;

“Transferred Accounts Payable” means all trade accounts and notes payable arising in the ordinary course of the Seller’s Group (other than any Vaccines Group Company) to the extent related to the Business, and outstanding at the Effective Time, together with any unpaid financing charges accrued thereon;

“Transferred Accounts Receivable” means all trade accounts and notes receivable arising in the ordinary course of the Seller’s Group (other than any Vaccines Group Company) to the extent related to the Business, and outstanding at the Effective Time, together with any unpaid financing charges accrued thereon;

“Transferred Affiliate Quality Agreement” means:

(i)any Affiliate Quality Agreement that is not a Mixed Affiliate Quality Agreement; and

(ii)the Relevant Part of any Mixed Affiliate Quality Agreement;

“Transferred Books and Records” means all books, ledgers, files, reports, plans, records, manuals and other materials (in any form or medium) to the extent of, or maintained predominantly for, the Business by the Seller’s Group (excluding the Vaccines Group Companies) (other than emails), but excluding:

(i)any such items to the extent that: (A) they are related to any Excluded Assets or Excluded Liabilities, (B) they are related to any corporate, Tax, human resources or stockholder matters of the Seller or its Affiliates (other than the Vaccines Group Companies), (C) any Applicable Law prohibits their transfer, (D) any transfer thereof otherwise would subject the Seller or any of its Affiliates to any material liability or (E) they are retained by the Seller in accordance with Clause 8.15;

(ii)any laboratory notebooks to the extent containing research and development information unrelated to the Business; and

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(iii)any books and records (including but not limited to the content of any personnel files) kept by the Seller’s Group relating to the employment of the Transferred Employees with the Seller’s Group;

“Transferred Contracts” means:

(i)the Contracts, other than Transferred Intellectual Property Contracts, that are Predominantly Related to the Business between a member of the Seller’s Group (excluding the Vaccines Group Companies), on the one hand, and any third party, on the other hand (other than this Agreement and any Ancillary Agreement), including, without limitation, Products-Only Tenders, but excluding any Excluded Contract;

(ii)any Transferred Affiliate Quality Agreement; and

(iii)subject to the Purchaser making an election under paragraph 1.3 of Schedule 10, the Relevant Part of the Shared Business Contracts;

“Transferred Employees” means (i) the Vaccines Business Employees to whom the Purchaser (or a member of the Purchaser’s Group) offers employment and who accept such employment and become employed by the Purchaser (or a member of the Purchaser’s Group) in accordance with Schedule 11; (ii) any Relevant Vaccines Business Employees who transfer to the Purchaser (or a member of the Purchaser’s Group) by operation of the Transfer Regulations and do not object to such transfer (to the extent permitted by the Transfer Regulations) in accordance with Schedule 11; and (iii) the Relevant Vaccines Group Company Employees, and “Transferred Vaccines Business Employees” means the employees in (i) and (ii), “Transferred Vaccines Group Company Employees” means the employees in (iii) and “Transferred Employee”, “Transferred Vaccines Business Employee” and “Transferred Vaccines Group Company Employee” respectively means any one of them;

“Transferred Information Technology” means:

(i)in the case of Shanghai Novartis Trading Limited, the Site Specific Information Technology; and

(ii)in the case of Novartis Korea Ltd, the Site Specific Information Technology that is located in the datacentre at 17fl. Yonsei Bldg., Tongil-ro 10, Joong-gu, Seoul 100-753,

including the Information Technology set out in Part 1 of Schedule 27;

“Transferred Intellectual Property Contracts” means Contracts Exclusively Related to the Business which relate to Intellectual Property Rights (but excluding the rights under any such Contracts that are held by the Vaccines Group Companies), including any such Contracts set out in Part 2 of Schedule 4 and the Merck 2012 Licence;

“Transferred Intellectual Property Rights” means the Intellectual Property Rights of any member of the Seller’s Group (other than a Vaccines Group Company) Exclusively Related to the Business, including the Intellectual Property Rights of any member of the Seller’s Group (other than a Vaccines Group Company) set out in Parts 1 and 3 of Schedule 4;

“Transferred Inventory” means all inventories (including Manufacturing Inventory and Manufacturing Stocks and In-Market Inventory), wherever located, including all raw materials, work in progress, finished Products and packaging and labelling material in

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respect of the Products and otherwise Predominantly Related to the Business (but excluding any such items held by the Vaccines Group Companies) whether held at any location or facility of a member of the Seller’s Group or in transit to a member of the Seller’s Group, in each case as of the Effective Time;

“Transferred Leased Real Properties” has the meaning given to it in paragraph 1.1 of Part 4 of Schedule 3;

“Transferred Owned Real Properties” has the meaning given to it in paragraph 1.1 of Part 4 of Schedule 3;

“Transferred Plant and Equipment” means:

(i)the Transferred Information Technology; and

(ii)all plant, furniture, furnishings, vehicles, equipment, tools and other tangible Personal Property (other than Transferred Inventory or Transferred Information Technology) of the Seller’s Group that are Predominantly Related to the Business (but excluding any such items owned by the Vaccines Group Companies);

“Transferred Real Properties” means:

(i)the Transferred Owned Real Properties;

(ii)the Transferred Leased Real Properties; and

(iii)all other freehold, leasehold or other immovable property Predominantly Related to the Business, other than any freehold, leasehold or other immovable property within the definition of “Excluded Assets”,

and “Transferred Real Property” means any one of them;

“Transitional Distribution Services Agreement” means the transitional distribution services agreement to be entered into between the Seller and the Purchaser at Closing, the quality agreement thereto and each local agreement entered pursuant to such transitional distribution services agreement on terms consistent with the Agreed Terms;

“Transitional Services Agreement” means the transitional services agreement to be entered into between the Seller and the Purchaser at Closing (and each local agreement entered pursuant to such transitional services agreement) on terms consistent with the heads of terms in the Agreed Terms, pursuant to which: (i) the Seller will provide or procure the provision of certain transitional services to the Purchaser; and (ii) the Purchaser will provide or procure the provision of certain transitional services to the Influenza Business;

“Transitional Trademark Licence” has the meaning given to it in Clause 9.1.1;

“US Benefit Plans” means all United States “employee benefit plans” (within the meaning of section 3(3) of ERISA), severance, change in control or employment, vacation, incentive, bonus, stock option, stock purchase, or restricted stock plans, programmes, agreements or policies benefiting the Vaccines Business Employees;

“Vaccines” means a preparation comprising (i) an antigen, (ii) an epitope of an antigen, or (iii) a polynucleotide encoding an antigen derived directly or indirectly from, or mimicking, an agent (including, but not limited to, a compound, a toxin, a microbe including a pathogen or component thereof), wherein such preparation may further comprise a composition capable of modulating an immune response, including preparations intended to improve a human’s immune response to a microbe that has been linked to cancer,

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wherein said preparation is intended for purposes of inducing an immune response in a human, including, but not limited to, a functional immune response or immunological memory to the particular or related antigen or agent, thereby causing or improving an immune response to a challenge by the particular or related agent. “Vaccines” shall not include preparations intended to improve a human’s immune response to or to treat other non-infectious conditions, whether or not related to pathogens, such as certain autoimmune diseases, Alzheimer’s disease and certain cancers, or non-antigen preparations comprising immune system components intended to function analogous to corresponding native components within the patient, such as antibodies or white blood cells (both unmodified or modified to better treat disease);

“Vaccines Business Employees” means the employees of any member of the Seller’s Group who work wholly or substantially in the Business (as carried on by the Vaccines Group) from time to time including, for the avoidance of any doubt, the International Assignees other than the Vaccines Group Company Employees, the Excluded Employees and the Shared Employees and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at the date of this Agreement” and “Vaccines Business Employee” means any one of them;

“Vaccines Business Manufacturing and Supply Agreements” means the MenA Fill Finish Manufacturing and Supply Agreement, the MenACWY Fill Finish Clinical Supply Agreement and the MenB Manufacturing and Supply Agreement;

“Vaccines Business Pharmacovigilance Agreement” means the pharmacovigilance agreement between the Seller or a member of the Seller’s Group and the Purchaser or a member of the Purchaser’s Group, to be entered into at Closing, in respect of pharmacovigilance and regulatory matters relating to certain Vaccines Business products;

“Vaccines Group” means the Vaccines Group Companies and the Vaccines Group Businesses, taken as a whole;

“Vaccines Group Businesses” means the businesses of the Business (but excluding the businesses of the Business carried on by the Vaccines Group Companies) as set out in Clause 2.3.1, but subject always to Clause 2.3.2, and “Vaccines Group Business” means any one of them;

“Vaccines Group Companies” means the Companies and the Subsidiaries, and “Vaccines Group Company” means any one of them;

“Vaccines Group Companies’ Cash Balances” means the aggregate amount of the Cash Balances held by or on behalf of the Vaccines Group Companies (excluding 50 per cent. of the Cash Balances held by Chiron Behring Vaccines Private Limited and Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd. above US$1,000,000) at the Effective Time;

“Vaccines Group Company Employees” means the employees from time to time of any of the Vaccines Group Companies other than the Excluded Employees, and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at the date of this Agreement”, and “Vaccines Group Company Employee” means any one of them;

“Vaccines Group Goodwill” means all goodwill of the Vaccines Group Businesses, but excluding any Trademark goodwill;

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“Vaccines Group Information Technology” means the Transferred Information Technology and the Owned Information Technology;

“Vaccines Group Insurance Policies” means all insurance policies held exclusively by and for the benefit of the Vaccines Group Companies and “Vaccines Group Insurance Policy” means any one of them;

“Vaccines Group Intellectual Property Contracts” means the Transferred Intellectual Property Contracts and the Owned Intellectual Property Contracts;

“Vaccines Group Intellectual Property Rights” means the Transferred Intellectual Property Rights and the Owned Intellectual Property Rights;

“Vaccines Patent” means any Vaccines Group Intellectual Property Right which is a Patent;

“Variation” has the meaning given to it in Clause 9.3.2(iii);

“VAT” means within the European Union such Taxation as may be levied in accordance with (but subject to derogations from) Council Directive 2006/112/EC and outside the European Union any Taxation levied by reference to added value or sales;

“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988 of the United States;

“Working Capital” means the aggregate amount of the working capital of the Vaccines Group Companies and Vaccines Group Businesses set out in the Closing Statement (which shall not include any amount in respect of Tax), at the Effective Time, as derived from the Closing Statement; and

“Working Capital Adjustment” means the amount by which the Working Capital exceeds or is less than the Base Working Capital, any such excess being treated as a positive amount and any such shortfall being treated as a negative amount.

1.2Shares

References to shares shall include, where relevant, quotas.

1.3Singular, plural, gender

References to one gender include all genders and references to the singular include the plural and vice versa.

1.4References to persons and companies

References to:

1.4.1a person include any individual, company, partnership or unincorporated association (whether or not having separate legal personality); and

1.4.2a company include any company, corporation or any body corporate, wherever incorporated.

1.5Schedules etc.

References to this Agreement shall include any Recitals and Schedules to it and references to Clauses and Schedules are to Clauses of, and Schedules to, this Agreement. References to paragraphs and Parts are to paragraphs and Parts of the Schedules.

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1.6Reference to documents

References to any document (including this Agreement), or to a provision in a document, shall be construed as a reference to such document or provision as amended, supplemented, modified, restated or novated from time to time.

1.7References to enactments

Except as otherwise expressly provided in this Agreement, any express reference to an enactment (which includes any legislation in any jurisdiction) includes references (i) to that enactment as amended, consolidated or re-enacted by or under any other enactment before or after the date of this Agreement; (ii) any enactment which that enactment re-enacts (with or without modification); and (iii) any subordinate legislation (including regulations) made before or after the date of this Agreement under that enactment as amended, consolidated or re-enacted as described in paragraph (i) or (ii) above, except to the extent that any of the matters referred to in paragraphs (i) to (iii) above occurs after the date of this Agreement and increases or alters the liability of the Seller or Purchaser under this Agreement.

1.8Information

References to books, records or other information mean books, records or other information in any form including paper, electronically stored data, magnetic media, film and microfilm.

1.9References to “indemnify”

Unless specified to the contrary, references to “indemnify” and “indemnifying” any person against any circumstance include indemnifying and holding that person harmless on an after-Tax basis and:

1.9.1references to the Purchaser indemnifying each member of the Seller’s Group shall constitute undertakings by the Purchaser to the Seller for itself and on behalf of each other member of the Seller’s Group;

1.9.2references to the Seller indemnifying each member of the Purchaser’s Group shall constitute undertakings by the Seller to the Purchaser for itself and on behalf of each other member of the Purchaser’s Group;

1.9.3to the extent that the obligation to indemnify relates to any Shares (including any Vaccines Group Companies) or other assets or liabilities transferred by a Share Seller or Business Seller (as the case may be) to a member of the Purchaser’s Group pursuant to this Agreement, references to the Seller indemnifying the Purchaser and references to the Seller indemnifying the Purchaser or any member of the Purchaser’s Group shall constitute undertakings by the Seller, to indemnify or procure the indemnification of the relevant purchaser of the Shares transferred or to be transferred by that Share Seller or the relevant purchaser of the assets or liabilities transferred or to be transferred by that Business Seller (as the case may be), and references to the Purchaser indemnifying the Seller and references to the Purchaser indemnifying the Seller and each member of the Seller’s Group shall constitute undertakings by the Purchaser to indemnify or procure the indemnification of the relevant member of the Seller’s Group; and

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1.9.4where under the terms of this Agreement one party is liable to indemnify or reimburse another party in respect of any costs, charges or expenses, the payment shall include an amount equal to any VAT thereon not otherwise recoverable by the other party or any member of any group or consolidation of which it forms part for VAT purposes, subject to that party using reasonable endeavours to recover or to procure recovery of such amount of VAT as may be practicable.

For the purposes of this Clause 1.9, indemnifying and holding harmless a person on an “after-Tax basis” means that the amount payable pursuant to the indemnity (the “Payment”) shall be calculated in such a manner as will ensure that, after taking into account:

(i)any Tax required to be deducted or withheld from the Payment and any additional amounts required to be paid by the payer of the Payment in consequence of such withholding;

(ii)the amount and timing of any additional Tax which becomes (or would, but for the use of any credit or other relief which would otherwise have been available to reduce the Tax liabilities of any member of the Seller’s Group, have become) payable by the recipient of the Payment (or a member of the Seller’s Group or the Purchaser’s Group, as the case may be) as a result of the Payments being subject to Tax in the hands of that person; and

(iii)the amount and timing of any Tax benefit which is obtained by the recipient of the Payment (or a member of the Seller’s Group or the Purchaser’s Group, as the case may be) to the extent that such Tax benefit is attributable to the matter giving rise to the indemnity payment or to the receipt of the Payment,

which amount and timing is to be determined by the auditors of the recipient at the shared expense of both relevant parties and is to be certified as such to the party making the Payment, the recipient of the Payment is in no better and no worse after Tax position as that in which it would have been if the matter giving rise to the indemnity payment had not occurred, provided that if either party to this Agreement shall have assigned or novated the benefit of this Agreement in whole or in part or shall, after the date of this Agreement, have changed its Tax residence or the permanent establishment to which the rights under this Agreement are allocated then no Payment to that party shall be increased by reason of the operation of paragraphs (i) to (iii) above to any greater extent than would have been the case had no such assignment, novation or change taken place.

1.10References to wholly or substantially in the Business (as carried on by the Vaccines Group)

References to “wholly or substantially in the Business (as carried on by the Vaccines Group)” in relation to any employee employed by a member of the Seller’s Group means that such employee spends more than 70 per cent. of their time working in the Business (as carried on by the Vaccines Group) at the relevant time.

1.11Legal terms

References to any English legal term shall, in respect of any jurisdiction other than England and Wales, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction.

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1.12Non-limiting effect of words

The words “including”, “include”, “in particular” and words of similar effect shall not be deemed to limit the general effect of the words that precede them.

1.13Currency conversion

1.13.1Subject to Clause 1.13.2, any amount to be converted from one currency into another currency for the purposes of this Agreement shall be converted into an equivalent amount at the Conversion Rate prevailing at the Relevant Date. For the purposes of this Clause 1.13:

“Conversion Rate” means the spot reference rate for a transaction between the two currencies in question as quoted by the European Central Bank on the Business Day immediately preceding the Relevant Date or, if no such rate is quoted on that date, on the preceding date on which such rates are quoted;

“Relevant Date” means, save as otherwise provided in this Agreement, the date on which a payment or an assessment is to be made, save that, for the following purposes, the date shall mean:

(i)for the purposes of Clause 5, the date of this Agreement;

(ii)for the purposes of Clause 7 and Schedules 16 and 23, the Closing Date; or

(iii)for the purposes of Clause 11, the date of this Agreement; and

(iv)for the purposes of the monetary amounts set out in Schedule 18, the date of this Agreement.

1.13.2The conversion of an amount from one currency into another as may be required in connection with the matters contemplated in Schedule 17 shall be carried out in accordance with the accounting policies and practices of the Purchaser’s Group in operation from time to time.

2Sale and Purchase of the Vaccines Group

2.1Sale and Purchase of the Vaccines Group

On and subject to the terms of this Agreement and the Local Transfer Documents:

2.1.1the Seller shall procure that the Share Sellers and Business Sellers shall sell,

and

2.1.2the Purchaser shall purchase or shall procure the purchase by one or more other members of the Purchaser’s Group of,

the Vaccines Group as a going concern.

2.2Sale of the Shares

2.2.1The Seller shall procure that the Share Sellers shall sell the Shares, which shall be sold with Full Title Guarantee free from Encumbrances and together with all rights and advantages attaching to them as at Closing (including the right to receive all dividends or distributions declared, made or paid on or after the Effective Time).

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2.2.2The Seller shall procure that, on or prior to Closing, any and all rights of pre-emption over the Shares and the Shares or equity interests in any subsidiaries are waived irrevocably by the persons entitled thereto.

2.3Sale of the Vaccines Group Businesses

2.3.1The Seller shall sell, or shall procure that the Business Sellers shall sell, the assets comprising the Vaccines Group Businesses, under this Agreement or, where relevant, the Local Transfer Documents with Full Title Guarantee (save in respect of the Transferred Intellectual Property Rights and the Abandoned Patent Applications) and free from Encumbrances other than Permitted Encumbrances (save for the Transferred Real Properties, which shall be sold free from Encumbrances other than as provided in paragraph 1.9 of Schedule 3), such assets being:

(i)the Transferred Real Properties;

(ii)the Transferred Plant and Equipment;

(iii)the Transferred Inventory;

(iv)the Transferred Accounts Receivable;

(v)the Transferred Books and Records;

(vi)subject to and in accordance with Schedule 10, the Transferred Intellectual Property Rights;

(vii)subject to and in accordance with Schedule 10, the Transferred Intellectual Property Contracts;

(viii)subject to and in accordance with Schedule 10, the Transferred Contracts;

(ix)subject to and in accordance with Schedule 8, all Product Approvals and all Product Applications and all other permits, licences, certificates, registrations, marketing or other authorisations or consents issued by a Governmental Entity Predominantly Related to the Business and not held by the Vaccines Group Companies;

(x)subject to and in accordance with Schedule 8, all Marketing Authorisation Data not held by the Vaccines Group Companies;

(xi)all Business Information not held at Closing by the Vaccines Group Companies;

(xii)all rights of the Purchaser, its Affiliates and the Vaccines Group Companies as contemplated by Schedule 11 and Schedule 12;

(xiii)the Abandoned Patents;

(xiv)the Vaccines Group Goodwill; and

(xv)all other property, rights and assets owned or held by the Seller’s Group (other than the Vaccines Group Companies) and Predominantly Related to the Business at Closing (other than any property, rights and assets of the Vaccines Group expressly excluded from the sale under this Agreement).

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2.3.2There shall be excluded from the sale of the Vaccines Group under this Agreement and the Local Transfer Documents the following:

(i)the Seller’s Group Retained Business, including the Influenza Business;

(ii)the Non-strategic Assets to the extent not transferred to the Purchaser or a member of the Purchaser’s Group at Closing;

(iii)the Out-Licensing Programme;

(iv)any Intellectual Property Right that is not a Vaccines Group Intellectual Property Right (subject to the Purchaser Intellectual Property Licence Agreement and any Contract relating to Intellectual Property Rights that is not a Vaccines Group Intellectual Property Contract or the Relevant Part of a Shared Business Contract);

(v)the Retained Information Technology;

(vi)the Seller Marks;

(vii)any product and any permits, licences, certificates, registrations, marketing or other authorisations or consents issued by any Governmental Entity in respect of any products, or any applications therefor, other than (a) the Products, Product Approvals, Products Under Registration and Pipeline Product Approvals; and (b) Permits Predominantly Related to the Business;

(viii)all cash, marketable securities and negotiable instruments, and all other cash equivalents, of the Seller’s Group (other than the Vaccines Group Companies);

(ix)all real property and any leases therefor and interests therein, other than the Properties;

(x)the land and buildings of the Seller’s Group at 4560 Horton Street, Emeryville CA, United States of America;

(xi)the land and buildings of the Seller’s Group at Jaboatão dos Guararapes, State of Pernambuco (Brazil), together with all buildings, fixtures, and improvements erected thereon, and any other assets, rights and Contracts related thereto;

(xii)the company seal, minute books, charter documents, stock or equity record books and such other books and records pertaining to the Seller or its Affiliates (other than the Vaccines Group Companies and the Transferred Books and Records), as well as any other records or material relating to the Seller or its Affiliates (other than Vaccines Group Companies) generally and not involving or related to the Vaccines Group;

(xiii)any right of the Seller or its Affiliates to be indemnified in respect of Assumed Liabilities;

(xiv)all Tax assets (including Tax refunds and prepayments), other than Tax Assets of any Vaccines Group Company);

(xv)all Tax Returns of the Seller’s Group (other than the Vaccines Group Companies) and all Tax Returns relating to Tax Groups of which persons

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other than Vaccines Group Companies are members and, in each case, all books and records (including working papers) related thereto;

(xvi)any rights in respect of any insurance policies of the Seller’s Group as provided in Clause 15;

(xvii)all artwork, paintings, drawings, sculptures, prints, photographs, lithographs and other artistic works of the Seller’s Group that are not embodiments of Vaccines Group Intellectual Property Rights;

(xviii)any rights of the Seller’s Group (other than the Vaccines Group Companies) under any Intra-Group Non-Trade Payables or Intra-Group Non-Trade Receivables (excluding Transferred Accounts Receivable);

(xix)any rights of the Seller or its Affiliates (other than the Vaccines Group Companies) contemplated by Schedule 11 and Schedule 12;

(xx)any equity interest in any person other than a Vaccines Group Company or a Minority Interest Entity;

(xxi)the Excluded Contracts;

(xxii)all rights of the Seller’s Group under this Agreement and the Ancillary Agreements;

(xxiii)the Purchase Price Bank Account;

(xxiv)the Manufacturing, production and research activity carried on by the Seller’s Group at the Holly Springs Site; and

(xxv)the Diagnostics GESA.

2.3.3The Seller agrees to procure the transfer (to the extent it is able so to do) and the Purchaser agrees to accept (or procure the acceptance by another member of the Purchaser’s Group of) the transfer of, and to assume, pay, satisfy, discharge, perform or fulfil (or procure that another member of the Purchaser’s Group will assume, pay, satisfy, discharge, perform or fulfil) the Assumed Liabilities with effect from Closing.

2.3.4Clause 2.3.3 shall not apply to, and the Purchaser shall not be obliged to accept (or procure the acceptance by another member of the Purchaser’s Group of), the transfer of or to assume, pay, satisfy, discharge, perform or fulfil, or procure that another member of the Purchaser’s Group will assume, pay, satisfy, discharge, perform or fulfil:

(i)any Excluded Liability; or

(ii)any Liability to the extent it relates to an Excluded Asset.

2.3.5Without prejudice to Clauses 2.1, 2.2, 2.3.1 to 2.3.4, 2.4 and 2.5 on or prior to Closing, the Seller may:

(i)assign or otherwise transfer assets, liabilities and (only where in compliance with Clause 5 (other than Clause 5.2.2)) employees between members of the Seller’s Group as may be reasonably required to facilitate separation of (A) the Business from the Influenza Business and (B) the Business from the Retained Information Technology; and

41

(ii)otherwise, carry out or procure one or more reorganisations of the Seller’s Group (including assigning or otherwise transferring assets and liabilities between members of the Seller’s Group but excluding assigning or otherwise transferring assets or liabilities to Vaccines Group Companies) as may reasonably be required to facilitate the Transaction,

each, a “Reorganisation”.

2.3.6In respect of any Reorganisation:

(i)the Seller shall notify the Purchaser of any proposed Reorganisation, the steps proposed to be implemented and such other information as the Purchaser may reasonably request regarding the proposed Reorganisation in advance of it being implemented;

(ii)the Seller shall, in good faith, consult with, and take into account the reasonable views of, and any reasonable requests made by, the Purchaser in relation to any Reorganisation before it is implemented, including any proposals to reduce or avoid Liability or cost being suffered or incurred by any member of the Purchaser’s Group or any Vaccines Group Company;

(iii)subject to the following sub-clause (iv) of this Clause 2.3.6, all fees, costs and expenses of implementing any Reorganisation (or any part thereof) shall be borne by the Seller’s Group; and

(iv)all out-of-pocket fees, costs and expenses which (x) are incurred by either party, whether before or after Closing, (y) specifically relate to the separation of the German Influenza Operations from the Vaccines Group, and (z) are incurred in respect of works council consultations (including court fees, notary fees and works council legal fees) or physical separation at the Marburg Site (including IT systems workarounds, costs of new access cards and construction works), but excluding the parties’ own legal fees, shall, to the extent that such fees, costs and expenses arise solely as a result of such works council consultations or physical separation, be split equally between the Seller and the Purchaser. For the avoidance of doubt, this Clause 2.3.6(iv) shall not affect the cost allocation of wider measures necessary to effect the separation of the Business from the Influenza Business.

2.3.7In respect of the separation of the Influenza Business from the Vaccines Group, the parties shall work together in good faith to facilitate such separation.

2.3.8The Seller undertakes to the Purchaser (for itself and as trustee for each other member of the Purchaser’s Group and each Vaccines Group Company) that, with effect from Closing, the Seller will indemnify on demand and hold harmless the relevant member of the Purchaser’s Group (including each Vaccines Group Company) against and in respect of any and all Liabilities arising in connection with any Reorganisation (or part thereof) undertaken by the Seller, other than:

(i)such Liabilities where the allocation has been, or is, otherwise agreed between the parties;

(ii)any Liabilities of any Vaccines Group Company in respect of Tax (which shall be dealt with under the Tax Indemnity); and

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(iii)any Liabilities in connection with this Agreement or any document entered into as provided by this Agreement (including the provisions of Clause 8.14) or any Ancillary Agreement.

2.4Employees and Employee Benefits

2.4.1The provisions of Schedule 11 shall apply in respect of the Employees.

2.4.2The provisions of Schedule 12 shall apply in respect of Employee Benefits.

2.5Properties

The provisions of Schedule 3 shall apply in respect of the Properties.

2.6Local Transfer Documents

2.6.1On Closing or at such other time as agreed between the parties, the Seller shall procure that the Share Sellers and Business Sellers execute, and the Purchaser shall execute (or procure the execution by one or more other members of the Purchaser’s Group of), such agreements, transfers, conveyances and other documents, as may be required pursuant to the relevant local law and otherwise as may be agreed between the Seller and the Purchaser to implement the transfer of (i) the Shares and (ii) the Vaccines Group Businesses, in each case on Closing, subject to the provisions of Schedule 25 (the “Local Transfer Documents” and each, a “Local Transfer Document”). The parties do not intend this Agreement to transfer title to any of the Shares, title to which shall be transferred by the applicable Local Transfer Document.

2.6.2To the extent that the provisions of a Local Transfer Document are inconsistent with or (except to the extent they implement a transfer in accordance with this Agreement) additional to the provisions of this Agreement:

(i)the provisions of this Agreement shall prevail; and

(ii)so far as permissible under the laws of the relevant jurisdiction, the Seller and the Purchaser shall procure that the provisions of the relevant Local Transfer Document are adjusted, to the extent necessary to give effect to the provisions of this Agreement or, to the extent this is not permissible, the Seller shall indemnify the Purchaser against all Liabilities suffered by the Purchaser or its Affiliates or, as the case may be, the Purchaser shall indemnify the Seller against all Liabilities suffered by the Seller or its Affiliates, in either case through or arising from the inconsistency between the Local Transfer Document and this Agreement or the additional provisions (except to the extent they implement a transfer in accordance with this Agreement).

2.6.3If there is an adjustment to the Purchase Price under Clause 7.3 which relates to a part of the Vaccines Group which is the subject of a Local Transfer Document, then, if required to implement the adjustment and so far as permissible under Applicable Law, the Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group will), and the Seller shall procure that its relevant Affiliate shall, enter into a supplemental agreement reflecting such adjustment and the allocation of such adjustment.

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2.6.4The Seller shall not, and shall procure that none of its Affiliates shall bring any claim against the Purchaser or any member of the Purchaser’s Group (including any Vaccines Group Company) in respect of or based upon the Local Transfer Documents save to the extent necessary to implement any transfer of the Shares or Vaccines Group Businesses as contemplated by this Agreement. To the extent that the Seller or a member of the Seller’s Group does bring a claim in breach of this Clause, the Seller shall indemnify the Purchaser and each member of the Purchaser’s Group (including any Vaccines Group Company) against all Liabilities which the Purchaser or that member of the Purchaser’s Group (including any Vaccines Group Company) may suffer through or arising from the bringing of such a claim.

2.6.5The Purchaser shall not, and shall procure that none of its Affiliates shall, bring any claim against the Seller or any member of the Seller’s Group in respect of or based upon the Local Transfer Documents save to the extent necessary to implement any transfer of the Shares or Vaccines Group Businesses as contemplated by this Agreement. To the extent that the Purchaser or a member of the Purchaser’s Group does bring a claim in breach of this Clause, the Purchaser shall indemnify the Seller and each member of the Seller’s Group against all Liabilities which the Seller or any member of the Seller’s Group may suffer through or arising from the bringing of such a claim.

2.7Inventory

2.7.1The parties agree that neither this Agreement nor the applicable Local Transfer Agreement shall transfer legal title to any Transferred Inventory held by the relevant Vaccines Group Business in the jurisdictions set out in Schedule 28 (the “Retained Inventory”) on Closing.

2.7.2Legal title to In-Market Inventory shall be transferred to the relevant member of the Purchaser’s Group in accordance with Article XVII of the Transitional Distribution Services Agreement.

2.7.3In respect of the relevant Vaccines Group Business in each jurisdiction set out in Schedule 28, the Seller shall, by no later than 5 Business Days after the date on which the relevant member of the Seller’s Group receives payment under Article XVII of the Transitional Distribution Services Agreement for In-Market Inventory in respect of the relevant Vaccines Group Business, pay to the Purchaser (in accordance with Clause 17.6) an amount equal to the value of the Retained Inventory in respect of the relevant Vaccines Group Business as recorded in the Closing Statement.

2.7.4If, following Closing, any Manufacturing Inventory or Manufacturing Stock is found to have formed part of the Retained Inventory, the Seller shall procure that such Manufacturing Inventory and/or Manufacturing Stock is transferred from the relevant member of the Seller’s Group to the member of the Purchaser’s Group nominated by the Purchaser as soon as practicable following Closing at no cost to the Purchaser.

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2.7.5Clause 3.5 shall apply to payments or other contributions under this Clause 2.7 as if such payments or other contributions were made or procured in respect of an indemnity under this Agreement.

3Consideration

3.1Amount

3.1.1The Seller and the Purchaser agree, for themselves and on behalf of the members of the Seller’s Group and the Purchaser’s Group (as the case may be), that the aggregate consideration for the purchase of the Vaccines Group under this Agreement and the Local Transfer Documents (the “Purchase Price”) shall be an amount in US dollars equal to the sum of:

(i)US$5,255,000,000 (the “Headline Price”);

minus

(ii)US$9,500,000 (the “Employee Adjustment Payment”);

plus

(iii)the Vaccines Group Companies’ Cash Balances and the Intra-Group Non-Trade Receivables;

minus

(iv)the Third Party Indebtedness;

minus

(v)the Intra-Group Non-Trade Payables;

minus

(vi)any Employee Benefit Indemnification Amount paid in accordance with Schedule 12;

minus

(vii)the Tax Adjustment;

plus

(viii)the Working Capital Adjustment;

plus

(ix)the Milestone Payments and the Royalty Payments.

3.1.2For the avoidance of doubt, the aggregate consideration provided for under Clause 3.1.1 includes the consideration payable in respect of the Delayed Businesses.

3.2Payment of Purchase Price

The Purchase Price shall be satisfied:

3.2.1other than in the case of the Milestone Payments and the Royalty Payments:

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(i)by the Purchaser making a cash payment for itself and on behalf of the members of the Purchaser’s Group in accordance with Clauses 6.3 and 7.6; and

(ii)by the Designated Purchasers making payments in accordance with Clauses 6.5 and 6.6 (at the procurement of the Purchaser); and

3.2.2in the case of the Milestone Payments and the Royalty Payments, pursuant to and in accordance with Schedule 17.

3.3Allocation of Purchase Price

The Purchase Price shall be allocated in accordance with Schedule 13.

3.4VAT

3.4.1The provisions of Schedule 14 shall apply in respect of VAT.

3.4.2The Seller and the Purchaser agree that the consideration given under this Agreement in respect of the sale of the Vaccines Group Businesses and the Shares is exclusive of any VAT. To the extent that VAT is chargeable in respect of that sale or any part thereof, the Purchaser shall, against delivery of a valid VAT invoice (or equivalent, if any), in addition to any other amount expressed in this Agreement to be payable by the Purchaser, pay or procure the payment to the Seller (on behalf of the relevant Business Seller or Share Seller as applicable) any amount of any VAT so chargeable for which the Seller (or the relevant Share Seller or Business Seller, as the case may be) is liable to account, in accordance with Schedule 14.

3.5Treatment of Payments

3.5.1If any payment is made or procured (i) by the Seller or a member of the Seller’s Group to the Purchaser or the relevant member of the Purchaser’s Group, or (ii) by a Purchaser or a member of the Purchaser’s Group to the Seller or the relevant member of the Seller’s Group, in either case in respect of any claim under or for any breach of this Agreement or pursuant to an indemnity (or equivalent covenant to pay) under this Agreement, the payment shall be treated, so far as possible, as an adjustment of the consideration paid by the relevant member of the Purchaser’s Group for the Shares or the particular part of the Vaccines Group to which the payment and/or claim relates under this Agreement and the consideration shall be deemed to be increased or reduced (as applicable) by the amount of such payment, provided that this Clause 3.5.1 shall not require any amount to be treated as an amount in respect of the Purchase Price for the purposes of Clause 17.10 if it would not otherwise have been so treated

3.5.2If:

(i)the payment and/or claim relates to the shares in more than one Vaccines Group Company or to more than one category of Vaccines Group Business, it shall be allocated in a manner which reflects the impact of the matter to which the payment and/or claim relates, failing which it shall be allocated rateably to the shares in the Vaccines Group Companies or Vaccines Group Businesses concerned by reference to the proportions in which the consideration is allocated in accordance with Schedule 13; or

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(ii)the payment and/or claim relates to no particular shares in any Vaccines Group Company or no particular category of Vaccines Group Business, it shall be allocated rateably to all the Shares and all the Vaccines Group Businesses by reference to the proportions in which the consideration is allocated in accordance with Schedule 13,

and in each case the consideration shall be deemed to have been reduced by the amount of such payment.

3.6Non-strategic Assets

3.6.1If, prior to Closing, any member of the Seller’s Group completes the disposal of a Non-strategic Asset to a third party in accordance with Clause 5.2.1, the Seller shall pay to the Purchaser at Closing the greater of:

(i)the relevant Threshold Amount; or

(ii)an amount equal to the consideration (less any Taxes, costs and expenses incurred by any member of the Seller’s Group in connection with such disposal) received for the relevant Non-strategic Asset.

Any payment obligation of the Seller arising pursuant to this Clause 3.6.1 shall be set-off against the Purchaser’s payment obligation pursuant to Clause 6.3.1.

3.6.2If, following Closing, any member of the Seller’s Group receives consideration for the disposal of a Non-strategic Asset, the Seller shall pay to the Purchaser, within five Business Days of the date of receipt of the consideration, the greater of:

(i)the Threshold Amount; or

(ii)an amount equal to the consideration (less any Taxes, costs and expenses incurred by any member of the Seller’s Group in connection with such disposal) received for the relevant Non-strategic Asset.

4Conditions

4.1Conditions Precedent

The sale and purchase of the Vaccines Group is conditional upon satisfaction or, where applicable, waiver of the following conditions, or their satisfaction subject only to Closing:

4.1.1to the extent that the proposed acquisition of all or any of the Shares or Vaccines Group Businesses (the “Transaction”) either constitutes (or is deemed to constitute under Article 4(5) or Article 5(2)) a concentration with a Community dimension within the meaning of Council Regulation (EC) 139/2004 (as amended) (the “Regulation”) or is to be examined by the European Commission as a result of a decision under Article 22(3) of the Regulation:

(i)the European Commission taking a decision (or being deemed to have taken a decision) under Article 6(1)(b) or, if the Commission has initiated proceedings pursuant to Article 6(1)(c), under Article 8(1) or 8(2) of the Regulation declaring the Transaction compatible with the common market; or

(ii)the European Commission taking a decision (or being deemed to have taken a decision) to refer the whole or part of the Transaction to the

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competent authorities of one or more Member States under Articles 4(4) or 9(3) of the Regulation; and

(a)each such authority taking a decision with equivalent effect to Clause 4.1.1(i) with respect to those parts of the Transaction referred to it; and

(b)the European Commission taking any of the decisions under Clause 4.1.1(i) with respect to any part of the Transaction retained by it.

4.1.2any waiting period (and any extension thereof) under the HSR Act applicable to the Transaction having expired;

4.1.3to the extent required or otherwise agreed between the parties as appropriate to permit the parties to consummate the Transaction in the jurisdictions listed in Schedule 24, any additional clearances, approvals, waivers, no-action letters and consents having been obtained and any additional waiting periods having expired under applicable antitrust, merger control or foreign investment rules set forth in Schedule 24;

4.1.4receipt of CFIUS Approval if CFIUS has initiated a review of the transactions contemplated by this Agreement, whether pursuant to Clause 4.2.3 or otherwise;

4.1.5no Governmental Entity having enacted, issued, promulgated, enforced or entered any Applicable Law or Judgment (whether temporary, preliminary or permanent) that is in effect at the Closing Date and that has the effect of making the transactions contemplated by this Agreement illegal or otherwise restraining or prohibiting the consummation of such transactions;

4.1.6the passing at a duly convened and held general meeting of the Purchaser Shareholders of an ordinary resolution validly approving the Target Asset Agreements (as defined in the Implementation Agreement) and any sale and purchase under the Put Option Agreement (as defined in the Implementation Agreement) in accordance with the Purchaser Articles of Association, the Listing Rules and all other Applicable Law (such resolution being the “Purchaser Shareholder Resolution” and such meeting being the “Purchaser Shareholder Meeting”);

4.1.7the Seller not delivering a Novartis AG Board Certificate (as defined in the Implementation Agreement), in accordance with clause 3 of the Implementation Agreement, prior to the conclusion of the vote on the Purchaser Shareholder Resolution at the Purchaser Shareholder Meeting;

4.1.8none of the Key Sites (each taken as a whole) being, or being reasonably likely to be, from or after Closing:

(i)incapable of operation in whole or part by the Purchaser’s Group without a member of the Purchaser’s Group being in breach of any Applicable Law or any other material duty or obligation; or

(ii)otherwise incapable of operation in whole or part by virtue of some other event, matter, or circumstance,

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but only where the circumstances giving rise to the inability of the Purchaser’s Group to operate a Key Site would, or would be reasonably likely to (whether alone or together with any other such circumstances), result in:

(a)a Key Site being prohibited from, or otherwise being substantially incapable of, operation for a period of at least three consecutive or non-consecutive months in the 12 month period immediately following the Closing Date; and

(b)the manufacturing output of that Key Site in the 12 month period following the Closing Date falling by 30 per cent. or more as compared to the manufacturing output at that Key Site in the 12 month period ending on the corresponding date in the immediately preceding year; and

4.1.9the obtaining in form and substance satisfactory to the Purchaser of any consent, amendment, waiver or approval that the Purchaser, acting reasonably and in good faith, notifies to the Seller prior to 21 May 2014 that it wishes to obtain or be obtained for its benefit prior to Closing in relation to the [***]; and

4.1.10each of the other Target Asset Agreements having become unconditional in accordance with its terms (save for any condition in those agreements relating to this Agreement or the other of those agreements having become unconditional).

4.2Responsibility for Satisfaction

4.2.1The Purchaser and the Seller shall prepare and file the notifications necessary for the fulfilment of the conditions in Clauses 4.1.1 to 4.1.3 (the “Required Notifications”) as soon as reasonably practicable (with notifications under the HSR Act to be filed by 29 May 2014). Notwithstanding anything to the contrary contained in this Agreement, the Purchaser shall have primary responsibility for obtaining all consents, approvals or actions of any Governmental Entity which are required in connection with the Required Notifications.

4.2.2The Purchaser shall be responsible for payment of all filing and other fees and expenses in connection with the Required Notifications and the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3.

4.2.3CFIUS:

(i)The Seller and the Purchaser shall consult, cooperate and keep each other reasonably informed regarding communications with, and requests for additional information from, CFIUS with respect to the Transaction. The Seller and the Purchaser shall use their respective reasonable best efforts to provide promptly all information that is pursuant to a request by CFIUS.

(ii)Within 60 calendar days after the execution of this Agreement, any party wishing to submit a formal joint voluntary notice to CFIUS pursuant to 31 C.F.R. Section 800.401, et. seq. (“CFIUS Filing”) shall provide the other party with written notice of its intent to make a CFIUS Filing (“Election Date”). Prior to making its election to submit a CFIUS Filing, the party wishing to make a CFIUS Filing shall consult in good faith with senior executives of the other party. If neither the Seller nor the Purchaser

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provides notice to submit a formal joint voluntary notice to CFIUS, a CFIUS Filing will not be made unless requested by CFIUS.

(iii)If either the Seller or the Purchaser elects to make a CFIUS Filing following the procedures and consultations in Clause 4.2.3(i) or if CFIUS requires a filing, then:

(a)the Seller and the Purchaser shall use their respective reasonable best efforts to submit a draft CFIUS Filing no later than 15 Business Days following the Election Date, and a final CFIUS Filing the earlier of (1) five business days after submitting the draft CFIUS filing or (2) five calendar days after the receipt of any comments from CFIUS staff regarding the draft CFIUS Filing;

(b)the Seller and the Purchaser will provide each other with the reasonable opportunity to review and comment on any information provided to CFIUS to the extent permitted by Applicable Law, with the exception of personal identifier information required under Section 800.402(c)(6)(vi)(B) of the CFIUS regulations, 31 C.F.R.. Competitively sensitive information, or information not related to the transactions contemplated by this Agreement, may be restricted to each party’s external counsel to the extent reasonably considered necessary or advisable by the providing party;

(c)the Seller and the Purchaser shall each have an opportunity to approve and mutually agree on the joint contents of the CFIUS Filing and shall be jointly responsible for the accuracy of such contents.  The Seller and the Purchaser respectively, shall each be responsible for the accuracy of contents of the CFIUS Filing that exclusively relate to itself, its business, and any subsidiaries, parents or other related parties; and

(d)The Seller and the Purchaser shall use their respective reasonable best efforts to obtain CFIUS Approval as promptly as practicable and shall consult with each other on strategic matters related to obtaining such CFIUS Approval, provided that the Purchaser shall have no obligation to agree to any mitigation or other restrictive provision that could reasonably be considered to have a substantial impact on either the Business or the Purchaser.

4.2.4The party responsible for satisfaction of each condition pursuant to this Clause 4.2 shall give notice to the other party of the satisfaction of the relevant condition within one Business Day of becoming aware of the same.

4.2.5The parties shall cooperate with each other in connection with the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3. The parties will consult and cooperate reasonably with one another, consider in good faith the views of one another, and provide to the other party in advance any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals they or their agents make or submit to a Governmental Entity. Without limiting the foregoing, the parties agree to: (a) give each other reasonable advance notice of all meetings with any Governmental Entity; (b) give each other an opportunity to participate in each of such meetings; (c) to the extent practicable, give each other reasonable advance

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notice of all substantive oral communications with any Governmental Entity; (d) if any Governmental Entity initiates a substantive oral communication, promptly notify the other party of the substance of such communication; (e) provide each other with a reasonable advance opportunity to review and comment upon all written communications (including any analyses, presentations, memoranda, briefs, arguments, opinions and proposals) with a Governmental Entity; (f) provide each other with copies of all written communications to or from any Governmental Entity; and (g) not advance arguments in connection with any regulatory review or litigation proceeding related to this Agreement (other than litigation between the parties) over the objection of the other party that would reasonably be likely to have a significant adverse impact on that other party, provided however, that neither party shall be required to comply with paragraph (b) above to the extent that the Governmental Entity objects to the participation of a party, or with paragraph (e) or (f) above to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis).

4.2.6The Purchaser shall, and shall cause its Affiliates to use reasonable endeavours to procure the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3 as soon as reasonably possible (and, in any event, not later than the Longstop Date). Notwithstanding any other provision of this Agreement to the contrary, the Purchaser shall and, shall cause its Affiliates to use best endeavours to propose, negotiate, offer to commit and effect (and if such offer is accepted, commit to and effect), by consent decree, undertaking, hold separate order, or otherwise, the sale, divestiture, licence or disposition of its Nimenrix and Mencevax products on a global basis (excluding existing manufacturing capabilities) as may be required or desirable in order to procure the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3 as soon as reasonably possible (and, in any event, not later than the Longstop Date) and to avoid the commencement of any Action or the issuing of any Decision to prohibit the acquisition or any other transaction contemplated by this Agreement or, if such Action is already commenced, to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any Action so as to enable the Closing to occur as soon as reasonably possible (and, in any event, not later than the Longstop Date):

4.2.7The Seller shall, and shall cause the Vaccines Group to use reasonable endeavours to cooperate with the Purchaser in connection with procuring the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3 as soon as reasonably possible (and, in any event, not later than the Longstop Date), including providing to the Purchaser such information with respect to the Vaccines Group as the Purchaser may reasonably require in connection with satisfaction of its obligations under this Clause.

4.2.8The Purchaser and Seller shall cooperate to confirm, within 21 Business Days from signing of this Agreement, any additional merger notification requirements reasonably required or advisable in respect of the Transaction in jurisdictions beyond those listed in Schedule 24, and shall cooperate with each other, within the meaning of Clause 4.2.6, in achieving any additional clearances, approvals and consents or waiting period expirations in such jurisdictions. For the avoidance of doubt, Closing shall not be conditional upon such additional clearances, approvals and consents or waiting period expirations.

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4.2.9The Purchaser and Seller shall cooperate, in the manner contemplated in Clause 4.2.6, and use reasonable endeavours to ensure that no Governmental Entity shall enact, issue, promulgate, enforce or enter any Applicable Law or Judgment as contemplated under Clause 4.1.5. In the event that any Governmental Entity enacts, issues, promulgates, enforces or enters any Applicable Law or Judgment as contemplated under Clause 4.1.5, the Seller and the Purchaser shall cooperate and use reasonable endeavours to put in place arrangements that would allow the Transaction to complete to the greatest possible extent in compliance with the relevant Applicable Law or Judgment.

4.2.10Without prejudice to the provisions of Schedule 3, each of the Seller and the Purchaser shall, and shall procure that each of its respective Affiliates shall, cooperate with each other in relation to the satisfaction of the condition set out in Clause 4.1.8, and shall use its reasonable endeavours to ensure that the condition set out in Clause 4.1.8 is satisfied at Closing.

4.2.11The Seller shall use best efforts to obtain the consents, amendments, waivers and approvals referred to in Clause 4.1.9 prior to the Closing Date. The cost of obtaining such consents, amendments, waivers and approvals shall be borne by the Seller, including any payment or other incentive that may (whether required to be offered or not) be offered to [***] and/or [***] or any of their respective Affiliates in order to obtain such consents, amendments, waivers and approvals. The Purchaser shall, and shall cause its Affiliates to cooperate with the Seller in connection with obtaining the consents, amendments, waivers and approvals referred to in Clause 4.1.9 and use its reasonable endeavours to ensure that such conditions are satisfied at Closing, including providing to the Seller such information as the Seller may reasonably require in connection with the satisfaction of its obligations under this Clause 4.2.11.

4.3Non-Satisfaction by the Long Stop Date

4.3.1The Purchaser may at any time waive in whole or in part (and conditionally or unconditionally) the conditions set out in Clause 4.1.8 or 4.1.9 by notice in writing to the Seller.

4.3.2If the conditions in Clause 4.1 are not satisfied (or waived in accordance with Clause 4.3.1) as of 22 October 2015 (the “Long Stop Date”), the Purchaser or the Seller may, in its sole discretion, terminate this Agreement (other than Clauses 1, 14 and 17.2 to 17.14) and no party shall have any claim against the other under it, save for any claim arising from breach of any obligation contained in such Clauses or Clause 4.2. Neither the Seller nor the Purchaser may terminate this Agreement after satisfaction or waiver of the conditions in Clause 4.1, except in accordance with this Agreement.

4.4Termination

4.4.1This Agreement may be terminated at any time prior to Closing:

(i)by written consent of the Seller and the Purchaser;

(ii)by either the Seller or the Purchaser by notice to the other party in the event that any Judgment restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement shall have become final and

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non-appealable, provided that the party seeking to terminate this Agreement pursuant to this Clause 4.4 has complied with the terms of the Implementation Agreement and this Agreement in connection with having such Judgment vacated or denied; or

(iii)by the Purchaser by notice to the Seller if:

(a)a Material Adverse Effect occurs prior to Closing (which shall include any breach or breaches of Clause 10.1 which alone or together constitute a Material Adverse Effect); or

(b)the Seller fails to provide a Certificate immediately prior to Closing; or

(iv)in accordance with the terms of the Implementation Agreement.

4.4.2This Agreement shall terminate automatically at any time prior to Closing in the event that:

(i)any other Target Asset Agreement terminates or is terminated in accordance with its terms; or

(ii)the Novartis Break Fee and/or the GSK Break Fee becomes payable under clause 5.1 or clause 5.8 of the Implementation Agreement, respectively.

4.4.3Save as provided in this Clause 4, neither party shall be entitled to terminate or rescind this Agreement (whether before or after Closing). If this Agreement is terminated pursuant to this Clause 4.4, this Agreement shall be of no further force and effect and there shall be no further liability under this Agreement or any of the Ancillary Agreements on the part of any party, except that Clauses 1, 14 and 17.2 to 17.14, in each case, to the extent applicable, shall survive any termination.

4.4.4Nothing in this Clause 4.4 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement prior to termination of this Agreement.

5Pre-Closing

5.1The Seller’s Obligations in Relation to the Business

5.1.1The Seller undertakes to procure that between the date of this Agreement and Closing, it and the relevant members of the Seller’s Group shall, so far as permitted by Applicable Law, carry on the Business as carried on by the Vaccines Group as a going concern in the ordinary course as carried on immediately prior to the date of this Agreement save in so far as agreed in writing by the Purchaser (such consent not to be unreasonably withheld or delayed).

5.1.2Without prejudice to the generality of Clause 5.1.1 and subject to Clause 5.2, the Seller undertakes to procure that, with respect to the Business as carried on by the Vaccines Group, between the date of this Agreement and Closing, no member of the Seller’s Group shall, except as may be required to comply with this Agreement, without the prior written consent of the Purchaser (such consent not to be unreasonably withheld or delayed), take any of the actions listed in Part 1 of Schedule 20.

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5.1.3Without prejudice to the generality of Clause 5.1.1, the Seller shall, in each case with respect to the Business as carried on by the Vaccines Group only: (i) undertake to procure the satisfaction of its obligations listed in paragraph 1, Part 2 of Schedule 20; and (ii) procure that the Vaccines Group shall, between the date of this Agreement and Closing, comply with the requirements of paragraph 2, Part 2 of Schedule 20.

5.2Exceptions to Seller’s Obligations in Relation to the Conduct of Business

Clause 5.1 shall not operate so as to prevent or restrict:

5.2.1the disposal or transfer by one or more members of the Seller’s Group of any or all of the Non-strategic Assets;

5.2.2any matter undertaken by any member of the Seller’s Group to facilitate or implement a Reorganisation in accordance with Clause 2.3.5;

5.2.3any matter undertaken by any member of the Vaccines Group that is set out in Part 3 of Schedule 20;

5.2.4any action to the extent it is required to be undertaken to comply with Applicable Law; or

5.2.5any matter reasonably undertaken by any member of the Seller’s Group in an emergency or disaster situation with the intention of minimising any adverse effect of such situation in relation to the Vaccines Group and where any delay arising by virtue of having to give notice to the Purchaser and await consent would materially prejudice the Vaccines Group,

provided that the Seller shall notify the Purchaser as soon as reasonably practicable of any action taken or proposed to be taken as described in Clause 5.2.4, shall provide to the Purchaser all such information as the Purchaser may reasonably request and shall use reasonable endeavours to consult with the Purchaser in respect of any such action.

5.3The Seller’s obligations in relation to insurance

Without prejudice to the generality of this Clause 5, between the date of this Agreement and Closing or, in respect of Delayed Businesses, the relevant Delayed Closing Date, the Seller shall or shall procure that the relevant members of the Seller’s Group shall maintain in force all Vaccines Group Insurance Policies and all Seller’s Group Insurance Policies for the benefit of the Vaccines Group Businesses and Vaccines Group Companies.

5.4The Seller’s obligations in relation to cash, Intra-Group Non-Trade Payables and Receivables and Third Party Indebtedness

Prior to Closing, the Seller shall seek to minimise the amounts which would, but for this Clause 5.4, otherwise fall to be treated as:

(i)Intra-Group Non-Trade Payables;

(ii)Intra-Group Non-Trade Receivables;

(iii)Vaccines Group Companies Cash Balances; and

(iv)Third Party Indebtedness,

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in each case to the extent reasonably possible, taking into account the consequences of any such reduction for the Seller’s Group.

5.5Other Seller’s Obligations Prior to Closing

Without prejudice to the generality of this Clause 5, prior to Closing the Seller shall, and shall procure that the relevant Vaccines Group Companies, the Seller and the Seller’s Affiliates shall allow the Purchaser and its respective agents, upon reasonable notice, reasonable access to, and to take copies of, the books, records and documents of or relating in whole or in part to the Vaccines Group, provided that the obligations of the Seller under this Clause shall not extend to allowing access to information which is (i) reasonably regarded as confidential to the activities of the Seller and the Seller’s Group otherwise than in relation to the Vaccines Group or (ii) commercially sensitive; or (iii) other information of the Vaccines Group if such information cannot be shared with the Purchaser prior to Closing in compliance with Applicable Law (though the Seller shall seek to share such information with the Purchaser to the extent and in such a manner as would comply with Applicable Law).

5.6Affiliate Contracts

5.6.1Other than as provided in the Ancillary Agreements and subject to Clause 8.7 and Clause 8.9, the Seller and the Purchaser shall procure that:

(i)the Cash Pooling Arrangements; and

(ii)each Affiliate Contract in force immediately prior to Closing,

shall terminate prior to Closing and each counterparty thereto shall, effective as of Closing, settle all outstanding financial obligations arising out of such Affiliate Contracts and unconditionally release and irrevocably discharge each other party thereto from (i) any and all further obligations to perform or any further performance of the various covenants, undertakings, warranties and other obligations contained in such Affiliate Contract and (ii) any and all claims and Liabilities whatsoever arising out of, in any way connected with, as a result of or in respect of such Affiliate Contract.

5.6.2As soon as practicable following the date of this Agreement, and in any event within one month of the date of this Agreement, the Seller shall provide a copy of each Affiliate Contract that is material to the Vaccines Group and is in writing to the Purchaser. Within two months of the date of this Agreement, the Purchaser shall notify the Seller of the services provided under the Affiliate Contracts from the Seller’s Group which the Purchaser reasonably requires in order to operate the business of the Vaccines Group as it is carried on at the date of this Agreement to continue to receive on the same terms as contained in the relevant Affiliate Contract for a maximum period of 6 months following Closing provided that such services are not addressed by the Ancillary Agreements.

5.7Tax Groups

5.7.1The Seller shall take all reasonable steps to procure that any Tax Consolidation existing between any member of the Seller’s Group Company and any Vaccines Group Company be terminated on or before Closing, so far as permitted by Applicable Law, or otherwise on the earliest date on which such termination is permitted under Applicable Law, and the Seller and the Purchaser shall take such

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action as is necessary to procure or effect this, including timely submitting any necessary Tax documents.

5.7.2Pending the taking effect of the action referred to in Clause 5.7.1, and for so long thereafter as may be necessary, the Purchaser shall (subject to the provisions of the Tax Indemnity) procure that such information is provided to the Seller as may reasonably be required to enable any relevant member of the Seller’s Group to make all Tax Returns and other filings required of it in respect of the Tax Consolidation.

5.7.3The Seller and the Purchaser shall cooperate in good faith to take, and procure that each member of the Seller’s Group and the Purchaser’s Group takes, all reasonable procedural or administrative steps (including the making of elections and filings with relevant Tax Authorities) which are reasonably necessary to procure the minimisation of the extent to which Tax liabilities of members of the Seller’s Group (other than Vaccines Group Companies) can be assessed on members of the Purchaser’s Group or on Vaccines Group Companies.

5.7.4The Seller shall take all reasonable steps to procure that Chiron Panacea Vaccines Limited is finally liquidated and ceases to exist before Closing.

6Closing

6.1Date and Place

Save where otherwise provided in this Agreement (including Schedule 25), Closing shall take place simultaneously with closing under the other Target Asset Agreements at the offices of Freshfields Bruckhaus Deringer, 65 Fleet Street, London EC4Y 1HS (other than in respect of any Local Transfer Documents agreed between the parties to be executed in another jurisdiction) on the last Business Day of the month in which fulfilment or waiver of the last of the condition(s) set out in Clause 4.1 to be fulfilled or waived takes place, except that:

6.1.1where the last day of such month is not a Business Day, Closing shall instead take place on the first Business Day of the following month; and

6.1.2where less than five Business Days remain between such fulfilment or waiver and the last Business Day of the month, Closing shall take place:

(i)on the last Business Day of the following month;

(ii)where the last day of such month is not a Business Day, Closing shall instead take place on the first Business Day of the month following the month referred to in Clause 6.1.2(i); or

(iii)at such other location, time or date as may be agreed between the Purchaser and the Seller in writing.

provided that:

(a)Closing shall not take place and shall not be effective in any circumstances unless closing also takes place under and in accordance with the terms of the other Target Asset Agreements at the same time; and

(b)in determining the date on which the last of the conditions set out in Clause 4.1 is fulfilled or waived, the date shall be the date on which the last

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of the conditions set out in Clauses 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.6, 4.1.7 and 4.1.9 is fulfilled or waived unless any of the conditions set out in Clauses 4.1.5 and 4.1.8 is not fulfilled or waived on that date, in which case the date shall then be the first following date on which all of the conditions set out in Clauses 4.1.5 and 4.1.8 are fulfilled or waived.

6.2Closing Events

6.2.1On Closing, the parties shall comply with their respective obligations specified in Schedule 15. The Seller may waive some or all of the obligations of the Purchaser as set out in Schedule 15 and the Purchaser may waive some or all of the obligations of the Seller as set out in Schedule 15.

6.2.2The parties acknowledge that the transfer of Product Approvals and Product Applications in respect of Vaccines Group Businesses to the Purchaser or other members of the Purchaser’s Group may be subject to the approval of applicable Governmental Entities, and that, notwithstanding anything in this Agreement to the contrary, each Product Approval and Product Application in respect of Vaccines Group Businesses shall continue to be held by the relevant member of the Seller’s Group from the Closing Date until the relevant PA Transfer Date.

6.2.3The parties shall perform their respective obligations with respect to:

(i)the transfer of the Product Approvals, Product Applications and Pipeline Product Approvals as set out in Schedule 8;

(ii)the transfer of Contracts (other than Product Approvals, Product Applications and Pipeline Product Approvals) and the Transferred Intellectual Property Contracts as set out in Schedule 10 and the treatment of Shared Business Contracts;

(iii)to the extent the Purchaser has elected to have the Relevant Part of a Shared Business Contract transferred to it, the separation of each Shared Business Contract as set out in Schedule 10; and

(iv)the Delayed Businesses as set out in Schedule 25.

6.3Payment on Closing

6.3.1On Closing the Purchaser shall pay (for itself and on behalf of each relevant member of the Purchaser’s Group in accordance with Clause 17.6) an amount in cleared funds, to the Purchase Price Bank Account, which is equal to the sum of:

(i)the Headline Price;

minus

(ii)the Employee Adjustment Payment;

plus

(iii)the Estimated Vaccines Group Companies’ Cash Balances and the Estimated Intra-Group Non-Trade Receivables;

minus

(iv)the Estimated Third Party Indebtedness;

minus

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(v)the Estimated Intra-Group Non-Trade Payables;

minus

(vi)any Estimated Employee Benefit Adjustment;

minus

(vii)the Estimated Tax Adjustment;

plus

(viii)the Estimated Working Capital Adjustment.

6.3.2The amounts payable in accordance with Clause 6.3.1 shall, in each case, include all such amounts payable in respect of the Delayed Businesses.

6.4Notifications to determine payments on Closing

6.4.1Five Business Days prior to Closing, the Seller shall notify the Purchaser of:

(i)the Estimated Vaccines Group Companies’ Cash Balances;

(ii)the Estimated Third Party Indebtedness;

(iii)the Estimated Intra-Group Non-Trade Receivables;

(iv)the Estimated Intra-Group Non-Trade Payables;

(v)any Estimated Employee Benefit Adjustment;

(vi)the Estimated Tax Adjustment;

(vii)the Estimated Working Capital; and

(viii)the Estimated Working Capital Adjustment,

and shall at the same time provide to the Purchaser reasonable supporting calculations and information to enable the Purchaser to review the basis on which the estimates have been prepared.

6.4.2The Seller’s notification pursuant to Clause 6.4.1 shall specify the relevant debtor and creditor for each Estimated Intra-Group Payable and Estimated Intra-Group Receivable.

6.4.3The Seller shall notify the Purchaser prior to Closing of the estimate for each Employee Benefit Indemnification Amount used in the calculation of the Estimated Employee Benefit Adjustment on a country-by-country (or, where necessary, plan-by-plan) basis.

6.4.4Immediately following Closing:

(i)the Purchaser shall procure that each Vaccines Group Company repays to the relevant member of the Seller’s Group the amount of any Estimated Intra-Group Non-Trade Payables and shall acknowledge on behalf of each Group Company the payment of the Estimated Intra-Group Non-Trade Receivables in accordance with Clause 6.4.4(ii); and

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(ii)the Seller shall procure that each relevant member of the Seller’s Group repays to the relevant Vaccines Group Company the amount of any Estimated Intra-Group Non-Trade Receivables and shall acknowledge on behalf of each relevant member of the Seller’s Group the payment of the Estimated Intra-Group Non-Trade Payables in accordance with Clause 6.4.4(i).

6.4.5The repayments made pursuant to Clause 6.4.3 shall be adjusted in accordance with Clauses 7.3 and 7.4 when the Closing Statement becomes final and binding in accordance with Clause 7.2.1.

6.5Local Payments

The Purchaser shall procure that each relevant Designated Purchaser set out in column 2 of the table in Part A of Schedule 26 shall, subject to the terms of the relevant Local Transfer Agreement (and, for the avoidance of doubt, in partial satisfaction of the Purchase Price) pay to the relevant Share Seller or Business Seller set out in column 3 the amount set out against its name in column 4 (each a “Local Payment Amount”) converted into the relevant currency set out in the relevant Local Transfer Document as at the Closing Date, on:

6.5.1the date falling 7 days after the Closing Date; or

6.5.2if this is not possible, the date falling 14 days after the Closing Date; or

6.5.3if this is not possible, the date falling 21 days after the Closing Date, or

6.5.4if this is not possible, the date falling 28 days after the Closing Date, or

provided that, in any event, all such payments shall be made by no later than the date falling 28 days after the Closing Date.

6.6Delayed Local Payments

In respect of each Delayed Business, the Purchaser shall procure that each relevant Designated Purchaser set out in column 2 of the table in Part B of Schedule 26 shall, subject to the terms of the relevant Local Transfer Agreement (and, for the avoidance of doubt, in partial satisfaction of the Purchase Price), pay to the relevant Share Seller or Business Seller set out in column 3 the amount set out against its name in column 4 in respect of that Delayed Business (each a “Delayed Local Payment Amount”) converted into the relevant currency set out in the relevant Local Transfer Document as at the relevant Delayed Closing Date, as soon as reasonably practicable following the relevant Delayed Closing Date and, in any event, within 10 Business Days following the relevant Delayed Closing Date, in accordance with the terms of the relevant Local Transfer Document.

6.7Repayment of Local Payments and Delayed Local Payments

Where a Local Payment Amount or Delayed Local Payment Amount is received by a member of the Seller’s Group pursuant to Clause 6.5 or Clause 6.6, the Seller shall (on behalf of the relevant Share Seller or Business Seller, in accordance with Clause 17.6) pay to the Purchaser in US Dollars an amount equal to such Local Payment Amount or Delayed Local Payment Amount by way of repayment of all or part (as the case may be) of the amount paid by the Purchaser on behalf of the Designated Purchaser that paid the relevant Local Payment Amount or Delayed Local Payment Amount, so as to ensure that

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the total amount received by members of the Seller’s Group under Clauses 2.7, 6.3, 6.5 and 6.6 does not exceed the amount of the Purchase Price.

6.8[***]

6.9Breach of Closing Obligations

If any party fails to comply with any material obligation in Clauses 6.2, 6.3 or 6.4, or Schedule 15 in relation to Closing, the Purchaser, in the case of non-compliance by the Seller, or the Seller, in the case of non-compliance by the Purchaser, shall be entitled (in addition to and without prejudice to all other rights or remedies available) by written notice to the Seller or the Purchaser fix a new date for Closing which, except as agreed by the parties, shall be the last day of the month next ending or, if that day is not a Business Day, the first Business Day falling after that day, in which case the provisions of Schedule 15 shall apply to Closing as so deferred, but provided such deferral may only occur once. In all circumstances Closing shall only occur simultaneously with closing under the other Target Asset Agreements.

7Post-Closing Adjustments

7.1Closing Statements

7.1.1The Seller shall procure that as soon as practicable following Closing there shall be drawn up a draft of the Closing Statement (the “Draft Closing Statement”) in accordance with Schedule 16 in relation to the Vaccines Group Companies and Vaccines Group Businesses, on a combined basis.

7.1.2The Closing Statement shall be drawn up as at the Effective Time and shall in each case include the Delayed Businesses which, for the purposes of this Clause 7, shall be deemed to have transferred to the Purchaser with effect from the Effective Time.

7.2Determination of Closing Statement

7.2.1The Draft Closing Statement as agreed or determined pursuant to paragraph 1 of Part 1 of Schedule 16:

(i)shall constitute the Closing Statement for the purposes of this Agreement; and

(ii)shall be final and binding on the parties.

7.2.2The Working Capital, the Vaccines Group Companies’ Cash Balances, the Third Party Indebtedness, the Intra-Group Non-Trade Receivables, the Intra-Group Non-Trade Payables and the Tax Adjustment shall be derived from the Closing Statement.

7.3Adjustments to Purchase Price

7.3.1Vaccines Group Companies’ Cash Balances:

(i)if the Vaccines Group Companies’ Cash Balances are less than the Estimated Vaccines Group Companies’ Cash Balances, the Seller shall repay to the Purchaser an amount equal to the deficiency; or

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(ii)if the Vaccines Group Companies’ Cash Balances are greater than the Estimated Vaccines Group Companies’ Cash Balances, the Purchaser shall pay to the Seller an additional amount equal to the excess.

7.3.2Intra-Group Non-Trade Receivables:

(i)if the Intra-Group Non-Trade Receivables are less than the Estimated Intra-Group Non-Trade Receivables, the Seller shall repay to the Purchaser an amount equal to the deficiency; or

(ii)if the Intra-Group Non-Trade Receivables are greater than the Estimated Intra-Group Non-Trade Receivables, the Purchaser shall pay to the Seller an additional amount equal to the excess.

7.3.3Third Party Indebtedness:

(i)if the Third Party Indebtedness is greater in magnitude than the Estimated Third Party Indebtedness, the Seller shall repay to the Purchaser an amount equal to the excess; or

(ii)if the Third Party Indebtedness is less in magnitude than the Estimated Third Party Indebtedness, the Purchaser shall pay to the Seller an additional amount equal to the deficiency.

7.3.4Intra-Group Non-Trade Payables:

(i)if the Intra-Group Non-Trade Payables are greater in magnitude than the Estimated Intra-Group Non-Trade Payables, the Seller shall repay to the Purchaser an amount equal to the excess; or

(ii)if the Intra-Group Non-Trade Payables are less in magnitude than the Estimated Intra-Group Non-Trade Payables, the Purchaser shall pay to the Seller an additional amount equal to the deficiency.

7.3.5Tax Adjustment:

(i)if the Tax Adjustment is greater than the Estimated Tax Adjustment, the Seller shall repay to the Purchaser an amount equal to the difference; or

(ii)if the Tax Adjustment is less than the Estimated Tax Adjustment, the Purchaser shall pay to the Seller an additional amount equal to the difference.

7.3.6Working Capital:

(i)if the Working Capital Adjustment is less than the Estimated Working Capital Adjustment, the Seller shall repay to the Purchaser an amount equal to the deficiency; or

(ii)if the Working Capital Adjustment exceeds the Estimated Working Capital Adjustment, the Purchaser shall pay to the Seller an additional amount equal to the excess.

7.4Adjustments to repayment of Intra-Group Non-Trade Payables and Intra-Group Non-Trade Receivables

Following the determination of the Closing Statement pursuant to Clause 7.2 and paragraph 1 of Part 1 of Schedule 16, if the amount of any Intra-Group Non-Trade Payable

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and/or any Intra-Group Non-Trade Receivable contained in the Closing Statement is greater or less than the amount of the corresponding Estimated Intra-Group Non-Trade Payable or Estimated Intra-Group Non-Trade Receivable, then the Seller and the Purchaser shall procure that such adjustments to the repayments pursuant to Clause 6.4.3 are made as are necessary to ensure that (taking into account such adjustments) the actual amount of each Intra-Group Non-Trade Payable and each Intra-Group Non-Trade Receivable has been repaid by each Group Company to the relevant member of the Seller’s Group or by the relevant member of the Seller’s Group to the relevant Group Company, as the case may be.

7.5Interest

Any payment to be made in accordance with Clause 7.3 shall include interest thereon calculated from the Effective Time to the date of payment at a rate per annum of LIBOR.

7.6Payment

7.6.1Any payments pursuant to Clause 7.3 or 7.4, and any interest payable pursuant to Clause 7.5, shall be made on or before the Final Payment Date.

7.6.2Where any payment is required to be made pursuant to Clause 7.3 or Clause 7.5 (in relation to a payment pursuant to Clause 7.3) the payment made on account of the Purchase Price shall be reduced or increased accordingly.

7.6.3Where any payment is required to be made pursuant to Schedule 12, the payment made shall be deemed to be a reduction to the Purchase Price.

8Post-Closing Obligations

8.1Indemnities

8.1.1Indemnity by the Purchaser against Assumed Liabilities

The Purchaser hereby undertakes to the Seller (for itself and on behalf of each other member of the Seller’s Group (excluding any Delayed Vaccines Group Companies) and their respective directors, officers, employees and agents) that, with effect from Closing, the Purchaser will indemnify on demand and hold harmless each member of the Seller’s Group (excluding any Delayed Vaccines Group Companies) and their respective directors, officers, employees and agents against and in respect of any and all Assumed Liabilities.

8.1.2Indemnities by Seller

Subject to Clause 8.1.3, the Seller hereby undertakes to the Purchaser (for itself and on behalf of each other member of the Purchaser’s Group (including any Delayed Vaccines Group Companies) and their respective directors, officers, employees and agents) that, with effect from Closing, the Seller will indemnify on demand and hold harmless each member of the Purchaser’s Group (including any Delayed Vaccines Group Companies) and their respective directors, officers, employees and agents against and in respect of any and all:

(i)Excluded Liabilities; and

(ii)Liabilities, including legal fees, to the extent they have arisen or arise (whether before or after Closing) as a result of or otherwise relate to any

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act, omission, fact, matter, circumstance or event undertaken, occurring or in existence or arising before Closing so far as related to: (A) any breach of any anti-bribery warranty, including without limitation those set forth in paragraphs 9.1 through 9.6 of Schedule 18, not being true and correct when made; (B) any government inquiries or investigations involving the Seller or its Affiliates or associated persons; (C) save to the extent in existence as at the date of this Agreement, any limitation, restriction or other reduction in drug registrations, licenses, listings or marketing approvals, government pricing or reimbursement rates relating to the Products including specifically the value of lost future profits as a result of any such limitation, restriction or reduction; or (D) any other claim, litigation, investigation or proceeding to the extent related to any of the foregoing (A) to (C), including but not limited to costs of investigation and defence and legal fees.

8.1.3Limitations on Indemnities

Subject to Clause 8.1.4, the Seller shall not be liable under Clause 8.1.2 in respect of:

(i)any Time-Limited Excluded Liability unless a notice of claim in respect of the matter giving rise to such Liability is given by the Purchaser to the Seller within ten years of Closing, provided that this sub-Clause (i) shall not apply in respect of any claim by the Purchaser which relates to:

(a)a Product Liability;

(b)a Governmental Liability;

(c)a Clinical Trials/Data Liability;

(d)an IP Liability; or

(e)an Excluded Asset;

(ii)any claim if and to the extent that the relevant Liability is included in the Closing Statement; or

(iii)any individual claim (or a series of claims arising from similar or identical facts or circumstances) where the Liability (disregarding the provisions of this Clause 8.1.3(iii))) in respect of any such claim or series of claims does not exceed US$10 million, provided that, for the avoidance of doubt, where the Liability in respect of any such claim or series of claims exceeds US$10 million, the Liability of the Seller shall be for the whole amount of such claim(s) and not just the excess.

8.1.4Disapplication of limitations

None of the limitations contained in Clause 8.1.3 shall apply to any claim to the extent that such claim which arises or is increased, or to the extent to which it arises or is increased, as the consequence of, or which is delayed as a result of, fraud by any member of the Seller’s Group or any director, officer or employee of any member of the Seller’s Group.

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8.2Conduct of Claims

8.2.1Assumed Liabilities

(i)If the Seller becomes aware after Closing of any claim by a third party which constitutes or may constitute an Assumed Liability, the Seller shall as soon as reasonably practicable:

(a)give written notice thereof to the Purchaser, setting out such information as is available to the Seller as is reasonably necessary to enable the Purchaser to assess the merits of the potential claim;

(b)take all appropriate actions to preserve evidence; and

(c)provide the Purchaser with periodic updates on the status of the claim upon request and shall not admit, compromise, settle, discharge or otherwise deal with such claim without the prior written agreement of the Purchaser (such agreement not to be unreasonably withheld or delayed).

(ii)The Seller shall, and shall procure that each Share Seller and Business Seller shall, take such action as the Purchaser may reasonably request to avoid, dispute, resist, appeal, compromise, defend or mitigate any claim which constitutes or may constitute an Assumed Liability subject to the Seller and each Share Seller and Business Seller being indemnified and secured to their reasonable satisfaction by the Purchaser against all Liabilities which may thereby be incurred. In connection therewith, the Seller shall make or procure to be made available to the Purchaser or their duly authorised agents on reasonable notice during normal business hours all relevant books of account, records and correspondence relating to the Vaccines Group Businesses which have been retained by the Seller’s Group (and shall permit the Purchaser to take copies thereof at its expense) for the purposes of enabling the Purchaser to ascertain or extract any information relevant to the claim.

8.2.2Liabilities Indemnified by the Seller

(i)If the Purchaser becomes aware after Closing of any claim by a third party which constitutes or may constitute a Liability falling within Clause 8.1.2 or relates to a Liability or any investigations related thereto, regardless of whether the Purchaser believes that such claim would be made against a member of the Purchaser’s Group or a member of the Seller’s Group, the Purchaser shall as soon as reasonably practicable:

(a)give written notice thereof to the Seller, setting out such information as is available to the Purchaser as is reasonably necessary to enable the Seller to assess the merits of the potential claim;

(b)take all appropriate actions to preserve evidence; and

(c)provide the Seller with periodic updates on the status upon request and shall not admit, compromise, settle, discharge or otherwise deal with such claim without the prior written agreement of the Seller (such agreement not to be unreasonably withheld or delayed).

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(ii)The Purchaser shall take such action as the Seller may reasonably request to avoid, dispute, resist, appeal, compromise, defend or mitigate any claim which constitutes or may constitute a Liability falling within Clause 8.1.2 subject to the Purchaser being indemnified and secured to its reasonable satisfaction by the Seller against all Liabilities which may thereby be incurred by it or any member of the Purchaser’s Group (including for this purpose any Delayed Vaccines Group Company).

(iii)In addition, where any such claim or investigation involves a Governmental Entity, the Purchaser shall, subject to Applicable Law, the requirements of the Relevant Governmental Entity and the Seller providing an appropriate confidentiality undertaking in favour of the Purchaser’s Group, provide to the Seller, at least five Business Days in advance (or, where not possible, as soon as reasonably possible), any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals they or their agents make or submit to a Governmental Entity. Without limiting the foregoing, the parties agree, subject to the Applicable Law, and the requirements of the relevant Governmental Entity, and the Seller providing an appropriate confidentiality undertaking in favour of the Purchaser’s Group, to:

(a)give the Seller reasonable advance notice of all meetings with any Governmental Entity;

(b)give the Seller an opportunity to participate in each of such meetings;

(c)to the extent practicable, give the Seller reasonable advance notice of all substantive oral communications with any Governmental Entity;

(d)if any Governmental Entity initiates a substantive oral communication, promptly notify the Seller of the substance of such communication;

(e)provide the Seller with a reasonable advance opportunity to review and comment upon all substantive written communications (including any substantive correspondence, analyses, presentations, memoranda, briefs, arguments, opinions and proposals) that the Purchaser or its agents intend to make or submit to a Governmental Entity in connection with such claim;

(f)provide the Seller with copies of all substantive written communications to or from any Governmental Entity; and

(g)not advance arguments with the Governmental Entity without prior agreement of the Seller that would reasonably be likely to have a significant adverse impact on the Seller, provided however, that the Purchaser shall not be required to comply with paragraph (b) above to the extent that the Governmental Entity objects to the participation of a party, or with paragraph (e) or (f) above to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis).

(iv)Other than in respect of any claim to the extent it relates to an IP Liability, a Commercial Practices Liability or a Governmental Liability (other than in

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respect of any Liability arising solely by virtue of a breach of any Contract with any Governmental Entity which breach does not also constitute a breach of Applicable Law), the Seller shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Purchaser, to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest any such claim (including making counterclaims or other claims against third parties) in the name of and on behalf of the Purchaser or other member of the Purchaser’s Group concerned and to have the conduct of any related proceedings, negotiations or appeals. In taking action on behalf of any member of the Purchaser’s Group as permitted by this Clause 8.2, the Seller shall, in good faith, take into account and have due regard to any reputational matters or issues arising out of the claim for any member of the Purchaser’s Group or any of their respective directors, officers, employees or agents which are brought to its attention by the Purchaser or a member of the Purchaser’s Group.

(v)Without limitation to the Seller’s rights pursuant to Clause 8.12, the Purchaser shall make or procure to be made available to the Seller or its duly authorised agents on reasonable notice during normal business hours full and free access to all relevant books of account, records and correspondence relating to the Vaccines Group which are in the possession or control of the Purchaser or any member of the Purchaser’s Group (and shall permit the Seller to take copies thereof) for the purposes of enabling the Seller to ascertain or extract any information relevant to the claim.

(vi)The Purchaser shall, and shall procure that each other member of the Purchaser’s Group shall, on reasonable notice from the Seller, give such assistance to the Seller as it may reasonably require in relation to the claim including providing the Seller or any member of the Seller’s Group and its representative and advisers with access to and assistance from directors, officers, managers, employees, advisers, agents or consultants of the Purchaser and/or of each other member of the Purchaser’s Group (collectively, the “Relevant Persons”) and the Purchaser will use its reasonable endeavours to procure that such Relevant Persons comply with any reasonable requests from the Seller and generally co-operates with and assists the Seller and other members of the Seller’s Group.

(vii)When seeking assistance under Clauses 8.2.2(v) and (vi), the Seller, or any other relevant member of the Seller’s Group, shall use reasonable endeavours to minimise interference with the Purchaser and the Purchaser’s Group’s conduct of the relevant business or the performance by the Relevant Persons of their employment duties.

8.3Release of Guarantees

8.3.1The Purchaser shall use reasonable endeavours to procure as soon as reasonably practicable after Closing, the release of the Seller or any member of the Seller’s Group from any securities, guarantees or indemnities given by or binding upon the Seller or any member of the Seller’s Group in respect of the Assumed Liabilities or in connection with a liability of any of the Vaccines Group Companies (other than an Excluded Liability). Pending such release, the Purchaser shall indemnify the

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Seller and any member of the Seller’s Group against all amounts paid by any of them (acting reasonably) pursuant to any such securities, guarantees or indemnities in respect of such Assumed Liabilities or such liability of the Vaccines Group Companies (other than an Excluded Liability).

8.3.2The Seller shall use reasonable endeavours to procure by Closing or, to the extent not done by Closing, as soon as reasonably practicable after Closing, the release of the Vaccines Group Companies from any securities, guarantees or indemnities given by or binding upon the Vaccines Group Companies in respect of any liability of the Seller or any member of the Seller’s Group. Pending such release, the Seller shall indemnify the Vaccines Group Companies against all amounts paid by any of them (acting reasonably) pursuant to any such securities, guarantees or indemnities in respect of such liability of the Seller which arises after Closing.

8.4Transferred Accounts Payable

If at any time after Closing, the Seller or any of its Affiliates (but, in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date) pays any monies in respect of any Transferred Accounts Payable, then the Purchaser shall pay or procure payment to the Seller (for the relevant Business Seller), as soon as reasonably practicable the amount paid, plus any Taxation suffered or incurred by the Seller’s Group which would not have arisen but for the payment and receipt of such monies.

8.5Transferred Accounts Receivable

If at any time after Closing, a Business Seller receives any monies in respect of any Transferred Accounts Receivable, then the Business Seller shall pay or procure payment to the Purchaser, as soon as reasonably practicable the amount recovered, less any Taxation suffered or incurred by the Seller’s Group which would not have arisen but for the receipt and payment of such monies.

8.6Payables and Receivables Plan

8.6.1Without prejudice to the provisions of Clauses 8.4 and 8.5, the parties shall cooperate in good faith to agree, as soon as reasonably practicable after the Closing Date and in any event within one month of the Closing Date, a written plan in respect of each Market detailing: (i) the process for the collection of Transferred Accounts Receivables by the Seller (or its Affiliates) and the process and periodic timing of payment of monies received in respect of Transferred Accounts Receivable to the Purchaser; and (ii) the process for the settlement of Transferred Accounts Payable by the Seller (or its Affiliates) and the payment of monies by the Purchaser to the Seller in respect thereof (together, the “Payables and Receivables Plan”). In agreeing the Payables and Receivables Plan, the parties shall take into account the comments of the parties’ respective accounting and tax teams.

8.6.2If the parties fail to agree the Payables and Receivables Plan by the date specified in Clause 8.6.1, the matter shall be referred to and discussed by the Purchaser’s and the Seller’s chief financial officers who shall aim to resolve the matter within 10 Business Days.

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8.7Intra-Group Trading Balances

Any Intra-Group Trading Balances shall be settled after Closing in the ordinary course of business and, in any event, within 60 days of Closing.

8.8Transfer of Marketing Authorisations

8.8.1The transfer of the Marketing Authorisations following Closing shall take place in accordance with Part 2 of Schedule 8 and the terms of the Transitional Distribution Services Agreement.

8.8.2Between the Closing Date and the Marketing Authorisation Transfer Date, the Seller agrees to assist the Purchaser in accordance with Part 4 of Schedule 8 in respect of any tenders relating to the Products.

8.9Wrong Pockets Obligations

8.9.1Except as provided in Schedules 3, 8, 10, 11, 12 and 25, if any property, right or asset forming part of the Vaccines Group (other than any property, right or asset expressly excluded from the sale under this Agreement) has not been transferred to the Purchaser or to another member of the Purchaser’s Group and should have transferred pursuant to the terms of this Agreement, the Seller shall procure that such property, right or asset (and any related liability which is an Assumed Liability) is transferred to the Purchaser, or to such other member of the Purchaser’s Group as the Purchaser may nominate reasonably acceptable to the Seller, as soon as practicable and at no cost to the Purchaser.

8.9.2If, following Closing or, in respect of any Delayed Business, the relevant Delayed Closing, any property, right or asset not forming part of the Vaccines Group including, for the avoidance of doubt, any trade accounts and notes receivable or payable arising in the ordinary course between a member of the Seller’s Retained Group and a Vaccines Group Company, in each case to the extent related to the Influenza Business (other than any property, right or asset expressly included in the sale under this Agreement) is found to have been transferred to the Purchaser (or another member of the Purchaser’s Group) and should not have transferred pursuant to the terms of this Agreement, the Purchaser shall procure that such property, right or asset is transferred to the transferor or another member of the Seller’s Group nominated by the Seller reasonably acceptable to the Purchaser as soon as practicable and at no cost to the Seller.

8.10Information Technology

8.10.1If, within six months from Closing or, in respect of any Delayed Business, the Delayed Closing Date, the Purchaser identifies any Site Specific Information Technology, the Purchaser shall notify the Seller in writing and the Seller shall procure that such Information Technology is transferred to the Purchaser or a company nominated by the Purchaser for nominal consideration as soon as practicable after receipt of the Purchaser’s notification provided that any such Site Specific Information Technology shall be transferred by the Seller on an “as-is” basis and the Seller shall have no liability for not wiping or relocating such assets prior to such transfer and, to the extent that any third party consent is required for the transfer of such software, the Seller shall only be obliged to use reasonable endeavours to obtain such third party consent and the cost of any fee demanded

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by the third party as consideration for giving such consent shall be borne by the Purchaser.

8.10.2If and to the extent that the Purchaser no longer requires a member of the Seller’s Group to perform its obligations under the Transitional Services Agreement (or any part thereof) as a result of the transfer of Site Specific Information Technology to the Purchaser pursuant to Clause 8.10.1:

(i)no member of the Seller’s Group shall be in breach of the Transitional Services Agreement or otherwise liable to the Purchaser as a result of such failure to perform and no member of the Purchaser’s Group shall have any claim in respect of such failure; and

(ii)no member of the Purchaser’s Group shall be in breach of the payment obligations of the Transitional Services Agreement or otherwise liable to the Seller in respect of those obligations which are no longer required to be performed, and no member of the Seller’s Group shall have any claim in respect of the Purchaser’s failure to pay for the performance of such obligations.

8.11Covenant not to sue

8.11.1The Seller hereby undertakes not to enforce, at any time after Closing, any Out of Scope Patent against the Purchaser’s Group in relation to the Purchaser’s Group carrying on the Business as at the date of Closing.

8.11.2The Purchaser hereby undertakes not to enforce, at any time after Closing, any Vaccines Patent against the Seller’s Group in relation to the Seller’s Group carrying on the Seller’s Group Retained Business as at the date of Closing.

8.12The Purchaser’s Continuing Obligations

8.12.1The Purchaser shall procure that as soon as practicable after Closing or, in respect of any Delayed Vaccines Group Company, the relevant Delayed Closing, each of the Vaccines Group Companies shall change its name so that it does not contain any of the Seller Restricted Marks or any name which is likely to be confused with the same and shall provide the Seller with appropriate evidence of such change of name.

8.12.2Except as provided in the Ancillary Agreements, the Purchaser shall not, and shall procure that no member of the Purchaser’s Group shall, after Closing or, in respect of any Delayed Vaccines Group Company, the relevant Delayed Closing, use the Seller Restricted Marks or any confusingly similar name or mark, any extensions thereof or developments thereto in any business which competes with the Seller’s business, or any other business of the Seller or any member of the Seller’s Group in which the Seller Restricted Marks are used for a minimum period of five (5) years following Closing and thereafter for so long as any member of the Seller’s Group continues to retain an interest in the relevant Seller Restricted Marks.

8.12.3The Purchaser shall, and shall procure that the relevant Vaccines Group Companies shall:

(i)retain for a period of one (1) year from Closing, and not dispose of or destroy in that period, any emails of the Vaccines Group to the extent they

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are created prior to Closing and shall, and shall procure that the relevant Vaccines Group Companies shall, if reasonably requested by the Seller, allow the Seller reasonable access in that period to such emails (including the right to take copies at the Seller’s expense); and

(ii)retain for a period of 10 years from Closing (and, upon notice from the Seller between 9 and 10 years from Closing, for a further period of 5 years), and not dispose of or destroy during that period, the other books, records and documents (except, in each case, emails) of the Vaccines Group to the extent they relate to the period prior to Closing and shall, and shall procure that the relevant Vaccines Group Companies shall, if reasonably requested by the Seller, allow the Seller reasonable access during that period to such books, records and documents (including the right to take copies at the Seller’s expense) and to the employees of the Vaccines Group or former employees of the Vaccines Group who are employees of any member of the Purchaser’s Group.

8.12.4During the 90 days following the Closing Date, the Purchaser shall provide and cause to be provided to the Seller the information reasonably required to enable the Seller to prepare and audit the standard monthly reporting forms of the Seller’s Group, to the extent that such financial reporting relates to the Vaccines Group, in respect of the period prior to the Closing and in respect of the calendar month in which the Closing occurs. The Purchaser shall provide such financial reporting in respect of the calendar month in which Closing occurs to the Seller within six Business Days of the last day of the relevant month.

8.13The Seller’s Continuing Obligations

The Seller shall retain and not dispose of or destroy and make or procure to be made available to the Purchaser or their duly authorised agents and/or professional advisers on reasonable notice during normal business hours:

8.13.1in each case for a period of one (1) year from Closing (or from the relevant Delayed Closing Date in respect of emails relating to a Delayed Business), all emails relating to the Vaccines Group which have not been transferred to the Purchaser under this Agreement (and shall permit the Purchaser to take copies thereof);

8.13.2in each case for a period of 10 years from Closing (and, upon notice from the Purchaser between 9 and 10 years from Closing, for a further period of 5 years), all relevant books, accounts, other records and correspondence (except, in each case, emails) relating to the Vaccines Group which have not been, or to the extent they have not been, transferred to the Purchaser under this Agreement (and shall permit the Purchaser to take copies thereof), save as otherwise agreed by the parties in relation to any books and records (including but not limited to the content of any personnel files) relating to the employment of the Transferred Employees;

8.13.3in each case for a period of 10 years from Closing (and, upon notice from the Purchaser between 9 and 10 years from Closing, for a further period of 5 years), reasonable access to employees of the Seller’s Group who have knowledge relating to any of the Products (including any inventor of the Products) for the purposes of the defence, prosecution or enforcement of any Vaccines Group Intellectual Property Rights, any actual or potential regulatory or safety

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investigation involving any of the Products, or as required by Applicable Law or a Governmental Entity, provided that the Purchaser shall promptly reimburse the Seller in relation to the provision of such access for (i) out of pocket expenses reasonably incurred by the Seller; and (ii) for the time of that employee of the Seller’s Group if it exceeds 25 man hours in aggregate per annum; and

8.13.4in each case for a period of 3 years from Closing, the Seller shall make or procure to be made available to the Purchaser or their duly authorised agents on reasonable notice during normal business hours reasonable access to any employees of the Seller’s Group who have knowledge relating to the Vaccines Group (including, for the avoidance of doubt and without limitation, any background information relating to the legal position of the Vaccines Group and the Products), to the extent that such employees are retained by the Seller after Closing, to answer any questions other than those covered by Clause 8.13.3 that the Purchaser may reasonably ask in relation to the Vaccines Group, provided that:

(i)the Purchaser shall promptly reimburse the Seller in relation to the provision of such access for the time of that employee of the Seller’s Group to the extent it exceeds 25 man hours in aggregate per annum;

(ii)the Seller shall have no obligations under this Clause 8.13.4 where such access to employees of the Seller’s Group is prohibited under Applicable Law;

(iii)the Purchaser shall have no access rights under this Clause 8.13.4 to employees of the Seller’s Group to the extent such access is prohibited by applicable anti-trust rules or any undertakings, contractual arrangements, or guidelines entered into or provided, with the aim of reasonably ensuring compliance with applicable anti-trust rules; and

(iv)without prejudice to any indemnity provided by the Seller to the Purchaser under this Agreement, no member of the Seller’s Group shall have any Liability to any member of the Purchaser’s Group in connection with the provision of any information by employees of the Seller’s Group pursuant to this Clause 8.13.4.

8.14Influenza Business

8.14.1General

(i)Without prejudice to Clauses 2.1, 2.2, 2.3.1 to 2.3.4, 3 and 4, the parties shall, acting reasonably and as soon as practicable, enter into such arrangements as are required to enable the Influenza Business (or parts thereof) retained by the Seller, purchased by the Purchaser, or purchased by one or more third party purchasers (as applicable) to continue to operate the Influenza Business (or parts thereof) on substantially the same basis as it was operated by the Seller immediately prior to the date of this Agreement.

(ii)Each party shall take all reasonable steps to cooperate with the other party to ensure that each relevant technology transfer takes place as soon as practicable.

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(iii)The Purchaser acknowledges that the Seller shall, at its option, be entitled to:

(a)assign or novate the burden and benefit of the Influenza Business Manufacturing and Supply Agreement and any of the arrangements referred to in Clause 8.14.1(i) to any purchaser(s) of the Influenza Business (or parts thereof) without the consent of the Purchaser; or

(b)require the Purchaser to enter into separate agreements with any purchaser(s) of the Influenza Business (or parts thereof) on the same terms as the Influenza Business Manufacturing and Supply Agreement and any of the arrangements referred to in Clause 8.14.1(i).

8.14.2Influenza Business Manufacturing and Supply Agreement

If the Influenza Business Manufacturing and Supply Agreement has not been entered into on the earlier of: (i) Closing; or (ii) the closing of any sale to the purchaser(s) of the Influenza Business (or parts thereof), the provisions of the heads of terms in relation to the Influenza Business Manufacturing and Supply Agreement in the Agreed Terms shall be binding on the Seller and Purchaser until the earlier of: (i) the date on which the Influenza Business Manufacturing and Supply Agreement is entered into; and (ii) the date specified in the heads of terms.

8.14.3Confidential information

In connection with the services to be provided pursuant to this Clause 8.14, where required by Applicable Law, the Seller and the Purchaser shall establish appropriate safe guards to maintain, and protect from improper disclosure, confidential information arising from the provision of such services.

8.14.4Influenza defects indemnity

Notwithstanding the terms of any Influenza Business Agreement and except in respect of any loss of profit suffered by an indemnified person (other than any loss of profit included in the charges paid or payable under the Influenza Business Agreements), the Seller hereby undertakes to the Purchaser (for itself and on behalf of each other member of the Purchaser’s Group (including the Delayed Vaccines Group Companies)) that, with effect from Closing, the Seller will indemnify on demand and hold harmless each member of the Purchaser’s Group (including the Delayed Vaccines Group Companies) and their respective directors, officers, employees and agents (each an “indemnified person”) against and in respect of any and all Losses suffered by an indemnified person and arising as a result of the failure or alleged failure by an indemnified person to perform or discharge all or part of its obligations under any provision of any Influenza Business Agreement or any other agreement required to be entered into by the Purchaser or any member of the Purchaser’s Group pursuant to Clause 8.14.1(i):

(i)to the extent that such Losses arise as a result of or otherwise relate to any act, omission, fact, matter, circumstance or event undertaken or occurring, in existence or arising in relation to the Vaccines Business or the Influenza Business prior to Closing (“Inherited Defect”); and

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(ii)to the extent that such Losses arise as a result of or otherwise relate to any failure by the Seller to transfer, or procure the transfer of, or provide to, or procure the provision to, the Purchaser or any member of the Purchaser’s Group such assets, rights or information of or relating to the Influenza Business or the Vaccines Business (including any contracts, licences, authorisations and permits) as are reasonably required by the Purchaser’s Group (including the Delayed Vaccines Group Companies) to fulfil such obligations as at Closing.

8.14.5The Purchaser shall notify the Seller as soon as reasonably practicable after becoming aware of:

(i)any such Inherited Defect; or

(ii)any claim it may wish to make under Clause 8.14.4,

and the conduct of any claim notified to the Seller pursuant to (ii) above shall be dealt with pursuant to Clause 8.2.2 as if references in that Clause to “a Liability falling within Clause 8.1.2” were references to any liability to be indemnified under Clause 8.14.4.

8.14.6The Purchaser shall take reasonable steps to mitigate any liability arising in respect of any Inherited Defects, including

(i)taking reasonable steps in accordance with cGMP to identify and remediate any Inherited Defects; and

(ii)by implementing reasonable corrective actions to prevent such failure in the performance of its obligations under the Influenza Business Agreements from recurring.

8.15Retention of books and records

To the extent and for so long as required by, or to the extent and for so long as required in order to perform any obligations under, any Ancillary Agreement or Applicable Law, or where otherwise agreed between the parties, the Seller shall be entitled to retain the original or a copy of any book, ledger, file, report, plan record, manual or other material (in any form or medium) which would otherwise transfer to the Purchaser under this Agreement, provided that:

8.15.1any copy or original retained is treated as strictly confidential in accordance with Clause 14.2;

8.15.2in the case of retained originals, a copy of such book, ledger, file, report, plan, record, manual or other material is provided to the Purchaser;

8.15.3upon reasonable notice by the Purchaser, the Seller shall provide access to such retained book, ledger, file, report, plan, record, manual or other material in accordance with Clause 8.13.2; and

8.15.4upon expiry of the relevant obligation under the applicable Ancillary Agreement the Seller is entitled to retain a copy of any such book, ledger, file, report, plan, record, manual or other material to comply with Applicable Law but shall transfer the original to the Purchaser.

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8.16Abandoned Patents

Notwithstanding anything to the contrary contained in this Agreement or any of the Ancillary Agreements, no representations are made and no warranties are given (in each case, whether express or implied) by the Seller (or any member of the Seller’s Group) in relation to the Abandoned Patents (or transfer of the same) by the Seller (or a member of the Seller’s Group) to the Purchaser (or a member of the Purchaser’s Group).

8.17[***]

8.18Anti-bribery and corruption

The provisions of Schedule 31 shall apply in respect of the parties’ compliance with anti-bribery and corruption laws.

9Transitional Trademark Use

9.1Grant of Transitional Trademark Licence

9.1.1Subject to the terms set out in this Clause 9, the Seller hereby grants, and shall procure that each member of the Seller’s Group shall grant (as applicable), to the Purchaser, from Closing a non-exclusive, worldwide, royalty-free, non-assignable, licence without the right to sub-license (save with the prior written consent of the Seller which shall not be unreasonably withheld or delayed, or as otherwise permitted under Clause 9.1.7) to use the Seller Marks:

(i)subject to Clause 9.1.3, on signage of the Properties, solely in the manner and to the extent such signage bears any Seller Marks as at the Closing Date, which licence shall, unless terminated earlier under Clause 9.6, continue in force on a country by country basis for the longer of: (i) 6 months from the Closing Date; or (ii) for such period following the Closing Date as is required by Applicable Laws, provided that in either case the Purchaser shall, and shall procure that its sub-licensees shall, use all reasonable endeavours to cease such use of such Seller Marks as soon as reasonably practicable following the Closing Date;

(ii)subject to Clause 9.1.3, on any websites (or related digital assets) which exclusively relate to any Product or Pipeline Product solely in the manner and to the extent such websites (or related digital assets) bear any Seller Marks as at the Closing Date, which licence shall, unless terminated earlier under Clause 9.6, continue in force on a country by country basis for the longer of: (i) 6 months from the Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date, as applicable, in accordance with Schedule 8; or (ii) for such period following the Closing Date as is required by Applicable Laws, provided that in either case the Purchaser shall, and shall procure that its sub-licensees shall, use all reasonable endeavours to cease such use of such Seller Marks as soon as reasonably practicable following the Closing Date (“Novartis Branded Websites”);

(iii)on any Transferred Inventory, solely in the manner and to the extent that the Transferred Inventory bears any Seller Marks as at the Closing Date or as is otherwise required by Applicable Laws (“Novartis Branded Inventory”);

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(iv)on any products intended to be sold by the Business as the result of the Vaccines Business Manufacturing and Supply Agreements or the Transitional Distribution Services Agreement solely in the manner and to the extent that those products bear any Seller Marks as at the Closing Date or as is otherwise required by Applicable Laws (“Novartis Branded Products”); and

(v)on any stationery, sales literature, patient information leaflets or similar documentation used in the Business, solely in the manner and to the extent such materials: (i) bear any Seller Marks as at the Closing Date; and (ii) relate to the Novartis Branded Inventory or Novartis Branded Products (“Novartis Branded Literature”),

(the “Transitional Trademark Licence”).

9.1.2Subject to Clauses 9.1.3, 9.1.4, 9.1.5 and 9.1.6, in each case in respect of Clauses 9.1.1(iii) to 9.1.1(v), such licence shall, unless terminated earlier under Clause 9.6, continue in force, on a country by country basis, in relation to each item of Novartis Branded Inventory or Novartis Branded Product (or any Novartis Branded Literature related to the same), as applicable, from the Closing Date for the longer of:

(i)the period required by the Vaccines Business Manufacturing and Supply Agreements or the Transitional Distribution Services Agreement, where applicable;

(ii)the period until the Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date, as applicable, in accordance with Schedule 8; or

(iii)such period as is required by Applicable Laws,

9.1.3Subject always to Clause 9.1.6, the parties shall co-operate in the consideration of an extension of any licences granted under this Clause 9.1 in the event that it is reasonably necessary for any such licences to continue beyond the period contemplated in Clause 9.1, and the Seller shall not unreasonably withhold its agreement to any such extension.

9.1.4The Purchaser shall, and shall procure that its sub-licensees shall:

(i)use all reasonable endeavours to cease such use of the Seller Marks as soon as reasonably practicable following the Closing Date; and

(ii)use the Seller Marks in accordance with Applicable Laws only.

9.1.5Neither the Purchaser nor its sub-licensees shall have any rights under the licences granted in Clauses 9.1.1(iii) to 9.1.1(v) to use any of the Seller Marks in relation to any Novartis Branded Inventory or Novartis Branded Products whose “sell-by date” or shelf life, as applicable, has passed or expired.

9.1.6The licences granted under Clauses 9.1.1(ii) to 9.1.1(v) shall expire after 24 months of the Closing Date (the “Long Stop Expiry Date”).

9.1.7The Purchaser shall be entitled to sub-license its rights under the Transitional Trademark Licence to:

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(i)any member of the Purchaser’s Group without the prior written consent of the Seller, provided that any act of the sub-licensee which would, if committed by the Purchaser be a breach of any of the terms applying to the Transitional Trademark Licence, shall be treated as an equivalent breach by the Purchaser of the terms of the Transitional Trademark Licence; and

(ii)third party sub-contractors working with the Purchaser in relation to the Manufacture or Commercialisation of the Novartis Branded Inventory, Novartis Branded Products or Novartis Branded Literature, provided that:

(a)any act of the sub-licensee which would, if committed by the Purchaser be a breach of any of the terms applying to the Transitional Trademark Licence, shall be treated as an equivalent breach by the Purchaser of the terms of the Transitional Trademark Licence; and

(b)if the Seller or the Purchaser determines that any sub-licensee under Clause 9.1.7(ii) is using any Seller Marks outside the scope of a permitted sub-licence under this Clause 9.1, the Purchaser promptly will cause the sub-licensee to cease such unpermitted use and will notify such sub-licensee that it is in material breach of its sub-licence agreement. If the breach continues unremedied for a period of fifteen (15) calendar days after the Purchaser provides notice to such sub-licensee describing the nature of the breach, the Purchaser will, upon the Seller’s request, terminate the applicable sub-licence and will cooperate with the Seller to enforce the Seller’s rights against such former sub-licensee as the Seller directs.

9.2Reservation of Rights

The Seller reserves all rights in and to the Seller Marks. The Purchaser acknowledges and agrees that as between the Seller (or the relevant member of the Seller’s Group) and the Purchaser, the Seller (or the relevant member of the Seller’s Group) is the sole and exclusive owner of all right, title and interest in and to the Seller Marks, including all goodwill of the business connected with the use of, or symbolised by, the Seller Marks. All goodwill generated from the use of the Seller Marks by the Purchaser or its sub-licensees shall inure solely to the benefit of the Seller (or the relevant member of the Seller’s Group). Nothing in this Clause 9 grants the Purchaser or its sub-licensees any ownership or other proprietary interest in any Seller Marks.

9.3Restrictions on Use

9.3.1The Purchaser shall have no right pursuant to this Clause 9 to use or permit any other person to use, any of the Seller Marks as part of a corporate or trading name or to hold itself out or otherwise represent itself to be a member of, or to be associated or connected with, any member or business venture of the Seller’s Group, or permit any other person to do that same.

9.3.2Without limiting the generality of Clause 9.2 of this Agreement, the Purchaser will not, nor attempt to, nor permit, enable, or request any other person to:

(i)use any Seller Marks in any manner, or engage in any other act or omission, that would impair the right of the Seller (or the relevant member

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of the Seller’s Group) in and to the Seller Marks, including any act or omission that would invalidate or cause the cancellation or abandonment of any Seller Marks;

(ii)file, acquire or otherwise obtain any registration for or application to register any Trademark or domain name, or acquire, create or otherwise obtain any social media account that consists of, incorporates, uses, or is confusingly similar to any Seller Marks; whether with any Governmental Entity, internet domain name registrar, social media platform or otherwise (each, a “Registration”);

(iii)adopt or use any variation, derivation or acronym of the Seller Marks or any word, symbol or Trademark that is confusingly similar to the Seller Marks (each, a “Variation”);

(iv)use any Seller Marks with any other word, symbol or Trademark (other than a Trademark assigned or otherwise expressly transferred to the Purchaser pursuant to this Agreement) so as to form a composite Trademark (each, a “Composite”);

(v)represent to any other person that it, any sub-licensee, or any other person (other than the Seller (or the relevant member of the Seller’s Group) or its or their successors in interest to the Seller Marks) has or will have any ownership interest in any Seller Marks; or

(vi)grant or attempt to grant a security interest in or lien on, record any security interest or lien against, or otherwise encumber, any Seller Marks.

9.4Transfer of Rights

If the Purchaser or any of its sub-licensees has or acquires any rights in or to the Seller Marks, or any Registrations, Composites or Variations, the Purchaser hereby irrevocably assigns, and will cause its sub-licensees to assign irrevocably, all such rights to the Seller. At the request of the Seller, the Purchaser will, and will procure that its sub-licensees will, execute any document, and perform any act reasonably necessary to obtain, or confirm the Seller’s or its designee’s exclusive ownership interest in and to the Seller Marks and Registrations, in each applicable jurisdiction, including executing and delivering applications, oaths, declarations, affidavits, waivers, assignments and other documents.

9.5Quality Control

9.5.1The Purchaser will use, and cause its sub-licensees to use, the Seller Marks under the terms of this Clause 9 solely in a manner consistent with the operation of the Business immediately prior to the Closing Date.

9.5.2The Purchaser will comply, and will cause its sub-licensees to comply, with any specifications, standards and directions that the Seller may provide in writing from time to time relating to the use of the Seller Marks under this Clause 9.

9.5.3Concerning any Novartis Branded Products and Novartis Branded Inventory manufactured by the Seller or its Affiliates, or by any third party in privity of contract with the Seller or its Affiliates, the Purchaser will not tamper, modify or otherwise take any action, and will procure that its sub-licensees will not tamper, modify or

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otherwise take any action, to affect the quality of such Novartis Branded Products and Novartis Branded Inventory.

9.5.4Concerning any Novartis Branded Products and Novartis Branded Inventory manufactured by the Purchaser or its sub-licensees, or by any third party in privity of contract with the Purchaser or its sub-licensees, the Purchaser will ensure that such Novartis Branded Products and Novartis Branded Inventory at all times meet or exceed (i) the quality and manufacturing standards of similar products in the Novartis Branded Products and Novartis Branded Inventory’ industry; (ii) the Good Manufacturing Practices applicable to such Novartis Branded Products and Novartis Branded Inventory, as updated from time to time; (iii) any other standards imposed by the applicable Governmental Entities; and (iv) any specifications and quality provisions set forth in any agreement entered into by the parties in connection with this Agreement. The Purchaser will notify the Seller in the event that any Product does not meet such standards.

9.5.5Except where Product Packaging or Novartis Branded Literature originate with the Seller or the Seller’s Affiliates, the Purchaser will, to the extent physically practicable, include, and will procure that its sub-licensees will include, on all Product Packaging, Novartis Branded Literature and Novartis Branded Websites that bear the Seller Marks: (i) a statement that the Seller Marks used thereon is a Trademark of the Seller and used under license (or any similar statement required by the Seller concerning the status of the Seller Marks), and (ii) the symbols “®”, “™” or other notice required by the applicable Governmental Entity in proximity to each prominent use of the Seller Marks, all in line with the current practices applied by the Seller or its Affiliates prior to the Closing Date.

9.6Termination of the Transitional Trademark Licence

9.6.1The Seller may terminate the Transitional Trademark Licence and the rights granted to the Purchaser under the same at any time by providing notice of termination to the Purchaser if:

(i)the Purchaser commits a material breach of this Clause 9 and the material breach continues un-remedied for two months after the Seller provides notice to the Purchaser describing the nature of the material breach; or

(ii)the Purchaser contests, challenges or otherwise makes any claim or takes any action adverse to the Seller’s (or the relevant member of the Seller’s Group) ownership of or interest in, or the validity of, the Seller Marks, including in any proceeding before any Governmental Entity.

10Warranties

10.1The Seller’s Warranties

10.1.1Subject to Clause 10.2, the Seller warrants (on behalf of the relevant Business Sellers or Share Sellers as applicable) to the Purchaser and each member of the Purchaser’s Group to which Shares or other assets are transferred pursuant to this Agreement or any Local Transfer Document, that the statements set out in Schedule 18 are true and accurate as of the date of this Agreement.

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10.1.2Each of the Seller’s Warranties shall be separate and independent and shall not be limited by reference to any other paragraph of Schedule 18 or by anything in this Agreement or any Local Transfer Document or in the Tax Indemnity.

10.1.3The Seller does not give or make any warranty as to the accuracy of the forecasts, estimates, projections, statements of intent or statements of opinion provided to the Purchaser or any of its directors, officers, employees, agents or advisers on or prior to the date of this Agreement.

10.1.4Any Seller’s Warranty qualified by the expression “so far as the Seller is aware” or to the “Seller’s Knowledge” or any similar expression shall, unless otherwise stated, be deemed to refer to the knowledge of the following persons: [***], [***], [***], [***], [***], [***], [***], [***], [***] and [***], such persons having made due and reasonable enquiry.

10.1.5The Seller’s Warranties shall be deemed to be repeated immediately before Closing by reference to the facts, circumstances and knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date. Without prejudice to the provisions of Clause 11, the Seller shall have no liability for any breach of any Seller’s Warranty where such Seller’s Warranty was true as at the date of this Agreement unless the fact, event or circumstances giving rise to the breach constitutes a Material Adverse Effect. The Seller shall have no liability under this Clause 10.1.5 if the Purchaser has exercised its termination right in accordance with Clause 4.4.1(iv).

10.1.6Save insofar as they are specifically referred to in paragraphs 4.4 and 4.5 of Schedule 18, none of the Seller’s Warranties shall apply to any of the Beta Interferon Patent Rights.

10.2Seller’s Disclosures

10.2.1The Seller’s Warranties are subject to all matters which are fairly disclosed in this Agreement or in the Disclosure Letter.

10.2.2References in the Disclosure Letter to paragraph numbers shall be to the paragraphs in Schedule 18 to which the disclosure is most likely to relate. Such references are given for convenience only and, shall not limit the effect of any of the disclosures, all of which are made against the Seller’s Warranties as a whole.

10.3The Purchaser’s Warranties

The Purchaser warrants to the Seller that the statements set out in Schedule 19 are true and accurate as of the date of this Agreement.

11Limitation of Liability

11.1Application

11.1.1In respect of the Tax Indemnity, the provisions of this Clause 11 shall operate to limit the liability of the Seller only in so far as any provision in this Clause 11 is expressed to be applicable to the Tax Indemnity, and the provisions of the Tax Indemnity shall further operate to limit the liability of the Seller in respect of any claims thereunder.

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11.1.2References to the Seller’s Warranties in Clauses 11.2 to 11.5 and 11.7 to 11.9 shall not include the Tax Warranties and the provisions of clause 3 of the Tax Indemnity shall operate to limit the liability of the Seller and to govern the claims procedure in respect of any claim under the Tax Warranties in respect of a liability for Tax as if such claim had been a claim in respect of a Tax Liability (as defined in the Tax Indemnity) under the Tax Indemnity.

11.2Time Limitation for Claims

The Seller shall not be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty or under the Tax Indemnity in respect of any claim unless a notice of the claim is given by the Purchaser to the Seller specifying the matters set out in Clause 12.2:

11.2.1in the case of a claim under paragraph 1, 2.1, 2.2.1, 2.2.3 or 2.3 of Schedule 18, within the applicable statutory limitation period;

11.2.2in the case of any claim under paragraphs 4.1 to 4.11 of Schedule 18, within 6 years of Closing;

11.2.3in respect of claims under the Tax Warranties or the Tax Indemnity, before the date falling six months after the expiry of the period specified by statute during which an assessment of the relevant liability to Tax may be issued by the relevant Tax Authority; and

11.2.4in the case of any other claim, within two years of Closing.

11.3Minimum Claims

11.3.1The Seller shall not be liable under:

(i)this Agreement or any Local Transfer Document for breach of any Seller’s Warranty in respect of any individual claim (or a series of claims arising from similar or identical facts or circumstances) where the liability agreed or determined (disregarding the provisions of this Clause 11.3) in respect of any such claim or series of claims does not exceed 0.1 per cent. of the Headline Price; or

(ii)this Agreement for breach of any Tax Warranty or under the Tax Indemnity in respect of any individual claim (or series of claims arising from similar or identical facts or circumstances) where the liability agreed or determined (disregarding the provisions of this Clause 11.3) in respect of any such claim or series of claims does not exceed US$1 million;

11.3.2Where the liability agreed or determined in respect of any such claim or series of claims exceeds (in the case of claims falling within Clause 11.3.1(i)) 0.1 per cent. of the Headline Price or, in the case of claims falling within Clause 11.3.1(ii))) US$1 million, the liability of the Seller shall be for the whole amount of such claim(s) and not just the excess.

11.4Aggregate Minimum Claims

11.4.1The Seller shall not be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty in respect of any claim unless the aggregate amount of all claims for which the Seller would otherwise be liable under

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this Agreement or any Local Transfer Document for breach of any Seller’s Warranty (disregarding the provisions of this Clause 11.4) exceeds one per cent. of the Headline Price.

11.4.2Where the liability agreed or determined in respect of all claims exceeds one per cent. of the Headline Price, the Seller shall be liable for the aggregate amount of all claims as agreed or determined and not just the excess.

11.4.3For the avoidance of doubt, the Purchaser may give notice of any single claim in accordance with and for the purposes of Clause 11.2, irrespective of whether, at the time the notice is given, the amount set out in Clause 11.4.2 has been exceeded.

11.5Maximum Liability

The aggregate liability of the Seller in respect of:

11.5.1any breaches of the Seller’s Warranties (other than the Seller’s Warranties contained in paragraphs 1, 2.1, 2.2.1, 2.2.3, 2.3 or 4.1 to 4.10 of Schedule 18) shall not exceed an amount equal to 30 per cent. of the Headline Price;

11.5.2any breaches of the Seller’s Warranties contained in paragraphs 4.1 to 4.10 of Schedule 18 shall not exceed an amount equal to 60 per cent. of the Headline Price; and

11.5.3any breaches of the Seller’s Warranties contained in paragraphs 1, 2.1, 2.2.1, 2.2.3, or 2.3 of Schedule 18 shall not exceed the Headline Price.

11.6Contingent Liabilities

The Seller shall not be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranties in respect of which the liability is contingent, unless and until such contingent liability becomes an actual liability and is due and payable (but the Purchaser has the right under Clause 12.1 to give notice of such claim before such time).  For the avoidance of doubt, the fact that the liability may not have become an actual liability by the relevant date provided in Clause 11.2 shall not exonerate the Seller in respect of any claim properly notified before that date.

11.7Provisions

The Seller shall not be liable under this Agreement or any Local Transfer Document, in either case, in respect of any claim for breach of any Seller’s Warranty, if and to the extent that any allowance, provision or reserve has been properly made in the Closing Statement or Statement of Net Assets for the matter giving rise to the claim and the Seller can demonstrate that the allowance, provision or reserve so made was in respect of such matter.

11.8Matters Arising Subsequent to this Agreement

Subject to Clause 8.1.2, the Seller shall not be liable under this Agreement or any Local Transfer Document in either case in respect of any claim for breach of any Seller’s Warranty in respect of any matter, act, omission or circumstance (or any combination thereof), to the extent that the same would not have occurred but for:

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11.8.1Agreed matters

any matter or thing done or omitted to be done by the Seller or any member of the Seller’s Group before Closing pursuant to and in compliance with this Agreement or any Local Transfer Document or otherwise at the request in writing of the Purchaser; or

11.8.2Changes in legislation

the passing of, or any change in, after the Closing Date, any Applicable Law or administrative practice of any government, governmental department, agency or regulatory body having the force of the law including (without prejudice to the generality of the foregoing) any increase in the rates of Taxation or any imposition of Taxation or any withdrawal of relief from Taxation not in force at the Closing Date.

11.9Insurance

Without prejudice to Clause 15, the Seller’s Liability under this Agreement for breach of any Seller’s Warranty shall be reduced by an amount equal to any loss or damage to which such claim related which has actually been recovered under a policy of insurance held by the Purchaser or a Vaccines Group Company (after deducting any reasonable costs incurred in making such recovery including the amount of any excess or deductible).

11.10Purchaser’s Right to Recover

If the Seller has paid an amount in discharge of any claim under this Agreement for breach of any Seller’s Warranty and subsequently the Purchaser recovers (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, the Purchaser shall pay to the Seller as soon as practicable after receipt an amount equal to (i) the sum recovered from the third party less any costs and expenses incurred in obtaining such recovery and any Tax on any amounts recovered (or Tax that would have been payable on such amounts but for the availability of any Tax relief), or if less (ii) the amount previously paid by the Seller to the Purchaser. Any payment made by the Purchaser to the Seller under this Clause shall be made or procured by way of further adjustment of the consideration paid by the Purchaser and the provisions of Clause 3.3 shall apply mutatis mutandis.

11.11No Double Recovery and no Double Counting

A party shall be entitled to make more than one claim under this Agreement arising out of the same subject matter, fact, event or circumstance but shall not be entitled to recover under this Agreement or any Local Transfer Document or the Tax Indemnity or otherwise more than once in respect of the same Losses suffered or amount for which the party is otherwise entitled to claim (or part of such Losses or amount), regardless of whether more than one claim arises in respect of it. No amount (including any relief) (or part of any amount) shall be taken into account, set off or credited more than once under this Agreement or any Local Transfer Document or the Tax Indemnity or otherwise, with the intent that there will be no double counting under this Agreement or any Local Transfer Document and the Tax Indemnity or otherwise.

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11.12Fraud

None of the limitations contained in this Clause 11 shall apply to any claim to the extent that such claim arises or is increased as the consequence of, or which is delayed as a result of, fraud by any director or officer of any member of the Seller’s Group.

12Claims

12.1Notification of Potential Claims

Without prejudice to the obligations of the Purchaser under Clause 12.2, if the Purchaser becomes aware of any fact, matter or circumstance that may give rise to a claim against the Seller under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty other than a Tax Warranty (ignoring for these purposes the application of Clause 12.2 or 12.3), the Purchaser shall as soon as reasonably practicable give a notice in writing to the Seller of such facts, matters or circumstances as are then available regarding the potential claim. Failure to give notice within such period shall not affect the rights of the Purchaser to make a relevant claim under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty, except that the failure shall be taken into account in determining the liability of the Seller for such claim to the extent the Seller establishes that the amount of it is increased, or is not reduced, as a result of such failure.

12.2Notification of Claims under this Agreement

Notices of claims under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty (other than a Tax Warranty) shall be given by the Purchaser to the Seller within the time limits specified in Clause 11.2 and shall specify information (giving reasonable detail) in relation to the basis of the claim and setting out the Purchaser’s estimate of the amount of Losses which are, or are to be, the subject of the claim.

12.3Commencement of Proceedings

Any claim notified pursuant to Clause 12.2 shall (if it has not been previously satisfied, settled or withdrawn) be deemed to be irrevocably withdrawn 9 months after the relevant time limit set out in Clause 11.2 unless, at the relevant time, legal proceedings in respect of the relevant claim have been commenced by being both issued and served except:

12.3.1where the claim relates to a contingent liability, in which case it shall be deemed to have been withdrawn unless legal proceedings in respect of it have been commenced by being both issued and served with 9 months of it having become an actual liability; or

12.3.2where the claim is a claim for breach of a Seller’s Warranty of which notice is given for the purposes of Clause 11.2 at a time when the amount set out in Clause 11.4.2 has not been exceeded, in which case it shall be deemed to have been withdrawn unless legal proceedings in respect of it have been commenced by being both issued and served within 9 months of the date of any subsequent notification to the Seller pursuant to Clause 12.1 of one or more claims which result(s) in the total amount claimed in all claims notified to the Seller pursuant to Clause 11.2 exceeding the amount set out in Clause 11.4.2 for the first time.

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12.4Conduct of Third Party Claims

12.4.1If the matter or circumstance that may give rise to a claim against the Seller under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty (other than a Tax Warranty) is a result of or in connection with a claim by a third party (a “Third Party Claim”) then:

(i)the Purchaser shall as soon as reasonably practicable give written notice thereof to the Seller and thereafter shall provide the Seller with periodic updates upon reasonable request and shall consult with the Seller so far as reasonably practicable in relation to the conduct of the Third Party Claim and shall take reasonable account of the views of the Seller in relation to the Third Party Claim;

(ii)the Third Party Claim shall not be admitted, compromised, disposed of or settled without the written consent of the Seller (such consent not to be unreasonably withheld or delayed); and

(iii)subject to the Seller indemnifying the Purchaser or other member of the Purchaser’s Group (including any Delayed Vaccines Group Company) concerned against all reasonable costs and expenses (including legal and professional costs and expenses) that may be incurred thereby, the Purchaser shall, or the Purchaser shall procure that any other members of the Purchaser’s Group shall, take such action as the Seller may reasonably request to avoid, dispute, deny, defend, resist, appeal, compromise or contest the Third Party Claim, provided that this Clause 12.4.1(iii) shall not apply where the claim by the third party relates to matters or circumstances referred to in paragraph 4 or 9 of Schedule 18 and the Purchaser shall then have the right to conduct the claim at its discretion (subject to Clauses 12.4.1(i) and 12.4.1(ii)),

provided that failure to give notice in accordance with Clause 12.4.1(i) shall not affect the rights of the Purchaser to make a relevant claim under this Agreement for breach of any Seller’s Warranty, except that the failure shall be taken into account in determining the liability of the Seller for such claim to the extent the Seller establishes that the amount of it is increased, or is not reduced, as a result of such failure.

12.4.2Notwithstanding the provisions of this Clause 12.4, if a Third Party Claim may give rise to a claim against the Seller under Clause 8.1.2, the conduct of any such Third Party Claim shall be dealt with pursuant to Clause 8.2.2 and Clause 12.4.1 shall not apply.

13Restrictive Covenants

13.1Non-compete

The Seller will not, and undertakes to procure that each member of the Seller’s Group will not, for the period from Closing until three years after the Closing Date:

13.1.1be engaged (directly or indirectly) in any business which competes with the Business as it is carried on at the Closing Date (the “Restricted Business”), provided that commercial transactions outside the Restricted Business with a client, customer, supplier, licensor or distributor that is not a member of the Seller’s

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Group shall not be deemed to indirectly violate this Clause 13.1.1 by reason of such person being engaged in the Restricted Business or taking any other action prohibited hereunder; or

13.1.2solicit the custom of any person to whom goods or services have been sold by any member of the Vaccines Group in the course of its business during the two years before the Closing Date, in each case only to the extent that such solicitation is in competition with the Business of the Vaccines Group as it is carried on at the Closing Date.

13.2Exceptions to the non-compete

13.2.1The restrictions in Clause 13.1 shall not apply to:

(i)any Delayed Business in the period between Closing and the relevant Delayed Closing Date;

(ii)the Specified Excluded Businesses;

(iii)the Influenza Business;

(iv)any activities of any nature undertaken or developed by the Seller’s Group (other than the Vaccines Group) in relation to oncology;

(v)any activities of any nature (or any assets related thereto) contributed by the Seller’s Group pursuant to the Consumer Contribution Agreement;

(vi)any supply agreements between the Seller’s Group (other than the Vaccines Group) and the Business, the Influenza Business or Leo Constellation Limited (or its Affiliates);

(vii)any person at such time as it is no longer a member of the Seller’s Group, and any person that purchases assets, operations, subsidiaries or businesses from the Seller’s Group if such Person is not a member of the Seller’s Group after such transaction is consummated;

(viii)any Affiliate of Seller in which a person who is not a member of the Seller’s Group holds equity interests and with respect to whom a member of the Seller’s Group has existing contractual or legal obligations limiting its discretion to impose non-competition obligations;

(ix)the holding of shares in a company or other entity for investment purposes provided the Seller does not exercise, directly or indirectly, Control over that company or entity;

(x)any business activity that would otherwise violate Clause 13.1 that is acquired in connection with an acquisition so long as the relevant member of the Seller’s Group divests all or substantially all of the business activity that would otherwise violate Clause 13.1 or otherwise terminates or disposes of such business activity, product line or assets of such acquired business that would otherwise violate Clause 13.1 within nine months after the consummation of the relevant acquisition, or such longer period as may reasonably be necessary to comply with Applicable Law (provided that in those circumstances the Seller shall procure that the Restricted Business is disposed of as soon as reasonably practicable);

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(xi)passive investments by a pension or employee benefit plan or trust for present or former employees;

(xii)financial investments by the Novartis Venture Funds;

(xiii)investments by the Novartis Foundation for Sustainable Development, or a similar non-profit-based organization;

(xiv)performance of any obligation of the Seller’s Group under the Ancillary Agreements, as amended from time to time in accordance with its their terms; or

(xv)provision of data or other content to or in connection with business conducted by any person, in each case as required by Applicable Law.

13.3Non-solicit

The Seller will not, and undertakes to procure that each member of the Seller’s Group will not, for a period of two years after the Closing Date, solicit or induce any Restricted Vaccines Group Employee to become employed or engaged whether as employee, consultant or otherwise by any member of the Seller’s Group.

13.4Exceptions to the non-solicit

The restrictions in Clause 13.3 may be relaxed or additional exceptions allowed by written approval of the Purchaser’s Division Head of HR and shall in any event not apply to the solicitation, inducement or recruitment of any person:

13.4.1through the placing of advertisements of posts available to the public generally;

13.4.2through an employment agency, provided that no member of the Seller’s Group encourages or advises such agency to approach any such person;

13.4.3who is no longer employed by the Purchaser’s Group; or

13.4.4who is under formal notice of termination from his employer, provided that this exception only applies if the employment or engagement by the member of the Seller’s Group is offered with a start date which is no earlier than the day after the last scheduled date of the person’s employment with the Purchaser’s Group.

13.5Reasonableness of Restrictions

Each undertaking contained in this Clause 13 shall be construed as a separate undertaking and if one or more of the undertakings is held to be against the public interest or unlawful or in any way an unreasonable restraint of trade, the remaining undertakings shall continue to bind the Seller.

14Confidentiality

14.1Announcements

No announcement, communication or circular concerning the existence or the subject matter of this Agreement shall be made or issued by or on behalf of any member of the Seller’s Group or the Purchaser’s Group without the prior written approval of the Seller and the Purchaser (such consent not to be unreasonably withheld or delayed). This shall not affect any announcement, communication or circular required by law or any governmental

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or regulatory body or the rules of any stock exchange on which the shares of any party (or its holding company) are listed but the party with an obligation to make an announcement or communication or issue a circular (or whose holding company has such an obligation) shall consult with the other parties (or shall procure that its holding company consults with the other parties) insofar as is reasonably practicable before complying with such an obligation.

14.2Confidentiality

14.2.1Subject to Clause 14.1 and Clause 14.2.2, each of the parties shall treat as strictly confidential and not disclose or use any information received or obtained as a result of entering into this Agreement, the Ancillary Agreements or any agreement entered into pursuant to this Agreement which relates to:

(i)the existence and provisions of this Agreement, the Ancillary Agreements and of any other agreement entered into pursuant to this Agreement;

(ii)the negotiations relating to this Agreement, the Ancillary Agreements and any such other agreement;

(iii)(in the case of the Seller) any information relating to the Vaccines Group Companies and Vaccines Group Businesses following Closing and any other information relating to the business, financial or other affairs (including future plans and targets) of the Purchaser’s Group, provided that nothing in this Clause 14.2.1(iii) shall prohibit the use or disclosure by the Seller for or to the Influenza Business or any purchaser(s) of the Influenza Business (or parts thereof) of any information (as redacted to the extent required to comply with Applicable Law) to the extent it is exclusively related to the Influenza Business or reasonably necessary for the commercialization of the Influenza Business (including, but not limited to, any books, records and documents related to the SAM platform technology or other shared vaccines platforms, information or technologies); or

(iv)(in the case of the Purchaser) any information relating to the business, financial or other affairs (including future plans and targets) of the Seller’s Group including, prior to Closing, the Vaccines Group Companies and Vaccines Group Businesses.

14.2.2Clause 14.2.1 shall not prohibit disclosure or use of any information if and to the extent:

(i)the disclosure or use is required by law, any governmental or regulatory body or any stock exchange on which the shares of any party (or its holding company) are listed;

(ii)the disclosure or use is required to vest the full benefit of this Agreement or the Ancillary Agreements in any party;

(iii)the disclosure or use is required for the purpose of any arbitral or judicial proceedings arising out of this Agreement, the Ancillary Agreements or any other agreement entered into under or pursuant to this Agreement or to enable a determination to be made by the Reporting Accountants under this Agreement;

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(iv)the disclosure is made to a Tax Authority in connection with the Tax affairs of the disclosing party;

(v)the disclosure is made to a ratings agency on a confidential basis in connection with the affairs of the disclosing party;

(vi)the disclosure is made by the Purchaser to any of its Representatives, any member of the Purchaser’s Group and/or any of their respective Representatives, or by the Seller to any of its Representatives, any member of the Seller’s Group and/or any of their respective Representatives, in each case on a “need-to-know” basis and provided they have a duty (contractual or otherwise) to keep such information confidential;

(vii)the information was lawfully in the possession of that party without any obligation of secrecy prior to its being received or held, in either case as evidenced by written records;

(viii)the information is or becomes publicly available (other than by breach of this Agreement);

(ix)the other party has given prior written approval to the disclosure or use; or

(x)the information is independently developed,

provided that prior to disclosure or use of any information pursuant to Clause 14.2.2(i), (ii) or (iii), the party concerned shall, where not prohibited by law, promptly notify the other parties of such requirement with a view to providing the other parties with the opportunity to contest such disclosure or use or otherwise to agree the timing and content of such disclosure or use.

15Insurance

15.1No cover under Seller’s Group Insurance Policies from Closing

The Purchaser acknowledges and agrees that following Closing:

15.1.1neither the Purchaser nor any Vaccines Group Company (but, in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date) shall have or be entitled to the benefit of any Seller’s Group Insurance Policy in respect of any event, act or omission that takes place after Closing and it shall be the sole responsibility of the Purchaser to ensure that adequate insurances are put in place for those Vaccines Group Companies (but, in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date) and Vaccines Group Businesses (but, in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date) with effect from Closing;

15.1.2except in respect of any Delayed Vaccines Group Company or Delayed Vaccines Group Business until the relevant Delayed Closing Date, neither the Seller nor any member of the Seller’s Group shall be required to maintain any Seller’s Group Insurance Policy for the benefit of the Vaccines Group;

15.1.3no Vaccines Group Company shall make or shall be entitled to make or notify a claim under any Seller’s Group Insurance Policy in respect of any event, act or

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omission that occurred prior to the Closing Date or, in respect of a Delayed Vaccines Group Company, prior to the relevant Delayed Closing Date.

15.2Existing claims under Seller’s Group Insurance Policies

With respect to any claim made before the Closing Date under any Seller’s Group Insurance Policy by or on behalf of any Vaccines Group Company or in respect of any Vaccines Group Business, or to any claim made before the relevant Delayed Closing Date under any Seller’s Group Insurance Policy by or on behalf of any Delayed Vaccines Group Company or in respect of any Delayed Vaccines Group Business, to the extent that:

15.2.1neither the Purchaser nor the Vaccines Group Companies have been indemnified by the Seller prior to the Closing Date in respect of the matter in respect of which the claim was made; or

15.2.2the Liability in respect of which the claim was made has not been properly provided for in the Closing Statement and reduced the Working Capital accordingly,

the Seller shall use reasonable endeavours after Closing to recover all monies due from insurers and shall pay any monies received (after taking into account any deductible under the Seller’s Group Insurance Policies and less any Taxation suffered on the proceeds and any reasonable out of pocket expenses suffered or incurred by the Seller or any member of the Seller’s Group in connection with the claim) to the Purchaser or, at the Purchaser’s written direction, the relevant Vaccines Group Company as soon as practicable after receipt.

16France Business and Netherlands Business

16.1France Business

Notwithstanding any other provision of this Agreement, this Agreement shall not constitute a binding agreement to sell or purchase the France Business, provided that:

16.1.1in the event that the France Put Option Exercise occurs before Closing, this Clause 16.1 (other than this Clause 16.1.1) shall terminate and shall cease to have effect, and the sale of the France Business shall be subject to the provisions of this Agreement as if it were part of the Business to be sold as and from the date of this Agreement;

16.1.2in the event that the France Put Option Exercise does not occur before Closing:

(i)the provisions of Clauses 2 and 6 (the “Disapplied Provisions”) shall not apply to the France Business;

(ii)prior to the France Closing, the provisions of Clause 13 and Schedules 11 and 12 (the “Suspended Provisions”) shall not apply to the France Business; and

(iii)in respect of the Disapplied Provisions and, prior to the France Closing, the Suspended Provisions only:

(a)the term “Business” shall be deemed to exclude the France Business;

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(b)the term “Companies” shall be deemed to exclude Novartis Vaccines and Diagnostics S.A.S.;

(c)the term “Assumed Liabilities” shall be deemed to exclude the France Assumed Liabilities; and

(d)the term “Employees” shall be deemed to exclude the France Employees;

16.1.3with effect from the France Closing, the Suspended Provisions shall apply to the France Business mutatis mutandis save that in respect of the Suspended Provisions only (A) the term “Closing” shall be deemed to refer to the France Closing and (B) the term “Closing Date” shall be deemed to refer to the date of the France Closing; and

16.1.4the parties shall negotiate in good faith to agree any amendments to this Agreement and any of the Ancillary Agreements as are required in order to give effect to the principles set forth in this Clause 16.1 for the purposes of complying with the information and consultation requirements in respect of the Comité d’enterprise de Novartis Vaccines and Diagnostics SAS (being the relevant works council in respect of the France Business); and

16.1.5the provisions of Clause 11 shall apply to the France Business as if the remaining provisions of this Clause 16.1 did not have any force or effect.

16.2Netherlands Business

Notwithstanding any other provision of this Agreement, this Agreement shall not constitute a binding agreement to sell or purchase the Netherlands Business, provided that:

16.2.1in the event that the Netherlands Put Option Exercise occurs before Closing, this Clause 16.2 (other than this Clause 16.2.1) shall terminate and shall cease to have effect, and the sale of the Netherlands Business shall be subject to the provisions of this Agreement as if it were part of the Business to be sold as and from the date of this Agreement;

16.2.2in the event that the Netherlands Put Option Exercise does not occur before Closing:

(i)the Disapplied Provisions shall not apply to the Netherlands Business;

(ii)prior to the Netherlands Closing, the Suspended Provisions shall not apply to the Netherlands Business; and

(iii)in respect of the Disapplied Provisions and, prior to the Netherlands Closing, the Suspended Provisions only:

(a)the term “Business” shall be deemed to exclude the Netherlands Business;

(b)the term “Vaccines Group Businesses” shall be deemed to exclude the Netherlands Business;

(c)the term “Assumed Liabilities” shall be deemed to exclude the Netherlands Assumed Liabilities; and

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(d)the term “Employees” shall be deemed to exclude the Netherlands Employees;

16.2.3with effect from the Netherlands Closing, the Suspended Provisions shall apply to the Netherlands Business mutatis mutandis save that in respect of the Suspended Provisions only (A) the term “Closing” shall be deemed to refer to the Netherlands Closing and (B) the term “Closing Date” shall be deemed to refer to the date of the Netherlands Closing; and

16.2.4the parties shall negotiate in good faith to agree any amendments to the Ancillary Agreements as are required in order to give effect to the principles set forth in this Clause 16.2 for the purposes of complying with the information and consultation requirements in respect of Onderdeelcommissie NV (being the relevant works council in respect of the Netherlands Business); and

16.2.5the provisions of Clause 11 shall apply to the Netherlands Business as if the remaining provisions of this Clause 16.2 did not have any force or effect.

17Other Provisions

17.1Further Assurances and IP Recordals

17.1.1Without prejudice to any restriction or limitation on the extent of any party’s obligations under this Agreement, each of the parties shall from time to time, so far as each is reasonably able, do or procure the doing of all such acts and/or execute or procure the execution of all such documents in a form reasonably satisfactory to the party concerned as they may reasonably consider necessary to transfer the Vaccines Group to the Purchaser or otherwise to give the other party the full benefit of this Agreement.

17.1.2Subject to Clause 17.1.3, the parties shall negotiate in good faith to agree definitive and legally binding documentation in respect of each of the Ancillary Agreements for which heads of terms are in the Agreed Terms on the date of this Agreement, and shall duly execute and deliver such definitive and legally binding documentation in respect of the Ancillary Agreements at Closing.

17.1.3In the event that the parties are unable to agree definitive and legally binding documentation in respect of an Ancillary Agreement referred to in Clause 17.1.2 by Closing, the parties shall be subject to and shall adhere to the heads of terms in the Agreed Terms for that Ancillary Agreement, which terms shall be legally binding on the parties. Following Closing, the parties shall continue to negotiate in good faith to agree definitive and legally binding documentation in respect of each of the Ancillary Agreements which remains to be agreed and, once definitive and legally binding documentation has been agreed, such documentation shall supersede the heads of terms in the Agreed Terms.

17.1.4For the purposes of Clauses 17.1.4 to 17.1.9, the terms “Assignor” and “Assignee” shall have the meanings given to them in the Intellectual Property Assignment Agreement.

17.1.5The Purchaser and its Affiliates shall be responsible for preparing and filing any documentation necessary for the recordal with any relevant intellectual property office of the transfer of ownership of all of the Registered Transferred Intellectual Property Rights from the Assignor to the Assignee under the Intellectual Property

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Assignment Agreement. The Purchaser (or such of its Affiliates as it nominates) shall be responsible for all out-of-pocket filing fees and other costs and expenses associated with those recordals.

17.1.6Subject to Clause 17.1.8 and Clauses 17.1.11 to 17.1.16, the Seller shall procure that each relevant member of the Seller’s Group shall, at the request and cost of any member of the Purchaser’s Group, execute and deliver any further documents that may be reasonably necessary to secure the vesting in the Assignee under the Intellectual Property Assignment Agreement of all the Registered Transferred Intellectual Property Rights.

17.1.7Subject to Clauses 17.1.11 to 17.1.16, the Seller shall procure that each relevant member of the Seller’s Group shall, at the request and cost of any member of the Purchaser’s Group, (i) request that the applicable registrar for each of the Assigned Domain Names (as defined in the Intellectual Property Assignment Agreement), and any other domain name registration authorities that exercise authority over the Assigned Domain Names, facilitate the transfer of the Assigned Domain Names from the relevant Assignor to the Assignee; and (ii) execute all such documentation and take all such further acts as are reasonably necessary to effect such transfer. Within ten (10) Business Days of a date to be agreed by the parties, the Seller shall procure that each relevant member of the Seller’s Group shall (a) unlock the Assigned Domain Names; and (b) provide the Assignee with authorisation codes for any Assigned Domain Names that have authorisation codes.

17.1.8To the extent that any transfers of Registered Vaccines Group Intellectual Property Rights to an Assignor or a Vaccines Group Company have not been recorded prior to the Closing Date (including any transfers of such Registered Vaccines Group Intellectual Property Rights prior to the transfer of the same to the Assignor or a Vaccines Group Company), and to the extent that such separate recordal is necessary to effect:

(i)the recordal referred to in Clause 17.1.5; or

(ii)the recordal of any transfer of Owned Intellectual Property Rights that constitute Registered Intellectual Property Rights to a Vaccines Group Company (or its predecessor in title),

the Purchaser and its Affiliates shall be responsible for preparing and filing any documentation necessary for the recordal with any relevant intellectual property office of the transfer of ownership to such Assignor or Vaccines Group Company (as applicable). Subject to Clauses 17.1.11 to 17.1.16, the Seller shall or shall procure that such Assignor shall provide to the Purchaser or a relevant Affiliate of the Purchaser any documentation or information that is reasonably necessary to record such transfer in the name of the Assignor or Vaccines Group Company (as applicable) as soon as reasonably possible after receipt of a request for the same from the Purchaser or one of its Affiliates for the purposes of such recordal. The Seller (or such of its Affiliates as it nominates) shall be responsible for all out-of-pocket filing fees and other costs and expenses associated with the recordal of any such transfer to the Assignor or to the Vaccines Group Company (as applicable).

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Abandoned Patent Applications

17.1.9Subject to Clauses 17.1.10 to 17.1.16, in respect of any Abandoned Patents, the Seller shall, on reasonable request from the Purchaser’s Group for assistance from any member of the Seller’s Group, use reasonable endeavours to execute a document confirming the transfer of such rights as any member of the Seller’s Group has (if any) in such Abandoned Patent, to the extent not prohibited under Applicable Law in the relevant country of any such Abandoned Patent, to the Assignee under each Intellectual Property Assignment, provided that:

(i)if the Seller provides such assistance the Purchaser shall promptly reimburse the Seller for its reasonable costs; and

(ii)a request from the Purchaser’s Group for assistance will be deemed to be not reasonable if:

(a)the Assignee or any other member of the Purchaser’s Group is able to prove common ownership of (i) the Abandoned Patent and (ii) the relevant Patent(s) that constitute Vaccines Patent(s) to the satisfaction of any relevant intellectual property office, court or tribunal without such assistance from any member of the Seller’s Group (provided further that in no event shall the Purchaser’s Group be required to narrow the scope of protection of the claims of a Patent that constitutes a Vaccine Patent in order to avoid its request being unreasonable);

(b)any member of the Seller’s Group is asked to take any steps to achieve an outcome that is the same or equivalent to an outcome the Assignee or any other member of the Purchaser’s Group could achieve without such assistance from any member of the Seller’s Group (provided that the Seller’s Group shall not be required to narrow a Patent that constitutes a Vaccine Patent in order to avoid its request being unreasonable); or

(c)it requires any member of the Seller’s Group to state that an Abandoned Patent was abandoned inadvertently or unavoidably when this was not the case.

Sanctions - Restrictions

17.1.10For the purposes of Clauses 17.1.10 to 17.1.16 only, the terms below shall have the following meanings:

“Assignor” means an assignor under the Intellectual Property Assignment Agreement or any relevant member of the Seller’s Group’s (other than a Vaccines Group Company);

“Assignee” means an assignee under the Intellectual Property Assignment Agreement or a Vaccines Group Company; and

“Further Assurance Obligations” means any obligation to be performed by an Assignor under Clauses 17.1.1 to 17.1.9;

17.1.11The parties agree that to the extent that Vaccines Group Intellectual Property Rights which are the subject of a transfer pursuant to the Intellectual Property

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Assignment Agreement are registered (or are the subject of an application to register) in Iran, Iraq, Democratic People’s Republic of Korea or Syria, the Assignor’s Further Assurance Obligations shall be modified as set out in Clauses 17.1.12 to 17.1.16 below.

17.1.12If an Assignor is prevented from complying with its Further Assurance Obligations, with the effect that the recordal of assignment of legal title from the Assignor to the Assignee under the Intellectual Property Assignment Agreement (or to effect a transfer which is the subject of Clause 17.1.8) cannot be completed for any Vaccines Group Intellectual Property Rights by reason of:

(i)Applicable Law;

(ii)other factors beyond the reasonable control of the Assignor; or

(iii)application of the Assignor’s:

(a)internal sanctions and export control policy (or equivalent); or

(b)anti-bribery and corruption policy,

in each case in force from time to time, provided that such policy applies to all Affiliates of the Assignor and the policy is applied in the same way it would apply if the Assignee were an Affiliate of the Assignor,

each such Vaccines Group Intellectual Property Right (being an “Affected Right” and each of (i) to (iii) being a “Restriction” and in the plural the “Restrictions”), Clauses 17.1.13 to 17.1.16 shall apply.

17.1.13The relevant Assignor shall notify the Assignee as soon as reasonably practicable after Closing of:

(i)each Affected Right and the country in which it is registered (or is the subject of an application to register); and

(ii)the relevant Restriction.

17.1.14As soon as reasonably practicable and, in any event within three months after the date that Assignor notifies the Assignee of an Affected Right under Clause 17.1.13 above the parties shall discuss in good faith the means by which the Assignee may be able to achieve protection in the relevant country which is equivalent or similar to the protection provided by the Affected Right.  Such means may include, without limitation:

(i)the Assignee filing a new trade mark application and the Assignor providing to the Assignee the consent of the Assignor to the new application to endeavour to overcome any objection raised by the relevant intellectual property registry on relative grounds based on the Affected Right; or

(ii)the Assignor filing a WIPO trade mark application in the name of the Assignor, which shall be assigned by the Assignor to the Assignee on grant of registration or earlier if possible.  The reasonable costs incurred by the Assignor in filing and prosecuting that registration to grant to be met by the Assignee; or

(iii)the Assignor withdrawing or cancelling any Affected Right subject to the written consent of the Assignee.

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The parties will agree such means as are possible in light of the limitations imposed by the Restrictions and both parties will use reasonable efforts to achieve the agreed means.  Neither party shall be obliged to take any action agreed pursuant to this Clause 17.1.14 to the extent that such party is prevented from doing so by a Restriction.

The reasonable costs incurred by either party in fulfilling any such actions shall be met by the Assignee.

17.1.15The relevant Assignor undertakes (at the cost of the Assignee), during the current registration period up to the next renewal date of the Affected Right:

(i)to take any action to comply with its Further Assurance Obligations to the extent it is able to do so given the Restrictions;

(ii)to comply with its Further Assurance Obligations as soon as reasonably practicable if and to the extent that such obligations are no longer prevented by the Restrictions; and

(iii)not to take any other action in connection with an Affected Right without the consent of the Assignee.

17.1.16The parties acknowledge that in relation to Vaccines Group Intellectual Property Rights that are Trademarks, there is nothing in this Agreement to preclude the Assignee from taking action to revoke or cancel an Affected Right and the Assignor hereby undertakes not to defend any such action.

17.2Whole Agreement

17.2.1This Agreement and the Ancillary Agreements contain the whole agreement between the parties relating to the subject matter of this Agreement at the date hereof to the exclusion of any terms implied by law which may be excluded by contract and supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in this Agreement.

17.2.2The Purchaser acknowledges that, in entering into this Agreement, it is not relying on any representation, warranty or undertaking not expressly incorporated into it.

17.2.3Each of the parties agrees and acknowledges that its only right and remedy in relation to any representation, warranty or undertaking made or given in connection with this Agreement shall be for breach of the terms of this Agreement and each of the parties waives all other rights and remedies (including those in tort or arising under statute) in relation to any such representation, warranty or undertaking.

17.2.4In Clauses 17.2.1 to 17.2.3, “this Agreement” includes the Ancillary Agreements and all other documents entered into pursuant to this Agreement.

17.2.5Nothing in this Clause 17.2 excludes or limits any liability for fraud.

17.3No Assignment

No party may without the prior written consent of the other parties, assign, grant any security interest over, hold on trust or otherwise transfer the benefit of the whole or any part of this Agreement.

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17.4Third Party Rights

17.4.1Subject to Clause 17.4.2, the parties to this Agreement do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.

17.4.2Certain provisions of this Agreement confer benefits on the Affiliates of the Purchaser and the Affiliates of the Seller (each such Affiliate being, for the purposes of this Clause 17.4, a “Third Party”) and, subject to Clause 17.4.3, are intended to be enforceable by each Third Party by virtue of the Contracts (Rights of Third Parties) Act 1999.

17.4.3Notwithstanding Clause 17.4.2, this Agreement may be varied in any way and at any time without the consent of any Third Party.

17.5Variation or waiver

17.5.1No variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the parties.

17.5.2No failure or delay by a party in exercising any right or remedy provided by Applicable Law or under this Agreement or any Ancillary Agreement shall impair such right or remedy or operate or be construed as a waiver or variation of it or preclude its exercise at any subsequent time and no single or partial exercise of any such right or remedy shall preclude any further exercise of it or the exercise of any other remedy.

17.6Method of Payment and set off

17.6.1Except as set out in Clause 17.6.2, payments (including payments pursuant to an indemnity, compensation or reimbursement provision) made or expressed to be made by the Purchaser and the Seller pursuant to this Agreement or any claim for breach of this Agreement shall, insofar as the payment or claim relates to or affects any Shares (including the underlying Vaccines Group Companies transferred (directly or indirectly) by reason of the transfer of those Shares), assets or liabilities, transferred pursuant to this Agreement and the Local Transfer Documents, be made or received (as the case may be) by:

(i)the Seller, for itself or as agent on behalf of the relevant Share Seller or the Business Seller (each in respect of the Shares and/or assets and liabilities to be transferred by it pursuant to this Agreement and the Local Transfer Documents); and

(ii)the Purchaser, for itself or as agent on behalf of the relevant members of the Purchaser’s Group (each in respect of Shares and/or the assets and liabilities to be transferred by it pursuant to this Agreement and the Local Transfer Documents).

17.6.2The repayment of the Estimated Intra-Group Non-Trade Receivables and the Estimated Intra-Group Non-Trade Payables pursuant to Clause 6.4.3 and any adjustments to such repayment pursuant to Clause 7.4 shall be settled by payments between the Seller, on behalf of the relevant members of the Seller’s Group, and the Purchaser, on behalf of the relevant Group Companies.

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17.6.3Any payments pursuant to this Agreement shall be made in full, without any set-off, counterclaim, restriction or condition and without any deduction or withholding (save as may be required by law or as otherwise agreed), except that payments due between the Seller and the Purchaser:

(i)in relation to repayments of the Estimated Intra-Group Non-Trade Payables and Estimated Intra-Group Non-Trade Receivables pursuant to Clause 6.4.3; or

(ii)in relation to adjustments to those repayments pursuant to Clause 7.4,

respectively, shall be discharged to the fullest extent possible by way of set-off against each other.

17.6.4Any payments pursuant to this Agreement shall be effected by crediting for same day value the account specified by the Seller or the Purchaser (as the case may be) on behalf of the party entitled to the payment (reasonably in advance and in sufficient detail to enable payment by telegraphic or other electronic means to be effected) on or before the due date for payment.

17.6.5Payment of a sum in accordance with this Clause 17.6 shall constitute a payment in full of the sum payable and shall be a good discharge to the payer (and those on whose behalf such payment is made) of the payer’s obligation to make such payment and the payer (and those on whose behalf such payment is made) shall not be obliged to see to the application of the payment as between those on whose behalf the payment is received.

17.7Costs

17.7.1Subject to Clauses 17.1 and 17.8, the Seller shall bear all costs incurred by it and its Affiliates in connection with the preparation and negotiation of, and the entry into, this Agreement, the Local Transfer Documents, the Tax Indemnity and the sale of the Vaccines Group.

17.7.2Subject to Clause 17.1, the Purchaser shall bear all such costs incurred by it and its Affiliates in connection with the preparation and negotiation of, and the entry into, this Agreement, the Local Transfer Documents, the Tax Indemnity and the purchase of the Vaccines Group.

17.8Notarial Fees, Registration, Stamp and Transfer Taxes and Duties

17.8.1Subject to Clauses 2.3.5, 2.3.6, 17.1 and 17.8.2, the Purchaser or the relevant member of the Purchaser’s Group:

(i)shall bear the cost half of all notarial fees and all registration, stamp and transfer taxes and duties or their equivalents (which fees, taxes, duties or equivalents shall not include, for the avoidance of doubt, the $0.75 per antigen excise tax imposed by 26 United States Code section 4131 on the sale of certain vaccines products) in all jurisdictions where such fees, taxes and duties are payable as a result of the transactions contemplated by this Agreement the other half of such cost to be borne by the Seller;

(ii)shall be responsible for arranging the payment of all such fees, taxes and duties, including fulfilling any administrative or reporting obligation imposed by the jurisdiction in question in connection with such payment; and

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(iii)shall indemnify the Sellers or any other member of the Seller’s Group against any Losses suffered by that Seller or member of the Seller’s Group as a result of the Purchaser failing to comply with its obligations under this Clause 17.8.

17.8.2The Purchaser and the Seller shall make or procure the making of such payments to each other (and to each other’s Affiliates) as are necessary to ensure the sharing of cost provided for under Clause 17.8.1.

17.9Interest

If any party defaults in the payment when due of any sum payable under this Agreement, the Local Transfer Documents or the Tax Indemnity the liability of that party shall be increased to include interest on such sum from the date when such payment is due until the date of actual payment (as well after as before judgment) at a rate per annum of two per cent. above LIBOR. Such interest shall accrue from day to day.

17.10Grossing-up

17.10.1All sums payable under this Agreement, the Local Transfer Documents and the Tax Indemnity shall be paid free and clear of all deductions, withholdings, set-offs or counterclaims whatsoever save only as may be permitted by Clause 17.6.3 or required by law. Subject to Clauses 17.10.3 to 17.10.7 if any deductions or withholdings are required by law the party making the payment shall (except in the case of (i) any interest payable under Clause 7.5 or 17.9 (ii) or any amount payable under Schedule 17 which would not have been the subject of a deduction or withholding had it been paid to a company resident in Switzerland for the purposes of the double taxation treaty between Belgium and Switzerland which was beneficially entitled to the payments and was not party to a conduit arrangement in respect of them) be obliged to pay to the other party such sum as will after such deduction or withholding has been made leave the other party with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding, provided that if either party to this Agreement shall have assigned or novated the benefit in whole or in part of this Agreement or shall, after the date of this Agreement, have changed its tax residence or the permanent establishment to which the rights under this Agreement are allocated then the liability of the other party under this Clause 17.10.1 shall be limited to that (if any) which it would have been had no such assignment, novation or change taken place.

17.10.2If either party is or becomes aware of any facts making it reasonably likely that the Purchaser, or any relevant member of the Purchaser’s Group, will be required to deduct or withhold any amount in respect of the Purchase Price (excluding any amount payable under Schedule 17) (a “Relevant Tax Deduction”), then that party shall, as soon as reasonably practicable, give notice to the other party (including details of the relevant facts and, so far as possible, details of the rate and basis of such withholding) provided that for purposes of this Clause 17.10.2, the Seller may assume that the Purchase Price will be paid by (and for) a company resident for Tax purposes only in Belgium.

17.10.3The Seller and the Purchaser shall, and shall procure that the members of their respective groups shall (at the Seller’s cost), co-operate with each other in good

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faith and use all reasonable efforts to reduce or mitigate any Relevant Tax Deduction (or its amount) and/or to enable the Seller or the relevant Share Seller or Business Seller to obtain any available credit or refund in respect of such Relevant Tax Deduction, including, without limitation, making any available claim under an applicable double taxation treaty.

17.10.4Without prejudice to the generality of Clause 17.10.3, the Seller and the Purchaser shall co-operate in good faith to establish or agree the amount or basis of calculation of any Relevant Tax Deduction prior to Closing (and in this regard the Purchaser shall consider reasonably any relevant information or evidence provided or obtained by the Seller) including, if requested by the Seller and at the Seller’s expense, by seeking to obtain a ruling or confirmation from a relevant Tax Authority, or obtaining an opinion from reputable local tax counsel or a firm of accountants of international standing satisfactory to the Purchaser (acting reasonably) and instructed jointly by the Seller and the Purchaser.

17.10.5The Purchaser shall, or shall procure that the relevant member of the Purchaser’s Group shall, make any Relevant Tax Deduction in the minimum amount required by Applicable Law, provided that:

(i)if a double taxation treaty between the jurisdiction under the laws of which the Relevant Tax Deduction is required and the jurisdiction of residence of the Seller or the relevant Share Seller or Business Seller is in force, the Purchaser shall (and shall procure that any relevant member of the Purchaser’s Group shall) make any Relevant Tax Deduction in an amount not exceeding the rate specified in such double taxation treaty (which may be nil), provided that the Seller has provided the Purchaser with such evidence as is required under Applicable Law to establish the entitlement of the Seller (or relevant Share Seller or Business Seller) to the benefit of the applicable treaty; and

(ii)if an opinion from reputable local counsel or a firm of accountants of international standing has been obtained at the request of the Seller as envisaged by Clause 17.10.4, the Purchaser shall (and shall procure that any relevant member of the Purchaser Group shall) make such Relevant Tax Deduction in an amount or on a basis which is consistent with that opinion (which may result in no withholding or deduction), provided that the Seller has indemnified the Purchaser and any relevant member of the Purchaser’s Group, to the Purchaser’s reasonable satisfaction, against any Liabilities arising (including any interest and penalties) should such opinion be wholly or partly incorrect.

17.10.6The Purchaser shall promptly provide the Seller with evidence reasonably satisfactory to the Seller that a Relevant Tax Deduction has been made and an appropriate amount paid to the relevant Tax Authority.

17.10.7If any Relevant Tax Deduction is required an additional sum shall be payable in accordance with Clause 17.10.1 only if and to the extent that such deduction or withholding would not have been required had the Purchaser and each member of the Purchaser’s Group making such payment or to which such payment relates been resident for Tax purposes only in Belgium.

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17.11Notices

17.11.1Any notice or other communication in connection with this Agreement (each, a “Notice”) shall be:

(i)in writing in English; and

(ii)delivered by hand, fax, or by courier using an internationally recognised courier company.

17.11.2A Notice to the Seller shall be sent to such party at the following address, or such other person or address as the Seller may notify to the Purchaser from time to time:

Novartis AG

Postfach
CH-4002 Basel
Switzerland

Fax: +41 613244300

Attention: Head of M&A Legal, Novartis International AG

with a copy to the Seller’s Lawyers, marked for the urgent attention of James Inglis (delivery of such copy shall not in itself constitute valid notice).

17.11.3A Notice to the Purchaser shall be sent to such party at the following address, or such other person or address as the Purchaser may notify to the Seller from time to time:

GlaxoSmithKline plc

980 Great West Road
Brentford

Middlesex TW8 9GS
United Kingdom

Fax: +44 (0)208 0476904

Attention: The Company Secretary

with a copy to the Purchaser’s Lawyers, marked for the urgent attention of Simon Nicholls (delivery of such copy shall not in itself constitute valid notice).

17.11.4A Notice shall be effective upon receipt and shall be deemed to have been received:

(i)at the time of delivery, if delivered by hand or courier;

(ii)at the time of transmission in legible form, if delivered by fax.

17.12Invalidity or Conflict

17.12.1If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, the provision shall apply with whatever deletion or modification is necessary so that the provision is legal, valid and enforceable and gives effect to the commercial intention of the parties.

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17.12.2To the extent it is not possible to delete or modify the provision, in whole or in part, under Clause 17.12.1, then such provision or part of it shall, to the extent that it is illegal, invalid or unenforceable, be deemed not to form part of this Agreement and the legality, validity and enforceability of the remainder of this Agreement shall, subject to any deletion or modification made under Clause 17.12.1, not be affected.

17.12.3If there is any conflict between the terms of this Agreement and any of the Ancillary Agreements this Agreement shall prevail (as between the parties between this Agreement and as between any member of the Seller Group and any member of the Purchaser Group) unless (i) such Ancillary Agreement expressly states that it overrides this Agreement in the relevant respect and (ii) the Seller and the Purchaser are either also parties to that Ancillary Agreement or otherwise expressly agree in writing that such Ancillary Agreement shall override this Agreement in that respect.

17.12.4For the avoidance of doubt, nothing in this Agreement is intended to limit the Liabilities of any party under any Ancillary Agreement (other than, to the extent expressly stated, the Tax Indemnity).

17.13Counterparts

This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any party may enter into this Agreement by executing any such counterpart. Delivery of a counterpart of this Agreement by email attachment shall be an effective mode of delivery.

17.14Governing Law and Submission to Jurisdiction

17.14.1This Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, and any non-contractual obligations arising out of or in connection with the Agreement and such documents shall be governed by and construed in accordance with English law.

17.14.2Each of the parties irrevocably agrees that the courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, and that accordingly any proceedings arising out of or in connection with this Agreement and the documents to be entered into pursuant to it shall be brought in such courts. Each of the parties irrevocably submits to the jurisdiction of such courts and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

17.15Appointment of Process Agent

17.15.1The Seller hereby irrevocably appoints Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the Seller.

17.15.2The Seller agrees to inform the Purchaser in writing of any change of address of such process agent within 28 days of such change.

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17.15.3If such process agent ceases to be able to act as such or to have an address in England and Wales, the Seller irrevocably agrees to appoint a new process agent in England and Wales and to deliver to the Purchaser within 14 days a copy of a written acceptance of appointment by the process agent.

17.15.4Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law.

This Agreement has been entered into on the date stated at the beginning.

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SIGNED by   AND
for and on behalf of NOVARTIS AG:
SIGNED by  for and on behalf of GLAXOSMITHKLINE PLC:

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Schedule 1
Details of the Share Sellers, Shares etc.
(Clause 2.1)

	(2)
(1) Name of Share Seller	Name of Company/Minority Interest  Entity	(3) Shares
Novartis Deutschland GmbH	Novartis Vaccines and Diagnostics GmbH	2 shares (100%)
Novartis Pharma AG	Novartis Vaccines and Diagnostics S.A.S	93,750 shares (100%)
Novartis Farmaceutica S.A	Novartis Vaccines and Diagnostics S.L	150,100 shares (100%)
Novartis Pharma AG	Novartis Vaccines and Diagnostics AG	1,600 shares (100%)
Novartis Pharma AG	Novartis Vaccines and Diagnostics S.r.l.	1 quota of entire share capital (as defined under Italian law) (100%)
Novartis Pharma AG	Novartis Vaccines and Diagnostics Pty Ltd	1,024,921 shares (100%)
(A) Novartis Pharma AG (B) Novartis Vaccines and Diagnostics Inc.	Chiron Behring Vaccines Private Limited	(A) 4,900,000 shares (49%) (B) 5,100,000 shares (51%) TOTAL: 10,000,000 shares
Novartis Overseas Investments AG	Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd	85%
Novartis Pharma AG	Novartis Vaccines Institute for Global Health S.r.l.	1 quota of entire share capital (as defined under Italian law) (100%)
(A) Novartis Pharma AG	Valneva SE	(A) 3,788,048 (6.63%)
(B) Novartis Vaccines and Diagnostics Inc.		(B) 1,560,000 (2.73%)

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Schedule 2
Companies, Subsidiaries and Minority Interest Entities

1Particulars of the Companies

Name of Company:	Novartis Vaccines and Diagnostics GmbH
Registered Number:	HRB 5629
Registered Office:	Emil-von-Behring-Str. 76, 35041 Marburg, Germany
Date and place of incorporation:
Issued share capital:	EUR 5,000,000.00 divided into 2 shares of 1 EUR and EUR 4,999,999 each
Shareholders and shares held:	Novartis Deutschland GmbH	2 (100%)

Name of Company:	Novartis Vaccines and Diagnostics SAS
Registered Number:	423 697 168
Registered Office:	10, rue Chevreul, 92150 Suresnes, France
Date and place of incorporation:	22 July 1999, Nanterre
Issued share capital:	EUR 1,500,000 divided into 93,750 shares of EUR 16 each
Shareholders and shares held:	Novartis Pharma AG	93,750 (100%)

Name of Company:	Novartis Vaccines and Diagnostics S.L.
Registered Number:	B58564808
Registered Office:	Gran Vía de les Corts Catalanes, 764. 08013 Barcelona, Spain
Date and place of incorporation:	19 September 1988, Barcelona
Issued share capital:	EUR 675,450 divided into 150,100 shares of EUR 4.50 each
Shareholders and shares held:	Novartis Farmaceutica S.A	150,100 (100%)

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Name of Company:	Novartis Vaccines and Diagnostics AG
Registered Number:	CHE-103.264.079
Registered Office:	Basel, Switzerland
Date and place of incorporation:	28 September 1953, Avenches
Issued share capital:	CHF 800,000.00 divided into 1,600 shares of CHF 500 each
Shareholders and shares held:	Novartis Pharma AG	1,600 shares (100%)

Name of Company:	Novartis Vaccines and Diagnostics S.r.l.
Registered Number:	01392770465
Registered Office:	Via Fiorentina 1, 53100, Siena, Italy
Date and place of incorporation:	18 September 1990, Barga (LU)
Issued share capital:	EUR 41,610,809.00 comprising 1 quota of entire share capital
Shareholders and shares held:	Novartis Pharma AG	1 (100%)

Name of Company:	Novartis Vaccines and Diagnostics Pty Limited
ABN / ACN:	ABN 60 089 509 544; ACN 089 509 544
Registered Office:	54 Waterloo Road, North Ryde NSW 2113, Australia
Date and place of incorporation:	10 September 1999, Victoria
Issued share capital:	ASD 1,024,921 divided into 1,024,921 shares of ASD 1 each
Shareholders and shares held:	Novartis Pharma AG	1,024,921 (100%)

Name of Company:	Chiron Behring Vaccines Private Limited
Registered Number:	U24230MH1997PTC111122
Registered Office:	501 Shree Amba Shanti Chambers, Kurla Road, Andheri, Mumbai 400059, India
Date and place of incorporation:	7 October 1997, Mumbai

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Name of Company:	Chiron Behring Vaccines Private Limited
Issued share capital:	INR 100,000,000 divided into 10,000,000 shares of INR 10 each
Shareholders and shares held:	Novartis Pharma AG	4,900,000 (49%)
	Novartis Vaccines and Diagnostics Inc.	5,100,000 (51%)

Name of Company:	Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd. (浙江天元生物药业有限公司)
Registered Number:	330000000015616
Registered/Principal Office:	No.56 Tian He Road, Yuhang Economic Development Zone, Hangzhou, Zhejiang Province, PRC.
Date and place of incorporation:
Registered capital:	RMB 46,800,000
Paid-in capital:	RMB 46,800,000
Total investment amount:	RMB 117,000,000
Shareholder and shares held:	Novartis Overseas Investments AG	85%

Name of Company:	Novartis Vaccines Institute for Global Health S.r.l.
Registered Number:	01204770521
Registered/Principal Office:	Via Fiorentina 1, 53100, Siena, Italy
Date and place of incorporation:	2 February 2007, Siena, Italy
Issued share capital:	EUR 500,000.00 comprising 1 quota of entire share capital
Shareholder and shares held:	Novartis Pharma AG	1 (100%)

2Particulars of the Subsidiaries

Name of Subsidiary:	Novartis Vaccines Vertriebs GmbH
Registered Number:	HRB 193621

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Name of Subsidiary:	Novartis Vaccines Vertriebs GmbH
Registered Office:	Rudolf-Diesel-Ring 27, 83607 Holzkirchen, Germany
Date and place of incorporation:
Issued share capital:	EUR 26,000.00 divided into 2 shares of EUR 25,600 and EUR 400 each
Shareholders and shares held:	Novartis Vaccines and Diagnostics GmbH	2 (100%)

3Particulars of the Minority Interest Entities

Name of Company:	Valneva SE
Registered Number:	422 497 560 RCS Lyon
Registered Office:	70 Rue Saint Jean de Dieu, 69007 Lyon, France
Date and place of incorporation:	Initially incorporated on 26 January 2011, Commercial Court (greffe du Tribunal de Commerce) of Roussay, France Incorporated with the Commercial Court (greffe du Tribunal de Commerce) of Lyon, France since change of registered office on 28 May 2013.
Issued share capital:	€8,390,317.14, divided into 54,746,333 ordinary shares of €0.15 each and 17,836,719 preferred shares with a nominal value of €0.01 each
Shareholders and shares held:	Novartis Vaccines & Diagostics Inc.	1,560,000
	Novartis Pharma AG	3,788,048

Name of Company:	Chiron Panacea Vaccines Private Limited
Registered Number:	U24230MH2004PTC147790
Registered Office:	7th Floor, A Wing, Sagar Tech Plaza Sakinaka, Mumbai 400072, Maharashtra, India
Date and place of incorporation:	13 July 2004, Mumbai, India

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Name of Company:	Chiron Panacea Vaccines Private Limited
Issued share capital:	INR 45,918,200 (4,591,820 shares of INR 10 each)
Shareholders and shares held:	Novartis Vaccines & Diagnostic S.r.l.	2,295,910 (50%)

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Schedule 3
The Properties
Part 1
(Company Real Property)

[***]

110

Schedule 3
The Properties
Part 2
(Transferred Real Property)

[***]

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Schedule 3
The Properties
Part 3
Terms relating to the Company Real Property

1General Provisions relating to the Company Real Property

1.1Interpretation

The following further definitions apply in this Part 3 of Schedule 3:

“Company Landlord” means the person for the time being entitled to the reversion immediately expectant on the termination of the term granted by a Company Lease;

“Company Leased Real Properties” means the leasehold properties identified in Part B of Part 1 of this Schedule 3, and “Company Leased Real Property” means any one of them;

“Company Leases” means the leases, licence documents or tenancy agreements under which the Company Leased Real Properties are held, including all documents supplemental to them, and “Company Lease” means any one of them;

“Company Owned Real Properties” means the owned properties as identified in Part A of Part 1 of this Schedule 3 together with all buildings, structures, fixed plant, fixed machinery and fixed equipment thereon (except as excluded in Clause 2.3.2), and “Company Owned Real Property” means any one of them;

“Company Real Property Longstop Date” means the date on which a court of competent jurisdiction finally determines that a Company Third Party Consent has been lawfully refused or cannot be obtained and/or that the Purchaser may not acquire (directly or indirectly, acting through a subsidiary) the relevant Company Real Property;

“Company Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from any Company Landlord, superior landlord and/or other third party, including any consents, licences, approvals, permits, authorisations or waivers required by any legislation or regulation or by any statutory, governmental, state, provincial or municipal bodies or authorities which are required under a Company Lease or otherwise in relation to any change of control, shareholders or directors of the Vaccines Group Companies, and “Company Third Party Consent” means any one of them;

“German Carve-out Leases” means the leases of the Company Leased Real Properties referred to at paragraphs 3.2 and 3.3 of Part B of Part 1 of Schedule 3 and any other lease(s) of the Company Leased Real Properties at the Marburg Site where the premises demised by such lease(s) are occupied by both the Business and the German Influenza Operations;

“German Influenza Lease(s)” has the meaning set out in paragraph 2.1 of this Part 3 of Schedule 3; and

“German Vaccines Lease(s)” has the meaning set out in paragraph 2.1 of this Part 3 of Schedule 3.

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1.2Company Third Party Consents

1.2.1This paragraph 1.2.1 of Part 3 of Schedule 3 applies to those Company Real Properties in relation to which a Company Third Party Consent is required and if such Company Third Party Consent remains to be obtained as at the Closing Date this paragraph 1.2.1 of Part 3 of Schedule 3 shall continue to apply until the relevant Company Third Party Consent shall have been obtained or until the Company Real Property Longstop Date.  If any Company Third Party Consents are required:

(i)the Seller shall make an application for, and shall use all reasonable endeavours to obtain each Company Third Party Consent as soon as reasonably practicable following the date of this Agreement and shall at all times keep the Purchaser informed of progress in obtaining such Company Third Party Consents;

(ii)the Purchaser shall supply such information and references as may reasonably be required by a Company Landlord, any superior landlord or other relevant third party in connection with a Company Third Party Consent;

(iii)the Purchaser shall be responsible for and undertake to pay, or procure the giving of undertakings to pay the professional and other fees of any Company Landlord, any superior landlord or other relevant person (including any Tax or disbursements in respect of such fees but excluding any Tax on the actual net income, profit or gains of the Company Landlord, any superior landlord or any other relevant person) properly incurred in connection with any application for Company Third Party Consents, whether or not such Company Third Party Consents are given; and

(iv)in respect of the period after Closing only, the Purchaser shall enter into such covenants for the payment of the rent under the Company Lease and for the observance and performance of the covenants and conditions contained in the Company Lease as may reasonably be required by the Company Landlord, any superior landlord or other relevant third party.

1.2.2Each party shall give written notice to the other party as soon as reasonably practicable after obtaining any Company Third Party Consents which shall be accompanied by a copy of such consent.

1.2.3Save as set out in paragraph 1.2.1(iii) of this Part 3 of Schedule 3, the Seller shall pay any moneys or provide or procure the giving of any guarantees or other security, in each case as may be lawfully required by a Company Landlord, superior landlord or other relevant third party in connection with the obtaining of the Company Third Party Consents, provided that the Purchaser shall indemnify and keep indemnified the Seller in an amount equal to:

(i)any moneys required to be paid by the Seller pursuant to this paragraph; and

(ii)any Liabilities under any guarantees or other security given or procured by the Seller pursuant to this paragraph and arising out of, or in connection with, an act or omission on the part of the Purchaser or (following Closing) the relevant Vaccines Group Company,

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and where the Company Landlord, superior landlord or other relevant third party lawfully requires any guarantees or other security to be given by the person who is acquiring a membership interest in respect of the relevant Vaccines Group Company, the Purchaser shall provide or procure the giving of any such guarantees or security.

Company Third Party Consent not obtained

1.2.4If a Company Third Party Consent has been refused or otherwise not obtained within twelve months following the Closing Date, the Seller and the Purchaser may (acting reasonably) agree that an application is to be made to a court of competent jurisdiction that the relevant Company Third Party Consent has been unreasonably withheld or delayed.

1.2.5If an application is to be made to a court of competent jurisdiction pursuant to paragraph 1.2.4 of this Part 3 of Schedule 3:

(i)the proceedings shall be brought by, and prosecuted at the expense of, the Purchaser;

(ii)the Seller shall provide all such assistance in connection with such proceedings as the Purchaser (acting reasonably) may require in the interests of obtaining the Company Third Party Consent; and

(iii)provided that the Seller has complied with its obligation under paragraph 1.2.1(i) of this Part 3 of Schedule 3, the Purchaser shall indemnify and keep indemnified the Seller for any costs and expenses properly incurred in connection with any such assistance provided by the Seller.

1.2.6If a Company Third Party Consent has not been obtained by the Company Real Property Longstop Date then the Seller and the Purchaser shall each bear fifty per cent. of any Losses of the Seller and the Purchaser arising out of or in connection with the failure to obtain such Company Third Party Consent.

2Specific provisions relating to the Marburg Site

2.1The Seller agrees to procure that Novartis Vaccines and Diagnostics GmbH shall use reasonable efforts to procure the contemporaneous surrender of the German Carve-out Leases and the grant of replacement leases, certain of which shall relate to those parts of the premises demised by the German Carve-out Leases which are used by the Business (the “German Vaccines Lease(s)”), and certain other of which shall relate to the balance of the premises demised by the German Carve-out Leases (the “German Influenza Lease(s)”).

2.2If Novartis Vaccines and Diagnostics GmbH is able to procure the surrender of the German Carve-out Leases and the grant of the German Vaccines Lease(s) and the German Influenza Lease(s) prior to Closing, it is acknowledged that:

2.2.1the German Influenza Lease(s) shall be entered into by, or assigned prior to Closing to, an entity in the Seller’s Group Retained Business;

2.2.2the German Influenza Lease(s) shall not constitute lease(s) of Company Leased Real Property; and

2.2.3the demise of the relevant Company Leased Real Property set out in Part B of Part 1 of this Schedule 3 shall be deemed amended to exclude the premises demised

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by the German Carve-out Leases and the German Influenza Lease(s) and to include reference to the premises demised by the German Vaccines Lease(s).

2.3If Novartis Vaccines and Diagnostics GmbH is not able to procure the surrender of the German Carve-out Leases and the grant of the German Vaccines Lease(s) and the German Influenza Lease(s) prior to Closing, the Seller and the Purchaser shall use reasonable efforts to give practical effect to the above-described separation following Closing, and shall consider (without limitation):

2.3.1continued negotiations with the relevant Company Landlords to achieve a separation of each German Carve-out Lease into a German Vaccines Lease and a German Influenza Lease, the latter of which shall be entered into by, or immediately assigned to, an entity in the Seller’s Group Retained Business; or

2.3.2if a separation pursuant to paragraph 2.3.1 of this Part 3 of Schedule 3 is not achievable, a sub-lease of those parts of the premises demised by the German Carve-out Leases which are used by the German Influenza Operations to an entity in the Seller’s Group Retained Business.

2.4The Seller agrees to procure that Novartis Vaccines and Diagnostics GmbH shall not agree to any terms of any German Vaccines Lease(s) which are not substantially similar to the equivalent terms of the relevant underlying German Carve-out Lease without the consent of the Purchaser (not to be unreasonably withheld or delayed), and shall not agree to any terms of any German Influenza Lease(s) which are not substantially similar to the equivalent terms of the relevant underlying German Carve-out Lease without the consent of the Seller (not to be unreasonably withheld or delayed).

2.5In connection with the implementation of the arrangements set out in this paragraph 2 of Part 3 of Schedule 3, the parties agree to work together prior to Closing (or, where paragraph 2.3 of this Part 3 of Schedule 3 applies, after Closing) to agree the provision of any site engineering services reasonably required by the other in order to operate those premises demised by the German Vaccines Lease(s) or the German Influenza Lease(s), as applicable, in substantially the same manner as operated immediately prior to Closing. Such services may include, but are not limited to, supply of water, gas and electricity, the operation of clean utility systems (water for injection, clean steam, clean gases, etc.), facility services contract management and administration, preventive and corrective maintenance, and shutdown coordination.

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Schedule 3
The Properties
Part 4
Terms relating to the Transferred Real Property

1General Provisions Relating to the Transferred Real Property

1.1Interpretation

The following further definitions apply in this Part 4 of Schedule 3:

“Landlord” means the person for the time being entitled to the reversion immediately expectant on the termination of the term granted by a Lease;

“Leases” means the leases, licences or tenancy agreements under which the Transferred Leased Real Properties are held by the relevant member of the Seller’s Group, including all documents supplemental to them, and “Lease” means any one of them;

“Letting Document” means any lease, licence or tenancy agreement to which a Transferred Real Property is subject;

“Licence” means a right in favour of the Purchaser and all persons authorised by it to occupy the Licensed Premises during the Licence Period pursuant to this Part 4 of Schedule 3;

“Licence Fee” means the payments to be made by the Purchaser to the Seller’s Group pursuant to paragraph 1.4.4 of this Part 4 of Schedule 3;

“Licence Period” means a period, which may be different for each of the Licensed Premises, commencing on the Closing Date and ending on the earliest of the following dates:

(i)the date on which this Agreement is terminated by whatever means whether in whole or in relation to the relevant Licensed Premises;

(ii)the date immediately preceding the date on which the term of the relevant Lease ends by whatever means;

(iii)the date of Property Transfer Completion in relation to the relevant Transferred Real Property; and

(iv)the Property Longstop Date;

“Licensed Premises” means any of the Transferred Real Properties for which all relevant Property Third Party Consents have not been obtained prior to, or at, the Closing Date;

“Property Agreed Terms” means a transfer in the terms agreed between the relevant Business Seller, the Purchaser and any relevant third party or determined pursuant to paragraph 1.3.2 of this Part 4 of Schedule 3 and signed for identification by or on behalf of the Business Sellers and by or on behalf of the Purchaser from time to time before or after the date of this Agreement, with such alterations as may be agreed from time to time in writing between the relevant Business Seller, the Purchaser and any relevant third party;

“Property Longstop Date” means the date on which a court of competent jurisdiction finally determines that a Property Third Party Consent has been lawfully refused;

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“Property Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from any Landlord, superior landlord and/or other third party, including any consents, licences, approvals, permits, authorisations or waivers required by any legislation or regulation or by any statutory, governmental, state, provincial or municipal bodies or authorities for or in connection with the transfer of a Transferred Real Property by the Business Sellers to the Purchaser and includes (where the context so admits) Sublease Consents;

“Property Transfer Completion” means the completion of the transfer of a Transferred Real Property under this Agreement, where such completion does not take place on the Closing Date because any relevant Property Third Party Consents have not been obtained on or prior to such date;

“Property Transfer Completion Date” means the date of Property Transfer Completion in accordance with paragraph 1.7 of this Part 4 of Schedule 3;

“Registered Title” means the registered title relating to a Transferred Real Property;

“Sublease Consent” has the meaning given to it in paragraph 1.11.2 of this Part 4 of Schedule 3;

“transfer”, for the purposes of this Part 4 of Schedule 3 only, means in respect of a Transferred Leased Real Property, the transfer or assignment of the relevant Lease or Leases, and in the case of a Transferred Owned Real Property the transfer thereof, and “a transfer” means and includes any instruments, deeds or agreements effecting such transfer;

“Transferred Leased Real Properties” means the leasehold properties held by a Business Seller and identified in Part B of Part 2 of this Schedule 3 and “Transferred Leased Real Property” means any one of them; and

“Transferred Owned Real Properties” means the owned properties identified in Part A of Part 2 of this Schedule 3 together with all buildings, structures, fixed plant, fixed machinery and fixed equipment thereon (except as excluded in Clause 2.3.2), and “Transferred Owned Real Property” means any one of them.

1.2Each of the Transferred Real Properties and/or the Leases thereof shall be transferred subject to the terms set out in this Part 4 of Schedule 3 and all other applicable terms of this Agreement.

1.3Pre-Closing

1.3.1Prior to Closing, the Business Sellers and the Purchaser shall agree (acting reasonably) the form of all documents on Property Agreed Terms necessary for the transfer of each of the Transferred Real Properties pursuant to the terms set out in this Part 4 of Schedule 3 and all other applicable terms of this Agreement.

1.3.2Any dispute arising out of or connected with paragraph 1.3.1 of this Part 4 of Schedule 3 which is not resolved by agreement between the parties within nine months of such dispute arising shall be referred for and resolved by expert determination as follows:

(i)either the relevant Business Seller or the Purchaser may initiate an expert reference under this provision by proposing to the other party the appointment of an expert (the “Expert”);

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(ii)the Expert shall either be the nearest equivalent to a chartered surveyor in the relevant jurisdiction or (in relation to legal issues) a single QC (or equivalent), in each case with no less than 15 years’ post-qualification experience in commercial real estate in the relevant jurisdiction chosen by agreement between the relevant Business Seller and the Purchaser or, failing agreement within 14 days of the initiation of the reference, by the President for the time being of the relevant professional body to which the Expert belongs (the “President”) on the application of either the relevant Business Seller or the Purchaser;

(iii)the relevant Business Seller and the Purchaser shall request that the Expert determines the referred dispute within 10 days of receiving the reference;

(iv)if the Expert has been appointed but is unable or unwilling to complete the reference, another Expert shall be appointed by agreement between the relevant Business Seller and the Purchaser or, failing agreement within 7 days of the parties being notified that the Expert is unable or unwilling to complete the reference, by the President on the application of either party;

(v)the Expert shall act as an expert and not as an arbitrator;

(vi)the relevant Business Seller and the Purchaser shall have the right to make representations and submissions to the Expert, but there will be no formal hearing;

(vii)the relevant Business Seller and the Purchaser shall make all relevant documents and information within their control available to the Expert;

(viii)the costs of the Expert shall be borne equally by the relevant Business Seller and the Purchaser; and

(ix)the decision of the Expert shall, in the absence of fraud or manifest error, be final and binding on the parties.

1.3.3This paragraph 1.3.3 of Part 4 of Schedule 3 applies to those Transferred Real Properties in relation to which a Property Third Party Consent is required and if such Property Third Party Consent remains to be obtained as at the Closing Date this paragraph 1.3.3 of Part 4 of Schedule 3 shall continue to apply until the relevant Property Third Party Consent shall have been obtained or until the Property Longstop Date. If any Property Third Party Consents are required:

(i)the Seller or relevant Business Seller shall make an application for, and shall use all reasonable endeavours to obtain each Property Third Party Consent as soon as reasonably practicable following the date of this Agreement for the transfer of the Transferred Real Property and shall, at all times, keep the Purchaser informed of progress in obtaining such Property Third Party Consents;

(ii)the Purchaser shall:

(a)supply such information and references as may reasonably be required by a Landlord, any superior landlord or other relevant third party in connection with a Property Third Party Consent;

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(b)in respect of the period after Closing only, enter into such covenants for the payment of the rent in respect of the Transferred Leased Real Properties and for the observance and performance of the covenants and conditions on the part of the lessee contained in any Lease as may reasonably be required by the Landlord, any superior landlord or other relevant third party;

(c)if reasonably required by the Landlord, any superior landlord or other relevant third party, provide a rent deposit or procure that a surety acceptable to such person guarantees the Purchaser’s obligations under the Lease following the transfer of the relevant Transferred Leased Real Property; and

(d)be responsible for and undertake to pay, or procure the giving of undertakings to pay the professional and other fees of any Landlord, any superior landlord or other relevant person (including any Tax or disbursements in respect of such fees but excluding any Tax on the actual net income, profit or gains of the Landlord, any superior landlord or any other relevant person) properly in connection with any application for Property Third Party Consents, whether or not such Property Third Party Consents are given.

1.3.4Each party shall give written notice to the other party as soon as reasonably practicable after obtaining any Property Third Party Consents which shall be accompanied by a copy of such consent.

1.3.5Subject to the Purchaser complying with its obligations under paragraphs 1.3.3(ii)(b) to (d) of this Part 4 of Schedule 3, the Seller shall pay, or shall procure that a member of the Seller’s Group pays, any moneys or provide or procure the giving of any guarantees or other security, in each case as may be lawfully required by a Landlord, superior landlord or other relevant third party in connection with the obtaining of the Property Third Party Consents, provided that the Purchaser shall indemnify and keep indemnified the Seller in an amount equal to:

(i)any moneys required to be paid or procured to be paid by the Seller pursuant to this paragraph; and

(ii)any Liabilities under any guarantees or other security given or procured by the Seller pursuant to this paragraph and arising out of, or in connection with, an act or omission on the part of the Purchaser.

1.4Licence

1.4.1In the event that any Property Third Party Consents are not obtained on or before the Closing Date, notwithstanding the terms of the Leases, the Seller shall procure that the relevant Business Seller allows the Purchaser to occupy the Licensed Premises for the Licence Period relating to the relevant Licensed Premises on the terms set out in this paragraph 1.4 of Part 4 of Schedule 3.

1.4.2The Purchaser acknowledges that the grant of each Licence may amount to a breach of the terms of the relevant Lease.

1.4.3The Licence of each Licensed Premises is granted:

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(i)subject to all of the matters to which the relevant Leases relating to the Transferred Leased Real Property are subject;

(ii)subject to the matters referred to in the Registered Title and the Letting Documents;

(iii)out of whatever right, title and interest that the relevant Business Seller has in the Licensed Premises and/or under the Leases;

(iv)in such state of repair and condition as the Licensed Premises may be in as at the date on which the relevant Licence is granted; and

(v)without making any statement or representation that the relevant Business Seller is entitled to grant it.

1.4.4From Closing and pending Property Transfer Completion, the Purchaser shall pay to the relevant Business Seller a “Licence Fee” equivalent to:

(i)all rents and other charges (including VAT due thereon under the relevant Lease where payable at the date of this Agreement by the relevant Business Seller) payable in respect of the Licensed Premises; and

(ii)all outgoings (including VAT due thereon under the relevant Lease) (including, but not limited to, rates, service charges, management charges, levies, air-conditioning charges, insurance, heating, electricity, gas, telecommunications and other services and the cost of complying with fire and other statutory regulations) payable by the relevant Business Seller in respect of the Licensed Premises or charged upon the owner or occupier of the Licensed Premises,

such payments to be made not less than 10 Business Days before any such sum falls due subject to the relevant Business Seller giving the Purchaser not less than 10 Business Days’ prior written notice to that effect. To the extent that there has been a prepayment at the Closing Date of the amounts in paragraphs 1.4.4(i) and (ii) of this Part 4 of Schedule 3 by the Seller’s Group which is not otherwise accounted for in the Closing Statement, the Purchaser shall pay to the relevant member of the Seller’s Group within 10 Business Days of written demand an amount equal to the amount of such prepayment in respect of any period after the Closing Date.

1.4.5Throughout the Licence Period, the Purchaser shall, in respect of the Licensed Premises only:

(i)keep the Licensed Premises in no worse a state of repair than they are in at the Closing Date, fair wear and tear excepted;

(ii)observe and perform the covenants and conditions on the part of the lessee in the relevant Lease under which the relevant Business Seller holds the Licensed Premises (other than in relation to the payment of rent and other charges paid to the relevant Business Seller as part of the Licence Fee and subject to paragraph 1.4.5(i) of this Part 4 of Schedule 3); and

(iii)use the Licensed Premises only in accordance with the terms of the Lease of the relevant Licensed Premises and in compliance with the law and

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regulations where the relevant Licensed Premises is located (save for any such law or regulation that prohibits the use of the Licensed Premises without a Property Third Party Consent having been obtained).

1.4.6The Purchaser and each Business Seller agree that:

(i)the Licence is personal to the Purchaser and may only be exercised by the Purchaser and those authorised by it;

(ii)(subject to paragraph 1.4.5 of this Part 4 of Schedule 3) the Purchaser and all persons authorised by it are permitted to have the unrestricted use and occupation of the Licensed Premises; and

(iii)no relationship of landlord and tenant is created as a result of the Licence.

1.4.7If a Landlord or any other relevant third party commences proceedings, raises any lawful objection or takes any other action in connection with the Purchaser’s occupation or use of any of the Licensed Premises pending the obtaining of the relevant Property Third Party Consents, the Purchaser and the relevant Business Seller shall meet and negotiate in good faith in order to determine which steps should be taken in respect of the relevant Transferred Real Property.

1.4.8Throughout the Licence Period, the Purchaser shall, in respect of the Licensed Premises only, indemnify and keep indemnified each member of the Seller’s Group from and against any Licence Fee and any Losses arising from the Licence and/or as a result of the occupation of the Licensed Premises by the Purchaser.

1.4.9The Purchaser and the Business Sellers shall each inform the other forthwith of any notice received by it in relation to any of the Licensed Premises from the Landlord or any other third party.

1.5Determination of Licence

1.5.1The Licence in relation to any one or more of the Licensed Premises shall determine:

(i)immediately if the Property Longstop Date occurs; or

(ii)by the relevant Business Seller giving at least three months’ prior written notice to the Purchaser if the Purchaser fails to make the payment of the Licence Fee for a period of one month or is otherwise in material breach of the provisions of the Licence for a continuous period of one month following written notification by the relevant Business Seller to the Purchaser of the same, and in either case the Purchaser has failed to remedy the relevant failure to pay or to remedy the breach prior to the expiry of the three month notice period (or, if the breach is not capable of remedy within such three month period, the Purchaser has failed to commence to remedy the breach within that period and thereafter failed diligently to continue with such remedy); or

(iii)if the relevant Landlord in relation to a Transferred Leased Real Property prosecutes forfeiture proceedings (or the nearest local law equivalent) as a result of the occupation by the Purchaser of the Licensed Premises then the parties shall either:

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agree that the Licence shall determine on a date to be agreed between the parties (acting reasonably); or

in the absence of such agreement, either party may require a QC (or equivalent) with no less than 15 years’ post-qualification experience in commercial real estate in the relevant jurisdiction to be appointed (such appointment to be by agreement between the Seller and the Purchaser or, failing agreement, within 14 days, by the President (as defined in paragraph 1.3.2(ii) of this Part 4 of Schedule 3)). Should the QC determine that there is more than a 50% chance of the proceedings in question resulting in the Lease in question being forfeited (or equivalent), then the Licence shall determine on a date to be agreed between the parties (acting reasonably) in order to afford the Seller the opportunity to apply for relief from forfeiture or otherwise challenge the proceedings in question on the basis that any breach resulting from the grant of the Licence has been cured,

provided that this paragraph 1.5.1(iii) shall at all times operate without prejudice to paragraphs 1.4.7, 1.5.1(i) and 1.12.

1.5.2If, for whatever reason, the Licence Period comes to an end in relation to any of the Licensed Premises then:

(i)the Licence insofar as it relates to the relevant Licensed Premises shall be severable from the remainder of this Agreement and this Agreement shall otherwise remain in full force and effect;

(ii)the Purchaser shall not be entitled to any refund, abatement or reduction of the Purchase Price but shall be entitled to a refund in respect of any Licence Fee prior to the termination of the Licence for the Licensed Premises and which relates to the period following termination of the Licence;

(iii)it shall not prejudice or affect any claim by any relevant Business Seller in respect of any prior breach of this Agreement by the Purchaser in respect of that Licensed Premises; and

(iv)unless the Licence Period comes to an end due to Property Transfer Completion in respect of the relevant Licensed Premises taking place, the Purchaser shall:

vacate the Licensed Premises forthwith;

remove from the Licensed Premises all items belonging to it;

leave the Licensed Premises in a clean and tidy condition; and

at the request of the relevant Business Seller, reinstate the Licensed Premises or any part or parts thereof to at least as good a state of repair or condition as at Closing, fair wear and tear excepted.

1.6Closing

1.6.1The transfer of the Transferred Real Property shall only take place on Closing to the extent that all necessary Property Third Party Consents in respect of the relevant transfer have been obtained prior to the Closing Date.

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1.6.2Without prejudice to Clause 4.1.8, the Purchase Price shall be paid on the Closing Date in accordance with this Agreement even if any necessary Property Third Party Consents have not then been obtained and not all the Transferred Real Property is transferred on the Closing Date.

1.6.3Completion of the transfer of the Transferred Real Property shall take place at such place (or places) as the parties may agree.

1.7Property Transfer Completion

Property Transfer Completion in respect of a Transferred Real Property shall take place on the date falling 15 Business Days following the grant of all relevant Property Third Party Consents for such Transferred Real Property or on such other date as the parties shall agree acting reasonably (but not before the Closing Date).

1.8General Transfer Provisions

1.8.1The Seller shall procure that the relevant members of the Seller’s Group shall transfer the Transferred Real Property to the Purchaser subject to the terms set out in this Part 4 of Schedule 3 and all other applicable terms of this Agreement on the Closing Date or (if later) Property Transfer Completion.

1.8.2The Transferred Real Property is sold subject to the Letting Documents (if any) but otherwise with vacant possession together with all buildings, structures, fixed plant, fixed machinery and fixed equipment thereon except as excluded in Clause 2.3.2.

1.8.3The transfer of each Transferred Real Property shall contain covenants with the relevant Business Seller by the Purchaser to comply with:

(i)the obligations arising from the matters mentioned in the Registered Title; and

(ii)obligations on the part of the landlord arising under the Letting Documents (if any),

insofar as the relevant Business Seller may remain liable directly or indirectly for them after the Closing Date or Property Transfer Completion (as the case may be) and to indemnify the relevant member of the Seller’s Group against any non-compliance and a further covenant by the Purchaser to indemnify the relevant Business Seller against any liability arising under an authorised guarantee agreement (or equivalent) entered into by the relevant member of the Seller’s Group.

1.8.4The transfer of each Transferred Real Property shall be on the nearest equivalent terms that exist under local (national) law to a transfer of real property in England and Wales made with full title guarantee save that where it is a Transferred Leased Real Property the covenant set out in Section 4(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1994 shall not extend to the imposition on the transferor of liability for any subsisting breach of obligation relating to the physical state of the Transferred Leased Real Property.

1.8.5On the Closing Date or Property Transfer Completion (as the case may be) in respect of each of the Transferred Real Properties:

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(i)the Seller shall procure that the relevant Business Seller delivers to the Purchaser a duly executed transfer in respect of the relevant Transferred Real Property on Property Agreed Terms; and

(ii)the Purchaser shall deliver to the Seller a duly executed transfer in respect of the relevant Transferred Real Property on Property Agreed Terms.

1.8.6The Purchaser shall, at its own cost and expense, procure that all transfers are duly stamped, filed or registered at the relevant registries on a timely basis and within the statutory period (if any) and the relevant Business Seller shall promptly assist the Purchaser with any requisitions or enquiries raised in relation thereto.

1.9Subjections

Notwithstanding anything contained in this Agreement:

1.9.1Each of the Transferred Real Properties is transferred subject to and (where appropriate) with the benefit of the following matters (to the extent applicable under the laws of the relevant jurisdiction):

(i)any unregistered interest which overrides first registration under Schedule 1 of the Land Registration Act 2002 (the “2002 Act”) and any interest which fall within Section 11(4)(c) of the 2002 Act and any unregistered interests which override registered dispositions under Schedule 3 of the 2002 Act or their local jurisdiction equivalent (if any);

(ii)such unregistered interests as may affect that Transferred Real Property to the extent and for so long as they are preserved by the transitional provisions of Schedule 12 of the 2002 Act or its local jurisdiction equivalent (if any);

(iii)all matters contained or referred to in the Letting Documents;

(iv)all matters contained or referred to in the Property, Proprietorship and Charges registers (or equivalent entries and registers) of the Registered Title relating to that Transferred Real Property (except fixed and floating charges securing money or liabilities);

(v)all exceptions, reservations, rights, easements, quasi-easements, wayleaves, rent charges, covenants, conditions, declarations, leases, tenancies (including statutory tenancies), licences and agreements affecting the same;

(vi)(in the case of a leasehold property) the rents, covenants and conditions reserved by or contained in the Lease under which the same is respectively held;

(vii)all local land charges (whether or not registered before the date of this Agreement) and all matters capable of registration as local land charges (whether or not actually registered) or their local jurisdiction equivalent (if any);

(viii)all notices served and orders, demands, proposals, or requirements made by any local or other public or competent authority;

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(ix)all actual or proposed orders, directions, plans, notices, instruments, charges, restrictions, conditions, agreements or other matters arising under any statute relating to town and country planning and any laws and regulations intended to control or regulate the construction, demolition, alteration or change of use of land or buildings or to preserve or protect the environment; and

(x)matters which are fairly disclosed by the Disclosure Letter.

1.9.2The Purchaser is deemed to acquire with full knowledge of the matters referred to in paragraph 1.9.1 of this Part 4 of Schedule 3.

1.9.3The Business Sellers shall procure that any and all financial charges affecting the Transferred Real Properties will be discharged on or before the date on which such Transferred Real Property is to be transferred to the Purchaser, and shall provide to the Purchaser such evidence as the Purchaser may reasonably require in order to satisfy itself that such discharge has been effected and to remove any notices or entries in respect of such charges from any relevant register.

1.9.4The Business Sellers do not give any warranty as to the use or area of any of the Transferred Real Properties and shall not be required to define the boundaries of any of the Transferred Real Properties. The transfer of the Transferred Real Properties shall not be annulled, nor shall any compensation be allowed or payable, in respect of any error in respect of any such matters.

1.9.5On the date on which the transfer of each Transferred Real Property is completed, the Seller shall deliver, to the Purchaser (or such other third party as the Purchaser may reasonably direct) all of the original documents in the possession of the Business Sellers or relevant member of the Seller’s Group in respect of each of the Transferred Real Properties.

1.9.6The Purchaser shall not raise any requisition on matters arising after the date of this Agreement, except where the subject matter of the requisition is registered at the Land Registry (or equivalent local registry) after the date of this Agreement and does not relate to any matter referred to in paragraph 1.9.1 of this Part 4 of Schedule 3.

1.9.7To the extent that deposit guarantees have been given by the Seller’s Group in respect of any Transferred Real Property and/or insofar as the Seller’s Group retains any residual or ongoing liabilities or obligations (including performance guarantees) in connection with the Transferred Real Property, the Purchaser shall use all reasonable endeavours procure that the Seller’s Group is released from all deposit guarantees and all other residual or ongoing liabilities or obligations and, insofar as the counterparties thereto shall properly and lawfully refuse to give any such release, the Purchaser shall indemnify and keep indemnified the Seller (or the relevant member of the Seller’s Group) in an amount equal to any Liabilities under any such residual or ongoing liabilities or obligations arising out of, or in connection with, an act or omission on the part of the Purchaser.

1.10Insurance

The Business Sellers shall maintain their existing insurance (if any) on the Transferred Real Properties and shall cancel such insurance with effect from the Closing Date or, if

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later, the date of Property Transfer Completion (as the case may be) unless agreed otherwise with the Purchaser.

1.11Grant of Sublease

If a Business Seller is unable to obtain a Property Third Party Consent from a Landlord for the transfer of a Transferred Leased Real Property the provisions of this paragraph 1.11 of Part 4 of Schedule 3 shall apply:

1.11.1where a Lease permits a sublease to be granted without the requirement for any Property Third Party Consent from the Landlord, the relevant Business Seller shall grant to the Purchaser a sublease of the Transferred Leased Real Property on the same rent and other terms and conditions as the Lease of the Transferred Leased Real Property with such changes as are appropriate and agreed between the relevant Business Seller and the Purchaser acting reasonably and the term of the sublease shall be the term of such Lease less one day; and

1.11.2where the Transferred Leased Real Property is held by the relevant Business Seller from a Landlord on terms which require the consent of the Landlord to:

(i)the grant of a sublease; or

(ii)the terms on which a sublease is granted,

the Seller or the relevant Business Seller shall use all reasonable endeavours to obtain such consent (“Sublease Consent”) from such Landlord. Where the relevant Business Seller is able to obtain the appropriate Sublease Consent (or, where applicable, the court of competent jurisdiction referred to in paragraph 1.12.1 of this Part 4 of Schedule 3 declares that the Sublease Consent has been unreasonably withheld or delayed), the relevant Business Seller shall grant to the Purchaser a sublease of the Transferred Leased Real Property on the same rent and other terms and conditions as the Lease of the Transferred Leased Real Property with such changes as are appropriate and agreed between the relevant Business Seller and the Purchaser acting reasonably and the term of the sublease shall be the term of such Lease less one day.

1.12Property Third Party Consent not obtained

1.12.1If a Property Third Party Consent (and, where applicable, a Sublease Consent) has been refused or otherwise not obtained within twelve months following the Closing Date, the Seller and the Purchaser may (acting reasonably) agree that an application is to be made to a court of competent jurisdiction that the relevant Property Third Party Consent has been unreasonably withheld or delayed.

1.12.2If an application is to be made to a court of competent jurisdiction pursuant to paragraph 1.12.1 of this Part 4 of Schedule 3:

(i)the proceedings shall be brought and prosecuted by the Seller; and

(ii)the Purchaser shall provide all such assistance in connection with such proceedings as the Seller (acting reasonably) may require in the interests of obtaining the Property Third Party Consent; and

(iii)provided that the Seller has complied with its obligations under paragraphs 1.3.3(i) and 1.11.2 of this Part 4 of Schedule 3, the Purchaser shall indemnify and keep indemnified the Seller for any costs and expenses

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properly incurred by the Seller in bringing and prosecuting proceedings under this paragraph.

1.12.3If a Property Third Party Consent has not been obtained by the Property Longstop Date then the Seller and the Purchaser shall each bear fifty per cent. of any Losses of the Seller and the Purchaser arising out of or in connection with the failure to obtain such Property Third Party Consent.

1.13Obligations on the Business Sellers

In this Part 4 of Schedule 3, any reference to an obligation on the part of the Business Sellers (or any of them, as the case may be) shall be read as if it were an obligation on the part of the Seller to procure performance of such obligation by the Business Seller or Business Sellers in question.

1.14Amsterdam Lease

1.14.1The Seller shall keep the Purchaser fully informed of any discussions or negotiations with the Landlord in respect of the lease of premises at Hullenbergweg 81-135 (1011 CL), Amsterdam, The Netherlands (the “Amsterdam Lease”), or any notices received by the Seller (or any member of the Seller’s Group) from the Landlord in respect of the Amsterdam Lease relating to the determination thereof or the yielding up of the premises demised thereunder.

1.14.2The Seller shall not, and shall procure that no member of the Seller’s Group shall, act independently of the Purchaser in relation to any discussions or negotiations relating to the extension or renewal of the Amsterdam Lease, and shall not enter into any document or deed extending or renewing the term of the Amsterdam Lease without the prior written approval of the Purchaser (not to be unreasonably delayed).

1.14.3The Seller shall, and shall procure that any relevant member of the Seller’s Group shall, take such action as the Purchaser may reasonably request in connection with the Amsterdam Lease, including taking steps to extend or renew the same.

1.14.4The Purchaser shall indemnify and keep indemnified the Seller against all costs properly incurred by the Seller (or any member of the Seller’s Group) arising out of or in connection with paragraph 1.14.3 of this Part 4 of Schedule 3.

1.14.5If the Amsterdam Lease is extended or renewed, the leasehold property as extended or renewed shall be a “Transferred Real Property” for the purposes of this Agreement and the provisions of this Part 4 of Schedule 3 shall apply to such lease as extended or renewed.

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Schedule 4
Vaccines Group Intellectual Property Rights and Vaccines Group Intellectual Property Contracts
(Clause 2.3)

Part 1

Vaccines Group Intellectual Property Rights

Part 2

Vaccines Group Intellectual Property Contracts

Part 3

Beta Interferon Patents

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Schedule 5
Excluded Employees
(Clause 1.1)

[***]

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Schedule 6
International Assignees
(Clause 1.1)

[***]

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Schedule 7
Permitted Encumbrances
(Clause 1.1)

1.Co-owned Vaccines Group Intellectual Property Rights.

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Schedule 8
Product Approvals and Product Applications
Part 1
Terms relating to the Product Approvals and Product Applications

1General Provisions

1.1The Purchaser shall do all things necessary to effect the transfer of each Product Approval and Product Application, including complying with requirements and requests of Governmental Entities with respect to the transfer of each Product Approval and Product Application.

1.2The Marketing Authorisations shall be transferred in accordance with Part 2 of this Schedule 8.

2Product Applications

2.1The Purchaser shall file or cause to be filed applications for the transfer of each Product Application in each country or territory in which such transfer is required to be submitted as soon as possible after the Closing Date.

2.2Pending the transfer of each Product Application each Seller shall, and shall cause the relevant members of its Group to:

2.2.1upon reasonable request from the Purchaser and at the Purchaser’s expense, reasonably cooperate and coordinate with the Purchaser in relation to the transfer of the Product Applications, including by providing the Purchaser with regulatory documentation concerning the Products owned or controlled by that Seller or any of its Affiliates;

2.2.2perform such acts and services as may be requested by the Purchaser that are reasonably necessary or required by any Governmental Entity to maintain or renew any Product Application or are reasonably necessary for the Purchaser to pursue the regulatory approval for any Product Application, including conducting any studies, including clinical and stability studies, concerning the Products; and

2.2.3notify the Purchaser as soon as is reasonably practicable of any written communication received by such Seller or any member of its Group with respect to any Product Application and shall consult with the Purchaser with respect to such communication and take into account the Purchaser’s views as to the form and content of any communication with any Governmental Entity concerning such Product Application.

3Fees and expenses

From and after the Closing Date, the Purchaser shall promptly reimburse the relevant members of the Seller’s Group for all maintenance and renewal fees and similar fees paid, and all out of pocket expenses reasonably incurred in connection with the satisfaction of any commitments or obligations by such member of the Seller’s Group with respect to each Product Approval and each Product Application.

4Notification

As soon as a Seller or the Purchaser or any of their respective Affiliates receives notification, if any, of impending approval or approval of the transfer of a Product

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Application from a Governmental Entity, the notified party or the party whose Affiliate was notified shall inform the other party of the expected date of appointment or transfer and actual date of appointment or transfer of that Product Application.

5Responsibility for transfer

Notwithstanding any other provision of this Agreement, no Seller nor any of its Affiliates shall have any Liability to the Purchaser in the event that the transfer of any Product Application alone results in any further obligations, commitments or Liabilities in relation to such Product Application.

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Schedule 8
Product Approvals and Product Applications
Part 2
Transfer of Marketing Authorisations

1Marketing Authorisation Transfer and Marketing Authorisation Re-registration

1.1The Seller and the Purchaser hereby agree they will each use, and will procure that their respective Affiliates will use, all reasonable endeavours to ensure that, as soon as reasonably practicable after the Closing Date:

1.1.1subject to paragraphs 1.1.2 and 1.1.3, each Marketing Authorisation shall be transferred in accordance with Applicable Law by the Marketing Authorisation Holder to the Marketing Authorisation Transferee (“Marketing Authorisation Transfer”); and

1.1.2where Applicable Law does not permit Marketing Authorisation Transfer, a new marketing authorisation shall be registered in the name of the Marketing Authorisation Transferee to replace the existing Marketing Authorisation (“Marketing Authorisation Re-registration”) and the Seller shall procure that the relevant Marketing Authorisation Holder takes all necessary steps to withdraw, abandon, cancel or allow to lapse the superseded Marketing Authorisation as soon as practicable after the Marketing Authorisation Re-registration Date; and

1.1.3good faith discussions are held between the Seller and the Purchaser (or their respective Affiliates) to determine whether a structure may be implemented such that the Marketing Authorisation Transfers in Brazil may be effected without the need for a Marketing Authorisation Re-registration, such as by means of a spin-off structure under Applicable Law.

1.2The parties agree that the transfer of any Marketing Authorisation from the Marketing Authorisation Holder to the Marketing Authorisation Transferee in respect of any Delayed Businesses shall not complete until on or after the relevant Delayed Closing Date.

1.3Any Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as applicable) shall each be effected on a Market-by-Market basis (such that there shall not be any staggered Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as the case may be) on a Product-by-Product basis in any Market), unless otherwise agreed between the Seller and the Purchaser.

1.4With effect from the Closing Date until the Marketing Authorisation Transfer Date or the Marketing Authorisation Re-registration Date (as applicable), the Seller shall procure that each Marketing Authorisation Holder shall hold the Marketing Authorisation(s) in its name but for the account, risk and benefit of the relevant Marketing Authorisation Transferee.

Submission of MA Documentation

1.5Without prejudice to paragraph 1.5, the Purchaser shall be responsible for preparing and submitting, or for procuring that there is prepared and submitted (in any such case at the Purchaser’s cost and expense), all notices, applications, submissions, reports and any other instruments, documents, correspondence or filings necessary to complete Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as applicable) (the “MA

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Documentation”). The MA Documentation shall be prepared in accordance with Applicable Law as soon as reasonably practicable.

1.6At the Seller’s election, the Purchaser shall procure that advanced drafts of the MA Documentation are submitted to the Seller so as to allow the Seller and/or the Marketing Authorisation Holder a reasonable opportunity to provide comments on such MA Documentation before it is submitted to the relevant Governmental Entity. The Purchaser shall incorporate all comments on such drafts as may reasonably be made by the Seller and/or the Marketing Authorisation Holder PROVIDED THAT the Purchaser shall not be obliged to incorporate any comments if the Purchaser considers, acting reasonably that to do so would materially delay Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as applicable).

1.7Where under Applicable Law the MA Documentation is required to be submitted to the relevant Governmental Entity:

1.7.1by the Marketing Authorisation Holder, the Purchaser shall procure that the finalised MA Documentation is provided to the Seller after such MA Documentation is finalised in accordance with paragraph 1.5 above and the Seller shall, in turn, procure that the Marketing Authorisation Holder submits such MA Documentation to the relevant Governmental Entity (the timing and date of such submission to be agreed with the Purchaser) and the Seller shall promptly thereafter advise the Purchaser of such submission and provide a copy of the relevant MA Documentation (in the form submitted) to the Purchaser; and

1.7.2by the Marketing Authorisation Transferee, the Purchaser shall procure that the relevant Marketing Authorisation Transferee submits the finalised MA Documentation to the relevant Governmental Entity as soon as reasonably after such MA Documentation is finalised in accordance with paragraph 1.5 above and the Purchaser shall promptly thereafter advise the Seller of such submission and provide a copy of the relevant MA Documentation (in the form submitted) to the Seller.

1.8From the Closing Date, the Seller shall procure that the relevant Marketing Authorisation Holder shall, as soon as reasonably practicable, sign any notices, applications, submissions, reports and other instruments, documents, correspondence or filings presented to it by the Purchaser or the relevant Marketing Authorisation Transferee that are necessary to effect Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as applicable). The Marketing Authorisation Holder shall:

1.8.1provide notice of its consent to a Marketing Authorisation Transfer or Marketing Authorisation Re-registration if required by any Governmental Entity; and

1.8.2provide to the Purchaser or the relevant Marketing Authorisation Transferee any information or other data or technical or other information in its possession that relates to the relevant Marketing Authorisation and that is required by a relevant Governmental Entity or otherwise reasonably required by the Purchaser or the relevant Marketing Authorisation Transferee to assist the Purchaser or the relevant Marketing Authorisation Transferee to effect the relevant Marketing Authorisation Transfer or Marketing Authorisation Re-registration;

1.8.3in the event of any request for information or any query from any relevant Governmental Entity in respect of Marketing Authorisation Transfer or the

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Marketing Authorisation Re-registration (as applicable), the relevant party receiving such request or query shall provide copies of any such request or query to the Seller or, as the case may be, to the Purchaser. The Purchaser shall be responsible for preparing, or shall be responsible for procuring that there is prepared, (at the Purchaser’s cost and expense) any response to such a request or query with the intention that such request or query shall be dealt with as promptly and efficiently as possible. In advance of finalising any such response, the Purchaser shall procure that the relevant response is submitted to the Seller so as to allow the Seller and/or the relevant Marketing Authorisation Holder a reasonable opportunity to provide comments on such response before it is submitted to the Governmental Entity. The Purchaser shall procure that relevant Marketing Authorisation Transferee (i) shall submit the response to the relevant Governmental Entity as soon as reasonably practicable after the same has been finalised in accordance with this paragraph 1.7.3 and (ii) shall provide a copy of the relevant response (in the form submitted) to the Seller.

2Obligations Pending Marketing Authorisation Transfer or Marketing Authorisation Re-Registration

2.1Unless otherwise required by Applicable Law or a relevant Governmental Entity (or unless otherwise agreed in writing by the Seller and the Purchaser), from the Closing Date until the applicable Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date:

2.1.1the Seller shall:

(i)maintain in force (or procure that there is maintained in force) each Marketing Authorisation, and shall not voluntarily amend, cancel or surrender any Marketing Authorisation unless requested to do so in writing by the Purchaser or required to do so by any Applicable Law or any Governmental Entity;

(ii)with the Purchaser’s consent (not to be unreasonably withheld or delayed) progress (or procure that there is progressed) any registrations, variations or renewals to Marketing Authorisations initiated by the Seller (or any other member of the Seller’s Group) prior to the Closing Date or withdraw them upon the request of the Purchaser;

(iii)procure that each Marketing Authorisation Holder shall comply with the terms of any Marketing Authorisation and shall notify the Purchaser as soon as reasonably practicable of the details of any variations or renewals initiated following the Closing Date;

(iv)inform the Purchaser of any impending renewals of Marketing Authorisations as at the Closing Date and the parties shall discuss in good faith to what extent any such renewal will be pursued or  withdrawn (it being agreed that the Purchaser shall have the final decision in any such matter);

(v)not without the consent of the Purchaser,  initiate any additional variations or amendments to the Marketing Authorisations, except to the extent required by any Governmental Entity or where failure to do so would breach Applicable Law; and

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(vi)consider in good faith any request by the Purchaser to apply for a new marketing authorisation in respect of a Product PROVIDED THAT if the Seller agrees to submit such application, any costs or expenses incurred by the Seller in making such application shall be for the Purchaser’s account and shall constitute MA Costs;

2.1.2without prejudice to the generality of the foregoing paragraph 2.1.1(iii), the Purchaser acknowledges and agrees that each Marketing Authorisation Holder shall be entitled to do (or to procure that there is done) any or all of the following (and the Purchaser acknowledges that, where the relevant Marketing Authorisation Holder so chooses and unless otherwise agreed, responsibility for each of the following activities shall rest with the relevant Marketing Authorisation Holder):

(i)pharmacovigilance activities related to the Marketing Authorisations, which activities shall be conducted in accordance with Applicable Law, the Vaccines Business Pharmacovigilance Agreement, and the standards, policies and procedures of the Seller’s Group from time to time in force; and

(ii)conducting any and all communications with a Governmental Entity in respect of a Marketing Authorisation (including, without limitation to the generality of the foregoing, attending any meetings with relevant Governmental Entities and filing and submitting all reports and other documents which it reasonably considers necessary to be submitted in order to comply with Applicable Law or its obligations under this Agreement), PROVIDED THAT responsibility for (a) the costs of preparation of any such documents, reports and/or filings shall be borne by the Purchaser (or the relevant Marketing Authorisation Transferee) to the extent such costs are reasonably necessary, and (b) the submission of MA Documentation shall be the responsibility of the Purchaser in accordance with paragraph 1.4 above, PROVIDED THAT the Seller shall ensure that the Purchaser is kept fully and promptly informed of any such communications or submissions in advance, to the extent reasonably practicable; and

2.1.3the Seller shall procure that each Marketing Authorisation Holder shall act in accordance with the reasonable instructions of the Purchaser or the Marketing Authorisation Transferee in respect of each Marketing Authorisation in respect of which such Marketing Authorisation Holder is the holder, PROVIDED THAT no Marketing Authorisation Holder shall be obliged to comply with such instructions to the extent the same: (i) infringe the terms of the relevant Marketing Authorisation(s); or (iii) are otherwise inconsistent with the provisions of the Vaccines Business Pharmacovigilance Agreement relating to the Seller;

2.1.4the Purchaser shall only request artwork changes to the extent such changes are required in order to comply with Applicable Law;

2.1.5the Purchaser shall submit to the Seller (or shall procure that there is submitted) written details (in such form and with such supporting materials as the Seller may reasonably request) of any new, amended or proposed advertising and promotional activity or training materials in respect of any Product Commercialised pursuant to any Marketing Authorisation (including (without limitation) any material reasonably

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requested by the Seller in order to validate new and/or amended promotional or training materials), and the Purchaser acknowledges and agrees that no such advertising, promotional or training activity shall be implemented, undertaken or otherwise commenced without the prior written consent of the Seller (for itself and on behalf of the relevant Marketing Authorisation Holder), such consent not to be unreasonably withheld. The Purchaser further agrees and acknowledges that, if it so chooses, the Seller shall be entitled to assume responsibility for obtaining (or procuring that there is obtained) the consent(s) and approval(s) of any relevant Governmental Entity required for such new, amended or proposed advertising and promotional activity or training activity; and

2.1.6to the extent permitted by the terms of the relevant Marketing Authorisation, the Purchaser or any other member of the Purchaser’s Group shall Commercialise the Product(s) which are the subject of such Marketing Authorisation (notwithstanding that such Marketing Authorisation is held in the name of the relevant Marketing Authorisation Holder and, for the avoidance of doubt, the proceeds of any such Commercialisation shall be for the benefit of the Purchaser’s Group) and the Purchaser shall:

(i)indemnify each member of the Seller’s Group against any and all actions, claims, demands, investigations, judgments, proceedings, liabilities, loss, damages, payments, costs and expenses arising in relation to the Commercialisation of the Products by the Purchaser or any other member of the Purchaser’s Group under this paragraph (i); and

(ii)procure that such Product(s) are Commercialised in compliance with the terms of the relevant Marketing Authorisation and/or the requirements of the relevant Governmental Entity.

2.2Unless otherwise required by Applicable Law or a relevant Governmental Entity, from the Closing Date until the applicable Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date, where any Market Authorisation Holder is required by Applicable Law to consult with a Governmental Entity in order to negotiate the discounts, rebates or other pricing mechanisms (including reimbursement) (the “Pricing”) applicable to the Commercialisation of the Products in the relevant Market (a “Pricing Negotiation”):

2.2.1the Seller shall (or shall procure that the Marketing Authorisation Holder shall) notify the Purchaser as soon as reasonably practicable after the Marketing Authorisation Holder becomes aware of any opportunity or requirement to enter into a Pricing Negotiation;

2.2.2the Purchaser shall be responsible for preparing or procuring that there is prepared (at the Purchaser’s cost) all notices, submissions and reports, and any other documents or correspondence necessary for the purposes of the Pricing Negotiation (the “Pricing Negotiation Documentation”);

2.2.3the Seller shall (or shall procure that the Marketing Authorisation Holder shall) co-operate with the Purchaser and provide the Purchaser with such data and information as the Purchaser may reasonably request for the purposes of preparing the Pricing Negotiation Documentation;

2.2.4the Purchaser shall procure that the Pricing Negotiation Documentation is provided to the Seller and/or Marketing Authorisation Holder prior to the intended date of

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submission to the relevant Governmental Entity with such advance notice as is reasonably sufficient for the Seller and/or the Marketing Authorisation Holder to determine whether any of the information or any proposal included in the Pricing Negotiation Documentation would constitute or result in a breach of Applicable Law by the Marketing Authorisation Holder or any other member of the Seller’s Group;

2.2.5if the Seller and/or the Marketing Authorisation Holder believes (acting reasonably) that any of the information or any proposal included in the Pricing Negotiation Documentation prepared by the Purchaser (or a member of the Purchaser’s Group) would constitute or result in a breach of Applicable Law by the Marketing Authorisation Holder, then it shall submit to the Purchaser (or relevant member of the Purchaser’s Group) within 10 Business Days of the date of receipt of the Pricing Negotiation Documentation from the Purchaser pursuant to paragraph 2.2.4, a written legal opinion specifying why any of the information or any proposal included in the Pricing Negotiation Documentation would constitute or result in a breach of Applicable Law. Following receipt of the legal opinion by the Purchaser (or relevant member of the Purchaser’s Group), the parties shall consult with each other, in good faith, in order to agree amendments to the Pricing Negotiation Documentation that are reasonably required in order to ensure compliance with Applicable Law and the Seller (or the relevant Marketing Authorisation Holder) shall submit the revised Pricing Negotiation Documentation to the relevant Governmental Entity as soon as possible thereafter;

2.2.6if the Seller and/or Marketing Authorisation Holder believes (acting reasonably) that neither the information nor any proposal included in the Pricing Negotiation Documentation would constitute or result in a breach of Applicable Law by the Marketing Authorisation Holder or any other member of the Seller’s Group, then the relevant member of the Purchaser’s Group shall submit such Pricing Negotiation Documentation directly to the Governmental Entity unless prohibited by Applicable Law or by the Governmental Entity, in which case, the Seller shall procure that the Marketing Authorisation Holder makes the submission to the Governmental Entity as soon as reasonably practicable after it is received from the Purchaser (or relevant member of the Purchaser’s Group);

2.2.7the Purchaser (or a member of the Purchaser’s Group) shall be entitled to correspond with and attend all meetings with the Governmental Entity in relation to the Pricing Negotiation and, to the extent that the Marketing Authorisation Holder is required to be present at any such meetings under Applicable Law or by the Governmental Entity, the Seller shall procure that the Marketing Authorisation Holder shall jointly attend any such meetings with the relevant member of the Purchaser’s Group;

2.2.8the Purchaser (or a member of the Purchaser’s Group) shall be entitled to conduct the Pricing Negotiation unless prohibited under Applicable Law or by the Governmental Entity, in which case, the Seller shall procure that the Marketing Authorisation Holder shall conduct the Pricing Negotiation and in any event enter into any related agreement with the Governmental Entity in accordance with the reasonable instructions of the Purchaser (or a member of the Purchaser’s Group); and

2.2.9the Seller undertakes (and shall procure that the Marketing Authorisation Holder undertakes) to ensure that the Pricing Negotiation Documentation and any

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information received in connection with or as part of the Pricing Negotiation: (i) is kept confidential and is only disclosed to employees of the Seller’s Group on a need to know and confidential basis; and (ii) is used by the Seller, the Marketing Authorisation Holder and/or employees of the Seller’s Group for the sole purpose of making a determination under sub-paragraph 2.2.4 above.

2.3Subject to paragraph 2.4 below, the parties agree that nothing in paragraph 2.2 above shall preclude the Seller and/or Marketing Authorisation Holder from: (i) preparing and submitting to any Governmental Entity any notices, submissions and reports, and any other documents or correspondence, (ii) attending meetings with any Governmental Entity, (iii) making representations to any Governmental Entity, and (iv) taking any and all steps as the Seller and/or Marketing Authorisation Holder shall consider necessary or desirable, in each case in relation to the negotiation of Pricing applicable to the products that form part of the Seller’s Group Retained Business (and, for the avoidance of doubt, excluding the Products).

2.4Where Applicable Law does not permit the Purchaser to participate in a Pricing Negotiation as contemplated by paragraph 2.2 above or the Seller’s interest in respect of the outcome of a Pricing Negotiation conflicts or is reasonably likely to conflict with the interests of the Purchaser in the outcome of the Pricing Negotiation, the Seller shall (or shall procure that the relevant Marketing Authorisation Holder shall):

2.4.1notify the Purchaser of such conflict of interest as soon as reasonably practicable after becoming aware of it; and

2.4.2afford the Purchaser to the fullest extent permissible under Applicable Law, the rights it has under paragraph 2.2 above.

Following notification of a conflict of interest the parties shall, to the extent permitted by Applicable Law, consult together to agree the approach to be taken by the Seller (or the relevant Marketing Authorisation Holder) to minimise the impact of the conflict of interest on the Purchaser’s interests and if the Parties cannot agree on the approach to be taken, the matter shall be escalated at the Purchaser’s request to chief financial officers or their nominees of each party for resolution.

3New and Pending Marketing Authorisations in Respect of the Products

3.1If, at any time prior to Closing, any member of the Seller’s Group is granted or otherwise comes to hold any marketing authorisation which relates exclusively to one or more Products (a “New Marketing Authorisation”) then:

3.1.1the Seller undertakes to the Purchaser to notify the Purchaser as soon as reasonably practicable following the date on which the relevant member of the Seller’s Group is granted, or becomes entitled to, the New Marketing Authorisation; and

3.1.2the provisions of paragraphs 1 and 2 above shall apply to that new Marketing Authorisation.

3.2Where a member of the Seller’s Group has submitted to any Governmental Entity any application relating to the grant of a new marketing authorisation in respect of the Vaccines Group which is pending or in process as at the date of this Agreement (a “Pending Marketing Authorisation”):

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3.2.1the Seller shall continue to be responsible for preparation and submission of all documents required to register such Pending Marketing Authorisation but, following Closing, it shall do so at the Purchaser’s cost and shall pass responsibility for such Pending Marketing Authorisation to the Purchaser (or such member of the Purchaser’s Group as the Purchaser may nominate) as soon reasonably possible after Closing, subject to Applicable Law;

3.2.2from the Closing Date, the provisions of paragraph 1 shall apply mutatis mutandis to any registration process for any Pending Marketing Approval.

4MA Costs

From the Closing Date, the Purchaser shall be responsible for all necessary costs of preparation and submission of MA Documentation and, save as expressly provided in this Agreement, any other necessary costs incurred by the Seller or a member of the Seller’s Group in connection with the maintenance and any variations, amendments and renewals of the Marketing Authorisations relating to the Products or for any matter requested by the Purchaser pursuant to this Part 2 of Schedule 8 and for all fees and costs reasonably incurred by the relevant member of the Seller’s Group in complying with its obligations in respect of a Marketing Authorisation Transfer or Marketing Authorisation Re-registration (“MA Costs”).

5Obligations following Marketing Authorisation Transfer or Marketing Authorisation Re-Registration

5.1On and from the relevant Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date (as applicable), the Purchaser shall procure that each Marketing Authorisation Transferee shall assume and be solely responsible for:

5.1.1all obligations as the holder of such Marketing Authorisation including (subject to the terms of the Vaccines Business Pharmacovigilance Agreement) pharmacovigilance activities related to such Marketing Authorisation;

5.1.2all activities and actions required by Applicable Law in connection with such Marketing Authorisation; and

5.1.3any and all outstanding commitments and obligations to the relevant Governmental Entities with respect to the relevant Marketing Authorisation, save for any such commitments or obligations arising from a breach of this Agreement by the Seller.

5.2In the event that, following Marketing Authorisation Transfer or Marketing Authorisation Re-registration in respect of any Product, the Seller wishes to apply for a marketing authorisation in respect of a retained product, the Purchaser shall (and shall procure that the relevant Marketing Authorisation Transferee shall) co-operate with and provide all reasonable assistance to the Seller (or the relevant member of the Seller’s Group) at the Seller’s costs as may be reasonably required for the purposes of applying for such new marketing authorisation, including (without limitation) providing the Seller (or the relevant member of the Seller’s Group) and/or any Governmental Entity with such access to Marketing Authorisation Data or such other data or technical or other information as is reasonably requested by the relevant Governmental Entity or is otherwise reasonably required by the Seller or the relevant member of the Seller’s Group.

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Schedule 8
Product Approvals and Product Applications
Part 3
List of Products, Products Under Registration and Pipeline Products

[***]

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Schedule 8
Product Approvals and Product Applications
Part 4
Tenders

1.Call for New Tender

From Closing until the Marketing Authorisation Transfer Date in any Market, the Seller shall, and shall procure that each member of the Seller’s Group and the relevant Marketing Authorisation Holder shall, to the extent permitted by Applicable Law:

(a)inform the Purchaser in writing of any Call for New Tender as soon as reasonably practicable following receipt; and

(b)co-operate with and provide reasonable assistance to the Purchaser (or the relevant member of the Purchaser’s Group) for the purposes of responding to the Call for New Tender or otherwise applying for a new tender; and

(c)where Applicable Law requires such responses or applications to be made by the Marketing Authorisation Holder, the Seller shall procure that the Marketing Authorisation Holder submits such responses or applications on behalf of the Purchaser PROVIDED THAT the Purchaser shall indemnify the Seller and/or the relevant Marketing Authorisation Holder (as the case may be) for any and all costs, expenses and liabilities suffered or reasonably incurred by the Seller and/or the Marketing Authorisation Holder in complying with or as a result of the provisions of this paragraph.

2.Ongoing calls for tender

If, prior to Closing, the Seller or any member of the Seller’s Group (other than a Vaccines Group Company) has submitted a bid in any Market in response to any call for a tender (whether a new tender or the renewal of an existing tender) which includes the Products (the “Bid”), then, following Closing:

(a)to the extent that the Purchaser (or any member of the Purchaser’s Group) is prohibited from progressing the Bid in place of the relevant member of the Seller’s Group under Applicable Law, the Seller shall (or shall procure that the relevant member of the Seller’s Group shall) take all steps as may be reasonably required in order to progress the Bid, including responding to all questions raised by the relevant third party and the Purchaser shall provide all assistance (including access to the Purchaser’s employees) reasonably requested by the Seller to enable it to progress the Bid; and

(b)if the Bid is successful, then either:

(i)if permitted by Applicable Law and the relevant third party consents, the Purchaser (or any member of the Purchaser’s Group as the Purchaser shall nominate) shall enter into any contracts or other arrangements as are required to give effect to the tender with the relevant third party and no member of the Seller’s Group shall be obliged to enter into any such contracts or arrangements; or

(ii)if paragraph 2(b)(i) does not apply, the Seller (or any member of the Seller’s Group as the Seller shall nominate) shall enter into any contracts or other arrangements as are required to give effect to the tender with the relevant third party and the tender shall be deemed to be a Transferred Contract, Shared Business Contract

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and/or a Non-Transferring Tender (as the case may be) and the provisions of Schedule 10 shall apply accordingly.

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Schedule 9
Certificate
(Clause 1.1)

To: GlaxoSmithKline plc

[Date]

Certificate

This Certificate is issued in accordance with clause 4.4.1(iii)(b) and paragraph 1.1.4 of Schedule 15 of the sale and purchase agreement between Novartis AG and GlaxoSmithKline plc dated 22 April 2014, as amended (the “Agreement”). Unless otherwise defined, capitalised words used in this Certificate shall have the meanings given to them in the Agreement.

We confirm that:

1. no Material Adverse Effect has occurred between the date of the Agreement and the date of this Certificate;

2. having made due and careful enquiry, we are not aware of any breach or breaches of Clause 9.1 which alone or together give rise to a Material Adverse Effect; and

[either]

3. having made due and careful enquiry, we are not aware of any breach or breaches of the Seller’s Warranties that would have occurred and that would, alone or together, have given rise to a Material Adverse Effect had the Seller’s Warranties been repeated immediately before Closing by reference to the facts, circumstances and knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date.

[or]

3. having made due and careful enquiry, we are aware of the following material breaches of the Seller’s Warranties that would, alone or together, be material and have occurred had the Seller’s Warranties been repeated immediately before Closing by reference to the facts, circumstances and knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date.

[description of material breaches.]

For an on behalf of Novartis AG

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Schedule 10
Shared Business Contracts, Mixed Contracts and Transferred Contracts

1Delayed transfer of certain Transferred Contracts and Shared Business Contracts

Subject to paragraph 5.6, any Transferred Contract, Transferred Intellectual Property Contract, or Shared Business Contract relating to a Delayed Business (“Delayed Business Contracts”) shall not be transferred to the relevant member of the Purchaser’s Group until the relevant Delayed Closing Date and references in this Schedule 10 to “Closing”, “Closing Date” or “Effective Time” shall be deemed to be to “Delayed Closing Date” insofar as they relate to such Delayed Business Contracts, except paragraphs 2, 3.1 and 5.1.

2Disclosure

From Closing the Purchaser shall have the right to full disclosure of all Transferred Contracts and Full Disclosure of the Relevant Part of the Shared Business Contracts (other than the Relevant Part of any Mixed Contracts) and the Seller shall use reasonable efforts to facilitate such disclosure as soon as reasonably practicable.

3Separation of Shared Business Contracts

3.1Prior to Closing, the Seller and the Purchaser shall discuss and agree in good faith a process to identify all material Shared Business Contracts.

3.2The Seller shall use its reasonable efforts to maintain relationships under the Shared Business Contracts and continue to operate the Shared Business Contracts, including without limitation fulfilling all its obligations under the Shared Business Contracts (excluding the Relevant Parts), in the same manner as it has for the twelve months prior to the date of this Agreement.

3.3The Purchaser may, by notice to the Seller at any time prior to the date falling 90 days after the Closing Date or, if the Seller has not provided Full Disclosure of the Relevant Part of a Shared Business Contract on or prior to Closing, the date falling 90 days after the date on which Full Disclosure of the Relevant Part of the relevant Shared Business Contract is made (the “Relevant Election Date”), elect to take the rights and obligations of the Relevant Part of any Shared Business Contract.

3.4If the Purchaser makes an election under paragraph 3.3 above, the Seller and the Purchaser shall use their respective reasonable endeavours to procure that an arrangement is entered into with the relevant counterparty to each Shared Business Contract, the effect of which shall be that, with effect from the date of the relevant arrangement, the benefit and burden of the Relevant Part is severed from such Shared Business Contract and an agreement or arrangement equivalent to such Shared Business Contract is entered into between the relevant counterparty and a member of the Purchaser’s Group (or the Relevant Part of the Shared Business Contract is sub-licensed to such Purchaser) (a “Separation”). For the avoidance of doubt, no part of any such Shared Business Contract shall be severed and transferred to the Purchaser in so far as it relates to the Seller’s Group Retained Business, any product other than the Products or any Excluded Asset.

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3.5If no election is made by the Purchaser under paragraph 3.3 above by the Relevant Election Date, the provisions of paragraphs 6.2 of this Schedule shall apply in respect of the Relevant Part of such Shared Business Contract until the earlier of 9 months from the Relevant Election Date and the date on which the Purchaser notifies the Seller that an alternative arrangement has been put in place.

3.6For the avoidance of doubt, (i) paragraphs 3.3, 3.4 and 3.5 shall not apply in respect of any Shared Business Contract which terminates before the Relevant Election Date and (ii) paragraph 5.6 shall not apply in respect of Shared Business Contracts or Mixed Contracts.

4Separation of Mixed Contracts

4.1Prior to Closing, the Seller and the Purchaser shall discuss and agree in good faith a process to identify all material Mixed Contracts.

4.2From Closing, the Purchaser shall use all reasonable efforts to maintain relationships under the Mixed Contracts and continue to operate the Mixed Contracts, including without limitation fulfilling all its obligations under the Mixed Contracts (excluding the Relevant Parts), substantially in the same manner in which they had been operated for the twelve months prior to the date of this Agreement.

4.3The Seller and the Purchaser shall use their respective reasonable endeavours to procure that an arrangement is entered into with the relevant counterparty to each Mixed Contract (save for those Mixed Contracts which the Seller and Purchaser otherwise agree and subject to such Mixed Contracts not containing any competitively sensitive information of the Influenza Business), the effect of which shall be that, with effect from the date of the relevant arrangement, the benefit and burden of the Relevant Part is severed from such Mixed Contract and an agreement or arrangement equivalent to such Mixed Contract is entered into between the relevant counterparty and a member of the Seller’s Group (or the Relevant Part of the Mixed Contract is sub-licensed to such Seller) (a “Mixed Contracts Separation”).

4.4The Seller and the Purchaser shall, and shall procure that each other member of its Group shall, take all reasonable steps to install appropriate firewalls and other proportionate safeguards against the sharing of competitively sensitive information of the Influenza Business with those employees of the Purchaser’s Group engaged in the business of influenza vaccines. To the extent it is necessary to redact any Mixed Contracts pending a Mixed Contracts Separation, the Seller shall pay the costs of such redaction exercise.

5Obligation to obtain Third Party Consents

5.1Subject to paragraph 3, in relation to any Transferred Contract (excluding, for the purposes of this Schedule 10, any Product Approval or Product Application) or Transferred Intellectual Property Contract or Co-Owned Vaccines Group Intellectual Property Right or Transferred Plant and Equipment which is not assignable or sub-licensable without a Third Party Consent or a Separation of a Shared Business Contract or a Mixed Contracts Separation of a Mixed Contract which is not separable without a Third Party Consent, this Agreement shall not be construed as an assignment, an attempted assignment, a sub-licensing or an attempted sub-licensing and the Seller and the Purchaser shall each use their respective reasonable endeavours both before and after Closing to obtain all necessary Third Party Consents as soon as possible and shall keep the other informed of progress in obtaining such Third Party Consents. The Seller shall deliver to the Purchaser, on Closing or, if later, as soon as possible after receipt, any Third Party Consent.

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5.2In connection with the obtaining of any Third Party Consent referred to in paragraph 5.1, the Purchaser shall supply to the Seller such information as may be reasonably requested by the Seller or any relevant third party.

5.3Save as otherwise provided in this Agreement and save where related to the Mixed Contracts Separation of a Mixed Contract, the cost of any fee demanded by the third party as consideration for giving the Third Party Consent shall be borne by the Purchaser, provided that:

5.3.1the cost is agreed in advance by the Purchaser (such agreement not to be unreasonably withheld or delayed); and

5.3.2no party shall be required to bear any internal or administrative costs of the other party in relation to any Third Party Consent.

5.4Save as otherwise provided in this Agreement, the cost of any fee demanded by the third party as consideration for consenting to a Mixed Contracts Separation of a Mixed Contract and all administrative and all reasonable fully burdened internal costs of the Purchaser’s Group (including any Delayed Vaccines Group Company) shall be borne by the Seller, provided that the cost of any fee demanded by the third party is agreed in advance by the Seller (such agreement not to be unreasonably withheld or delayed).

5.5The parties agree that the provisions of any document entered into in connection with a Third Party Consent (including by way of novation) shall be without prejudice to the provisions of Clauses 8.1, 8.2 and 14 of this Agreement.

5.6Without prejudice to the obligation in paragraph 5.1 for the Seller and the Purchaser to use their respective reasonable endeavours to obtain Third Party Consents as soon as possible, the transfer to the Purchaser (or any member of the Purchaser’s Group or its third party nominee) of any Transferred Contract shall not occur on Closing or, if later, the date on which the relevant Third Party Consent is obtained (a “Delayed Contract”), in the following circumstances:

5.6.1if the Seller or the relevant Business Seller and a member of the Purchaser’s Group agree in writing in respect of a specific Market that the Delayed Contract shall transfer at a later agreed date (a “Delayed Contract Transfer Date”), in which case such Delayed Contract shall transfer on the Delayed Contract Transfer Date; or

5.6.2if a Delayed Contract Transfer Date has not been agreed under sub-paragraph 5.6.1 and such Delayed Contract relates to an Ongoing Clinical Trial (a “Clinical Trial Agreement”), the Clinical Trial Agreement shall not transfer before 1 May 2015 and shall transfer after that date but only to the extent permitted by Applicable Law; or

5.6.3if a Delayed Contract Transfer Date has not been agreed under sub-paragraph 5.6.1 and such Delayed Contract is required to facilitate the provision of services by the Seller’s Group under the Transitional Distribution Services Agreement in any Market (a “Distribution Contract”), such Delayed Contract shall transfer in accordance with paragraph 5.7.

The parties agree that the provisions of this paragraph 5.6 shall not apply where a Contract is required under Applicable Law to transfer at a date that is earlier than the dates set out in sub paragraphs 5.6.1 to 5.6.3 and paragraph 5.7.

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5.7The parties agree that no Distribution Contracts shall transfer to the Purchaser (or a member of the Purchaser’s Group) before the date falling 90 days after the Closing Date (the “Moratorium Date”) (unless such Distribution Contract relates to distribution services provided in the USA). Following the Moratorium Date (or after the Closing Date if the Distribution Contract relates to distribution services in the USA), the Distribution Contracts shall transfer to the Purchaser (or a member of the Purchaser’s Group) as soon as possible after any relevant Third Party Consent is obtained unless either party notifies the other by the date which is 15 Business Days prior to the Moratorium Date that it believes (acting reasonably) that the transfer of the relevant Distribution Contract prior to the Planned Distribution Transfer Date will result in one or more Identified Risks, in which case, the relevant Distribution Contract shall not transfer to the Purchaser (or a member of the Purchaser’s Group) until the relevant Distribution Transfer Date unless any and all of the Identified Risks have been resolved to the reasonable satisfaction of the party that may be adversely affected by the relevant Identified Risks before such date.

5.8From the Effective Time until the transfer of any Delayed Contract is effected in accordance with sub-paragraphs 5.6 or 5.7, the provisions of paragraph 6 of this Schedule shall apply to such Delayed Contracts. Nothing in this paragraph 5.8 shall preclude the Purchaser or any member of the Purchaser’s Group from informing the counterparty to any Delayed Contract of the transfer of the Business to it or from engaging with such counterparty with respect to any matter relating to such Delayed Contract.

5.9The provisions of paragraphs 3.3 to 3.5 (inclusive), paragraphs 5.1 to 5.8 (inclusive) and the entirety of paragraph 5 of this Schedule 10 shall not apply to Non-Transferring Tenders. The parties agree that each Non-Transferring Tender shall remain with the relevant member of the Seller’s Group that is the contracting party to the Non-Transferring Tender as at the date of this Agreement and no Third Party Consents shall be sought in respect of any Non-Transferring Tenders.

6Obligations until Third Party Consents are obtained/where Third Party Consents are refused and with respect to Non-Transferring Tenders

6.1Subject to paragraph 5.2 and paragraph 5.3 and the Seller’s obligations under the Transitional Distribution Services Agreement, the Purchaser shall assume, carry out, perform and discharge the Seller’s and the Business Seller’s obligations arising under the Transferred Contracts (excluding the Relevant Part of any Mixed Contracts), Transferred Intellectual Property Contracts, Co-Owned Vaccines Group Intellectual Property Rights, Transferred Plant and Equipment, and the Relevant Part of the Shared Business Contracts as from the Effective Time but only to the extent such obligations do not constitute Excluded Liabilities.

6.2In respect of any Transferred Contract (excluding the Relevant Part of any Mixed Contract), Transferred Intellectual Property Contract, Transferred Plant and Equipment, Relevant Part of Shared Business Contract (other than a Non-Transferring Tender) or Co-Owned Vaccines Group Intellectual Property Right, from the Effective Time until the relevant Third Party Consent has been obtained as contemplated by paragraph 5.1 or where the Third Party Consent has been refused and in respect of the Non-Transferring Tenders:

6.2.1the relevant Business Seller shall hold on trust to the extent it is lawfully able to do so or, where it is not lawfully able to do so or where holding on trust is not possible under local law or otherwise impracticable, the relevant Business Seller and the

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Purchaser shall make such other arrangements between themselves to provide to the Purchaser the benefits of the Contract (other than amounts corresponding to any Tax Liability by the relevant Business Seller in respect of amounts due under or in respect of the Transferred Contract (excluding the Relevant Part of any Mixed Contracts), Transferred Intellectual Property Contract, Relevant Part of Shared Business Contract, Transferred Plant and Equipment or Co-Owned Vaccines Group Intellectual Property Right or any Non-Transferring Tender) including the enforcement at the cost and for the account of the Purchaser of all rights of the relevant Business Seller against any other party thereto;

6.2.2to the extent that the Purchaser (or the relevant member of the Purchaser’s Group) is lawfully able to do so and subject to the Seller’s obligations under the Transitional Distribution Services Agreement, the Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group shall) perform the relevant Business Seller’s obligations under the Contract (but only to the extent such obligations do not constitute Excluded Liabilities) as agent or sub-contractor and shall indemnify the Seller and the relevant Business Seller if the Purchaser or the relevant member of the Purchaser’s Group fails to do so;

6.2.3to the extent that the Purchaser (or a member of the Purchaser’s Group) is not lawfully able to perform such obligations, the Seller shall procure that the relevant Business Seller shall, (subject to being indemnified by the Purchaser for any Losses the Seller or the relevant Business Seller may incur in connection therewith) do all such things as the Purchaser (or the relevant member of the Purchaser’s Group may direct or reasonably require to enable due performance of the Contract;

6.2.4the Seller shall (or shall procure that the relevant Business Seller shall) act in accordance with any reasonable instructions or directions provided to it by the Purchaser (or a relevant member of the Purchaser’s Group) in relation to the management and operation of any Transferred Contract, Transferred Intellectual Property Contract or Relevant Part of any Shared Business Contract (excluding, for the avoidance of doubt, any part of any Shared Business Contract which relates exclusively to the Seller Group’s Retained Business), and the Purchaser shall indemnify the relevant Business Seller for any Losses that the Business Seller may incur in connection therewith, provided that should the Seller (or relevant Business Seller) believe (acting reasonably) that compliance with any instruction or direction given by the Purchaser (or a member of the Purchaser’s Group) pursuant to this sub-paragraph 6.2.4 will result in a breach of Applicable Law (including a breach of the terms of the relevant Contract), (i) the Seller (or relevant member of the Seller’s Group), shall inform the Purchaser (or the member of the Purchaser’s Group which gave the instruction) and shall not be required to implement such instruction or direction; and (ii) the parties shall discuss the concerns of the relevant member of the Seller’s Group in good faith, to determine whether an agreement can be reached such that the relevant instruction or direction can be implemented by the Seller (or the relevant Business Seller);

6.2.5without prejudice to the provisions of paragraph 6.2.2 and subject to Applicable Law, the Seller shall provide (or procure that the relevant Business Seller shall provide) the Purchaser (or the relevant member of the Purchaser’s Group) (with access to such documents, facilities, information and assistance as the Purchaser

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(or the relevant member of the Purchaser’s Group) may reasonably require with respect to any Transferred Contract, the Transferred Intellectual Property Contract, the Co-Owned Transferred Product Intellectual Property Right, and the Relevant Part of the Shared Business Contract which is subject to the provisions of this paragraph 6; and

6.2.6in respect of any Contract for the sale of any Product or Products and any Non-Transferring Tender, the amount of any profit arising from sales pursuant to any such Contract shall be calculated and remitted to the Purchaser in accordance with the relevant provisions of the Transitional Distribution Services Agreement.

6.3The Seller shall (or shall procure that the relevant Business Seller shall) retain, carry out, perform and discharge the Seller’s and the Business Seller’s obligations under the Relevant Part of the Mixed Contracts which are Transferred Contracts, and subject to paragraph 6.4, the Seller shall assume, carry out, perform and discharge the Purchaser’s Group and the Vaccines Group Companies’ obligations arising under the Relevant Part of the Mixed Contracts held by a Vaccines Group Company as from Closing.

6.4In respect of the Relevant Part of each Mixed Contract held by a Vaccines Group Company from Closing until the relevant Mixed Contracts Separation:

6.4.1the relevant Vaccines Group Company shall hold on trust to the extent it is lawfully able to do so or, where it is not lawfully able to do so or where holding on trust is not possible under local law or otherwise impracticable, the Seller and the Purchaser shall make such other arrangements between themselves to provide to the Seller the benefits of the Contract (other than amounts corresponding to any Tax Liability by the relevant Vaccines Group Company in respect of amounts due under or in respect of the Relevant Part of such Mixed Contract) including the enforcement at the cost and for the account of the Seller of all rights of the relevant Vaccines Group Company against any other party thereto;

6.4.2to the extent that the Seller (or the relevant member of the Seller’s Group) is lawfully able to do so, the Seller shall perform (or procure that a member of the Seller’s Group performs) the relevant obligations of the relevant Vaccines Group Company under the Contract as agent or sub-contractor and shall indemnify the Purchaser and relevant Vaccines Group Company if the Seller fails to do so; and

6.4.3to the extent that the Seller (or a member of the Seller’s Group) is not lawfully able to perform, or procure performance of, such obligations, the Purchaser shall procure that the relevant Vaccines Group Company shall, (subject to being indemnified by the Seller for any Losses the relevant Vaccines Group Company may incur in connection therewith) act in accordance with any reasonable instructions or directions provided to it by the  Seller (or a relevant member of the Seller’s Group) in relation to the management and operation of any Relevant Part of any Mixed Contract, and the Seller shall indemnify the Purchaser and the relevant member of the Purchaser’s Group in respect thereof, provided that should the Purchaser or the relevant member of the Purchaser’s Group believe that compliance with any instruction or direction given by the Seller (or a member of the Seller’s Group) pursuant to this sub-paragraph 6.4.3 will result in a breach of Applicable Law (including a breach of the terms of the relevant Contract), the Purchaser (or relevant member of the Purchaser’s Group), shall inform the Seller

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(or the member of the Seller’s Group which gave the instruction and shall not be required to implement such instruction or direction.

7Failure to Obtain Third Party Consents

7.1If a Third Party Consent is refused or otherwise not obtained on terms reasonably acceptable to the Purchaser within 18 months of Closing, or in the case of a Separation or a Mixed Contracts Separation, 18 months of the Relevant Election Date or Closing (respectively):

7.1.1the Seller shall be entitled to procure the termination of the Transferred Contract, Transferred Plant and Equipment, Transferred Intellectual Property Contract or Relevant Part of the Shared Business Contract and the obligations of the parties under this Agreement in relation to such Transferred Contract, Transferred Intellectual Property Contract or Relevant Part of the Shared Business Contract shall cease forthwith;

7.1.2the Seller may request termination of the Relevant Part of the Mixed Contract and the obligations of the parties under this Agreement in relation to such Relevant Part of the Mixed Contract shall cease forthwith;

7.1.3references in this Agreement to the Transferred Contracts, Transferred Intellectual Property Contracts, Transferred Plant and Equipment or Relevant Part of the Shared Business Contract and the Vaccines Group Businesses (other than in this paragraph 7) shall be construed as excluding such Transferred Contract, Transferred Intellectual Property Contract, Transferred Plant and Equipment or Relevant Part of the Shared Business Contract; and

7.1.4the Seller and the Purchaser shall use all reasonable efforts to put in place alternative arrangements so as to give the Purchaser or the Seller (as the case may be) equivalent benefits or rights as would have been enjoyed under the terminated Transferred Contract, Transferred Intellectual Property Contract, Relevant Part of the Shared Business Contract, Co-Owned Vaccines Group Intellectual Property Right or Relevant Part of the Mixed Contract.

7.2Notwithstanding the above, the Purchaser and the Seller may agree at any time after Closing not to seek the Separation of a Shared Business Contract or the Mixed Contracts Separation of a Mixed Contract (to the extent only that the Seller and the Purchaser agree that such Mixed Contract does not contain any competitively sensitive information).

8Non-Transferring Tenders

8.1Subject to the termination of any Non-Transferring Tender (or any Relevant Part thereof) pursuant to paragraphs 8.2 and 8.3 below, the provisions of paragraph 6.2 of this Schedule 10 shall continue to apply in respect of a Non-Transferring Tender for the term of the relevant Non-Transferring Tender.

8.2The Purchaser may serve written notice on the Seller requesting it at its absolute discretion to (i) terminate (or to procure the termination of) any Non-Transferring Tender which is a Products-Only Tender (an “NTT Products-Only Tender”) or (ii) amend or to procure the amendment of any Non-Transferring Tender which is a Multi-Basket Tender (a “NTT Multi-Basket Tender”) such that the Relevant Part thereof shall be terminated.

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8.3Upon receipt of such notice, the Seller shall as soon as reasonably practicable thereafter (i) take such steps as are reasonably necessary to terminate the relevant NTT Products-Only Tender and (ii) use its reasonable endeavours to procure an amendment of the relevant NTT Multi-Basket Tender. Where the Purchaser serves such a request:

8.3.1any and all actions, claims, demands, proceedings, judgments, liabilities, loss, damages, payments, costs and expenses arising in connection with such termination or amendment (including in respect of any early termination or similar fee or payment and all liabilities costs, expenses and payments suffered or reasonably incurred by the Business Seller in procuring such termination or amendment (as applicable)) shall be for the account of the Purchaser and the Purchaser shall indemnify the relevant Business Seller in respect thereof; and

8.3.2the Purchaser shall be solely responsible for putting in place its own arrangements in respect of the matters the subject of such terminated NTT Products-Only Tender or amended NTT Multi-Basket Tender (as the case may be) and no member of the Seller’s Group shall have any responsibility for putting in place any such arrangements.

8.4For the avoidance of doubt, if any NTT Products-Only Tender is terminated (or, in the case of a NTT Multi-Basket Tender, amended such that the Relevant Part thereof is terminated) by the relevant Business Seller pursuant to paragraph 8.2 then no member of the Seller’s Group shall be liable to make any payment to the Purchaser or any other member of the Purchaser’s Group in respect of any consideration payable or allocation made under this or any other Ancillary Agreement.

For the purposes of this Schedule, the following terms shall have the following meanings:

“Separation Plan” has the meaning given to it under the Transitional Distribution Services Agreement;

“Identified Risk” means a specifically identified adverse operational, legal or tax impact affecting either the Seller’s Group or the Purchaser’s Group (including an impact on the ability of the Seller’s Group to perform its obligations under the Transitional Distribution Services Agreement) which would arise or which would increase (by more than a de minimis amount) solely by reason of the relevant Distribution Contract transferring to the Purchaser (or the relevant member of the Purchaser’s Group) on a date prior to the Planned Distribution Transfer Date; and

“Planned Distribution Transfer Date” means the Distribution Transfer Date for the applicable Market as set out in the Separation Plan.

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Schedule 11
Employees
(Clause 2.4.1)

1Information and consultation

1.1At such time as the parties agree to be appropriate following the public announcement of the matters contemplated by this Agreement, the Seller and the Purchaser or the relevant member of the Purchaser’s Group shall jointly communicate to the Employees an agreed notice which shall, other than to the extent the parties agree otherwise:

1.1.1inform the Employees that following Closing those Employees who continue to be employed in the Business (as carried on by the Vaccines Group) would be employed by the Purchaser or relevant member of the Purchaser’s Group; and

1.1.2comply with the requirements of any applicable national law.

For the avoidance of doubt the parties may agree to issue such notice to different Employees or categories of Employees at different times and in different forms.

1.2Notwithstanding the operation of paragraph 1.1 above, the Seller and the Purchaser agree to comply with any more onerous notice requirements imposed by local laws.

1.3The Purchaser (on its own behalf and on behalf of any relevant member of the Purchaser’s Group) shall provide the Seller (for itself and any relevant member of the Seller’s Group) with such information and assistance at such times as the Seller may reasonably request or as may be reasonably necessary for the Seller or any other member of the Seller’s Group to comply with any formal or informal requirement to inform or consult with the Employees, a relevant trade union, a relevant works council, or any other employee representatives in connection with the matters contemplated by this Agreement (which formal or informal requirements the Seller hereby undertakes to comply or procure compliance with). Where reasonably necessary to ensure compliance with any formal or informal requirements or obligations to inform or consult with Employees, a relevant trade union, a relevant works council or any other employee representatives in connection with the matters contemplated by this Agreement, the Seller (for itself and for each member of the Seller’s Group) and the Purchaser (for itself and for each member of the Purchaser’s Group) agree that the Purchaser or relevant member of the Purchaser’s Group shall cooperate with and participate in any information, negotiation and/or consultation process as reasonably required by the Seller.

1.4As soon as practicable following the date of this Agreement, the Purchaser agrees to provide on a timely basis such information, in writing, in respect of its existing terms and conditions of employment as may reasonably be required by the Seller so as to facilitate the Seller’s information and consultation exercise with its Employees in respect of the matters set out in this Agreement.

2Vaccines Business Employees

2.1General

2.1.1The Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group shall) fulfil all its duties and obligations under Applicable Law in relation to the Vaccines Business Employees.  Where the provisions of local law do not provide for an automatic transfer of the employment of the Vaccines Business

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Employees to the Purchaser or a relevant member of the Purchaser’s Group with effect from (and including) the Closing Date, then paragraph 2.2 below shall apply. Where the provisions of local law do provide for an automatic transfer of employment of the Relevant Vaccines Business Employees to the Purchaser or the relevant member of the Purchaser’s Group with effect from (and including) the Closing Date, then paragraph 2.3 below shall apply.

2.1.2Notwithstanding that the employees referred to in the document attached to the email from [***] of Linklaters LLP and received by [***] of Slaughter and May on 25 February 2015 at 15:30 (GMT) may not in fact be working wholly or substantially in the Business (as carried on by the Vaccines Group), the parties hereby acknowledge and agree to treat them as if they are so working for the purposes of this Agreement.

2.1.3The parties acknowledge and agree that:

(i)any Deferred Employee shall be treated for all purposes under this Agreement as if such Deferred Employee were a Vaccines Business Employee or a Vaccines Group Company Employee (as appropriate); and

(ii)the Purchaser’s obligations under this Schedule 11 shall apply in respect of each Deferred Employee in the same way as they do to each Vaccines Business Employee or Vaccines Group Company Employee (as appropriate); and

(iii)if any Deferred Employee accepts an offer of employment made by the Purchaser under paragraph 2.2.1 below or becomes an employee of a Vaccines Group Company after the Closing Date, such Deferred Employee shall further be treated for all purposes under this Agreement as a Transferred Employee.

2.1.4For the avoidance of doubt, this paragraph 2 shall not apply to any Excluded Employee, who will remain employed by the Seller or the relevant member of the Seller’s Group.

2.1.5The parties agree that no provisions in this paragraph 2 shall require the Purchaser or another member of the Purchaser’s Group (including any Vaccines Group Company) to employ a Relevant Employee on and from the Closing Date until such time as such employee has the right (including, for the avoidance of any doubt, under any grace period) or is otherwise permitted under Applicable Law to accept an offer to work for the Purchaser or relevant member of the Purchaser’s Group and to commence working for the Purchaser or relevant member of the Purchaser’s Group.  Any such employee will only be a “Transferred Employee” for the purposes of this Agreement from the time (the “Transfer Date”) he becomes an employee of a member of the Purchaser’s Group, and any provisions relating to Transferred Employees in this Agreement shall only apply to any such employee with effect on and from the Transfer Date and with the following amendments:

(i)references to the “Closing Date” and the “Effective Time” in paragraphs 4.1, 4.3.1, 4.3.2 and 4.4 shall be replaced with references to the “Transfer Date”;

(ii)references to an “Employee” in paragraphs 4.2.1, 4.2.2 and 4.3.5 shall be extended to refer to such Transferred Employee, and to the extent required

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in respect of such Transferred Employee references to the “Closing Date” and the “Effective Time” shall be replaced with references to the “Transfer Date;

(iii)the reference to “basic salary” in paragraph 5.1.1 shall mean the basic salary that applied to such Transferred Employee immediately prior to the Transfer Date;

(iv)references to the “Closing Date” and the “Effective Time” in paragraph 6.2 shall be replaced with references to the “Transfer Date”;

(v)for the purposes of paragraphs 11.2 and 11.8 references to “Closing” and the “Closing Date” shall be construed as references to the Transfer Date; and

(vi)such other amendments as the parties may agree, each acting in good faith.

2.2Where no automatic transfer of employment

2.2.1In such timescale as the parties may agree in order to comply with any Applicable Law, but in any event at least 15 days prior to the Closing Date, unless agreed otherwise by the parties (such agreement not to be unreasonably withheld by any party), the Purchaser or relevant member of the Purchaser’s Group shall make an offer to each Vaccines Business Employee employed by the Seller or a member of the Seller’s Group to employ him or her under a new contract of employment to commence with effect from (and including) the Closing Date provided that such employee continues to be a Vaccines Business Employee until the Closing Date. Save as otherwise agreed with the Seller (such agreement not to be unreasonably withheld), the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that Vaccines Business Employee immediately prior to the Closing Date. The Purchaser shall keep the Seller updated throughout the offer process on when offers are made and accepted or rejected.

2.2.2If the Vaccines Business Employee wishes to accept the offer of employment from the Purchaser or the relevant member of the Purchaser’s Group, then the Seller shall (or shall procure that the relevant member of the Seller’s Group shall), insofar as it is permitted by Applicable Law, waive the requirement on the Vaccines Business Employee concerned to give any period of notice of termination of his or her employment under the terms of his or her employment so as to allow the Vaccines Business Employee to commence employment with the Purchaser or relevant member of the Purchaser’s Group with effect from (and including) the Closing Date.

2.2.3The parties agree that where a Relevant Employee (a “Leave Employee”) in the United States is absent on short term disability (including, without limitation, maternity) leave or military leave which will end on or after the Closing Date, and would otherwise have been made an offer of employment to commence with effect from (and including) the Closing Date by the Purchaser or relevant member of the Purchaser’s Group, such an offer shall be made, but employment pursuant to such offer shall commence only with effect from (and including) the date on which the Leave Employee returns to work at the end of such period of short term disability (including, without limitation, maternity) or military leave, provided always that the

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date of such return to work is no more than six months after the date on which such short term leave began. Any such employee will only be a “Transferred Employee” for the purposes of this Agreement from the time (the “Transfer Date”) he becomes an employee of a member of the Purchaser’s Group, and any provisions relating to Transferred Employees in this Agreement shall only apply to any such employee with effect on and from the Transfer Date and with the following amendments:

(i)references to the “Closing Date” and the “Effective Time” in paragraphs 4.1, 4.3.1, 4.3.2 and 4.4 shall be replaced with references to the “Transfer Date”;

(ii)references to an “Employee” in paragraphs 4.2.1, 4.2.2 and 4.3.5 shall be extended to refer to such Transferred Employee, and to the extent required in respect of such Transferred Employee references to the “Closing Date” and the “Effective Time” shall be replaced with references to the “Transfer Date”;

(iii)the reference to “basic salary” in paragraph 5.1.1 shall mean the basic salary that applied to such Transferred Employee immediately prior to the Transfer Date;

(iv)references to the “Closing Date” and the “Effective Time” in paragraph 6.2 shall be replaced with references to the “Transfer Date”;

(v)for the purposes of paragraphs 11.2 and 11.8 references to “Closing” and the “Closing Date” shall be construed as references to the “Transfer Date”; and

(vi)such other amendments as the parties may agree, each acting in good faith.

2.2.4If any Leave Employee has not returned to work by the date falling six months after the date on which such short term leave began then such Leave Employee shall be treated for all purposes under this Agreement as an Excluded Employee.

2.2.5If in relation to any Relevant Employee, the day prior to the Closing Date occurs on a day which is not a Relevant Working Day in the jurisdiction in which that Employee is employed, the parties may agree (such agreement not to be unreasonably withheld by any party), that such Relevant Employees (the “Working Day Relevant Employees”) shall remain employees of the Seller or a member of the Seller’s Group  until the first Relevant Working Day on or after the Closing Date (the “Working Day Employee Termination Date”). If so agreed, the parties agree that the transfer of employment of the Working Day Relevant Employees to the Purchaser or one of its Affiliates shall take effect on and from the day following the Working Day Employee Termination Date which applies to the relevant Working Day Relevant Employee. The Purchaser acknowledges that it will be responsible for the total amount actually paid by the Seller or its Affiliate for compensation and benefits, including any withholding taxes and payroll taxes paid by the Seller’s Group, to or in respect of the Working Day Relevant Employees in relation to their ordinary course of employment for the period on and from the Effective Time to (and including) the Working Day Employee Termination Date which applies to the relevant Working Day Relevant Employee.

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2.3Where automatic transfer of employment

If the Transfer Regulations do not or are found not to or are alleged not to apply to any person who is a Relevant Vaccines Business Employee and to whom paragraph 2.2 does not apply, the Purchaser agrees that following Closing:

2.3.1in consultation with the Seller, the Purchaser or relevant member of the Purchaser’s Group shall within 10 Business Days of being so requested by the Seller (as long as the request is made no later than 3 months after Closing) (or if the Purchaser so chooses), make such Relevant Vaccines Business Employee an offer in writing to employ him or her under a new contract of employment subject to, and to take effect upon, a date agreed between the parties and such employee; and

2.3.2save as otherwise agreed with the Seller (such agreement not to be unreasonably withheld) the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that Relevant Vaccines Business Employee immediately prior to the Closing Date.

3Wrong-pocket arrangements for persons other than Relevant Employees

3.1If the contract of employment of any person other than a Relevant Employee is found or alleged to have effect upon Closing as if originally made with the Purchaser or another member of the Purchaser’s Group (including any Vaccines Group Company) as a consequence of this Agreement, or if any Vaccines Group Company employs any person who at Closing does not work wholly or substantially in the Business (as carried on by the Vaccines Group), or if any Vaccines Group Company employs or becomes liable to employ on or after the Closing Date any person other than a Relevant Employee as a consequence of such person exercising a right of objection against the transfer of his employment relationship (including without limitation pursuant to Section 613a para. 6 German Civil Code (BGB)) which results in his continuing employment relationship with that Vaccines Group Company or otherwise exercising a right to be re-hired by that Vaccines Group Company and provided in either case that the right arose in connection with Closing or matters arising prior to Closing, the Seller agrees that following Closing:

3.1.1in consultation with the Purchaser, the Seller or relevant member of the Seller’s Group may within 10 Business Days of being so requested by the Purchaser (as long as the request is made no later than 3 months after Closing or, in the case of an objection or a right to be re-hired referred to above, no later than 3 months after that person exercises a right of objection or a right to be re-hired) (or if the Seller so chooses), make to that person an offer in writing to employ him or her under a new contract of employment subject to, and to take effect upon, the termination referred to below; and

3.1.2the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that person immediately prior to the Closing Date.

3.2After the expiry of the 10 Business Days referred to at paragraph 3.1 above, and provided that the relevant member of the Purchaser’s Group takes such steps as are legally possible to terminate the employment of the person concerned as soon as reasonably practicable after becoming aware of the finding, allegation, objection or re-hire referred to at paragraph 3.1 above (either by giving notice or transferring the person by agreement to

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be concluded between the relevant member of the Purchaser’s Group, the person concerned and the relevant member of the Seller’s Group), the Seller shall be responsible for and shall indemnify and keep indemnified the Purchaser (for itself and as trustee for any relevant member of the Purchaser’s Group) against all Losses from time to time made, suffered or incurred by the Purchaser (or any other member of the Purchaser’s Group) as a result of:

3.2.1the actual or alleged transfer to (or continued employment with or right to be employed by) a member of the Purchaser’s Group and (regardless of whether there has been such a transfer) any employment liabilities relating to such person;

3.2.2employing such person on and from the Closing Date until such termination (up to the time reasonably expected to have achieved such termination in accordance with the terms of the contract of employment and Applicable Law) but subject to a maximum period of 6 months unless prevented by the terms of the contract of employment or Applicable Law; and

3.2.3such termination.

3.3The parties agree to co-operate in good faith to minimise the Losses which are subject to the indemnity referred to in paragraph 3.2 above.

3.4Save as set out in paragraph 3.5 below, the provisions of this paragraph 3 shall not apply in relation to any of the people listed in Schedule 5 under the heading “Marburg 35”.

3.5As soon as any 18 people listed in Schedule 5 under the heading “Marburg 35” have exercised a right of objection or a right to be re-hired referred to at paragraph 3.1 above, then the provisions of this paragraph 3 shall apply in relation to the remaining 17 people listed under the heading “Marburg 35”.

4Employment liabilities

4.1All wages, salaries, employer’s liabilities in respect of associated Taxes and other periodic outgoings in respect of the Transferred Employees which relate to a period:

4.1.1on and after the Effective Time shall be borne or discharged by the Purchaser or relevant member of the Purchaser’s Group; and

4.1.2before the Effective Time shall be borne or discharged by the Seller or relevant member of the Seller’s Group.

4.2Subject to paragraph 4.1, the Seller shall (for itself and for each member of the Seller’s Group) indemnify and keep indemnified the Purchaser (for itself and as trustee for each other member of the Purchaser’s Group) against all Losses (ignoring any amount in respect of Employee Benefits, as to which see Schedule 12) in respect of:

4.2.1the employment of any Employee at any time prior to the Effective Time (excluding any Transferred Employee Benefit Liabilities (as defined in Schedule 12) which the Purchaser agrees to assume in accordance with Schedule 12);

4.2.2any termination of the employment of any Employees prior to the Effective Time and any termination of the employment of any Employees on and after the Effective Time but prior to the Closing Date which are not otherwise covered by paragraph 4.3.2 including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations (excluding any liability arising directly as a result of any breach of the commitments

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set out in paragraph 5 or 6 below by the Purchaser or a member of the Purchaser’s Group and any act or omission by the Purchaser or any member of the Purchaser’s Group in relation to any Employee before the Closing Date as a result of which that Employee treats his employment as having been terminated prior to the Closing Date);

4.2.3any amount which becomes payable to any Employee or benefit to which any Employee becomes entitled by reason of this Agreement or the matters it contemplates, including any change of control or other payment or benefit (and including any enhancement of severance terms on a subsequent termination of employment but excluding any Losses relating to any share-based incentive schemes, as to which see paragraph 11 below);

4.2.4any failure by the Seller or any other member of the Seller’s Group to comply with any obligation to inform or consult with employee representatives in connection with the matters contemplated by this Agreement (other than as a result of any failure set out in paragraph 4.3.3 below); and

4.2.5any breach by the Seller or any other member of the Seller’s Group of paragraph 4.1.2 above or paragraph 4.4, 4.5 or 10 below.

4.3The Purchaser shall (for itself and for each member of the Purchaser’s Group) indemnify and keep indemnified the Seller (for itself and as trustee for each other member of the Seller’s Group) against all Losses (ignoring any amount in respect of Employee Benefits, as to which see Schedule 12) in respect of:

4.3.1the employment of any of the Transferred Employees on and after the Effective Time (including, without limitation, any changes to terms and conditions of employment by the Purchaser or any other member of the Purchaser’s Group);

4.3.2any termination of the employment of any Transferred Employees on and after the Effective Time and any termination of the employment of any Employees by a member of the Seller’s Group on and after the Effective Time but prior to the Closing Date who would, but for such termination of employment by a member of the Seller’s Group, have been Transferred Employees (save in each case where such termination is in order to facilitate the transfer of any Relevant Employees pursuant to paragraph 2 of this Schedule 11 or is otherwise in connection with any rejection or objection to such transfer in circumstances where paragraph 4.3.5 does not apply) including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations except as contemplated under paragraph 3.2 above;

4.3.3any failure by the Purchaser or any other member of the Purchaser’s Group to provide information and reasonable assistance to the Seller to enable the Seller or any other member of the Seller’s Group to comply with any obligation to inform or consult with employee representatives in connection with the matters contemplated by this Agreement;

4.3.4any breach by the Purchaser or any other member of the Purchaser’s Group of paragraph 4.1.1 above or paragraph 4.4 or 4.5 below; and

4.3.5any act or omission by the Purchaser or any member of the Purchaser’s Group in relation to any Employee before the Closing Date as a result of which that

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Employee treats his employment as having been terminated prior to the Closing Date.

4.4Any amount payable to or in respect of any Transferred Employee on or after the Closing Date (including without limitation amounts paid under paragraph 4.5 below) which (ignoring vesting conditions and any amount payable in respect of Employee Benefits or otherwise in accordance with Schedule 12) is referable to the period prior to the Effective Time is payable by the Seller (for itself or on behalf of the relevant Share Seller or Business Seller). Responsibility for amounts payable which are only partly referable to the period prior to the Effective Time (again ignoring vesting conditions) is to be shared between the Seller (for itself or on behalf of the relevant Share Seller or Business Seller) and the Purchaser (for itself or on behalf of the relevant member of the Purchaser’s Group) such that the Seller bears S per cent. of the cost and the Purchaser bears P per cent., where S is the percentage of the period by reference to which the amount was earned which fell before the Effective Time and P is the percentage of that period which falls on and after the Effective Time.  Save for the payments described in paragraph 4.5 below, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, pay such amounts when due to the relevant Transferred Employees on or after the Closing Date and shall deduct and/or pay and account for any Tax payable or accountable for by the employer in respect of such amounts. The Seller covenants to reimburse the Purchaser in respect of any such amount (or S per cent. of it where relevant), including any Tax payable or accountable for by the employer in respect of such amount, within 30 days of receiving notification that it has been paid to the extent such amounts are not reflected in the Closing Statement. The Seller will provide the Purchaser with all information and documentation reasonably necessary to allow such payments to be made.

4.5Following the Closing Date:

4.5.1the Seller shall, or shall procure that a member of the Seller’s Group shall, pay a pro-rated cash bonus for the current bonus year as at the Effective Time and any unpaid cash bonus for the bonus year which ended before the Effective Time to each Transferred Employee who participated in such annual cash bonus plan within 90 days following the Closing Date. For the avoidance of doubt, this paragraph 4.5.1 shall apply whether or not a member of the Seller’s Group provides post-Closing payroll services to a Vaccines Group Company; and

4.5.2where the Seller is able to determine performance, any such bonus payment made to such eligible employees will be based on the Seller’s determination of performance to the Effective Time and (where applicable) pro-rated to the Effective Time; or

4.5.3where the Seller is unable to determine performance (either business or individual), for example, because the Effective Time occurs near the start of the bonus year, the Seller shall calculate any such bonus payment based on a deemed achievement of performance conditions at target level pro-rated to the Effective Time; and

4.5.4as soon as reasonably practicable after the Closing Date, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, provide such information as the Seller requires in order for the Seller to calculate the Tax payable or accountable for by the employer in respect of such bonus payments; and

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4.5.5if and to the extent permitted by Applicable Law, the Seller shall, or shall procure that such other member of the Seller’s Group shall, deduct and/or account for any Tax payable or accountable for by the employer in respect of such bonus payments; or

4.5.6if and to the extent paragraph 4.5.5 above is not permitted by Applicable Law, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, pay and/or account for any Tax payable or accountable for by the employer in respect of such bonus payments and the Seller shall reimburse the Purchaser in respect of such amounts so paid and/or accounted for; and

4.5.7where any amount in respect of payments made by the Seller or any other member of the Seller’s Group pursuant to this paragraph 4.5 is reflected in the Closing Statement, the Purchaser shall reimburse the Seller in respect of the amount so reflected. For the avoidance of doubt, no reimbursement by the Purchaser shall be due in respect of any such payment to the extent it is not reflected in the Closing Statement.

4.6If any loan made by a member of the Seller’s Group to a Transferred Employee (an “Employee Loan”) remains outstanding at the Closing Date, then the parties shall co-operate in good faith to procure an outcome such that:

4.6.1the Employee Loan shall be discharged in full within a reasonable period after the Closing Date and the relevant member of the Seller’s Group shall receive all outstanding amounts of principal and interest under the Employee Loan (either from the relevant Transferring Employee or from a member of the Purchaser’s Group); and

4.6.2a loan in the same amount and on the same terms as to interest and repayment as the outstanding portion of the Employee Loan shall be made available by the Purchaser to the relevant Transferred Employee.

5Protection of terms and conditions and termination rights post-Closing

5.1Without prejudice to paragraph 5.4 below, the Purchaser shall procure that for a period of 24 months following the Closing Date:

5.1.1each Transferred Employee will (for so long as such Transferred Employee continues in the same role with any member of the Purchaser’s Group save that the Purchaser shall not seek to demote any Transferred Employee to avoid the application of this provision) continue to receive at least the same basic salary; and

5.1.2each Transferred Employee will continue to receive contractual benefits (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans) which the Purchaser reasonably considers to be substantially comparable, taken as a whole, to the contractual benefits (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans) of such Transferred Employee immediately prior to the Closing Date; and

5.1.3no Transferred Employee will suffer a change to his overall employment terms (whether contractual or otherwise) and including, without limitation, any related to length of service (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans), which, when taken as a whole viewed

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in the round (including to the extent relevant alongside any other changes being made at the same time to that Transferred Employee’s employment terms), would in the Purchaser’s reasonable opinion acting in good faith, be regarded as materially detrimental.

5.2The Purchaser confirms that, following the Closing Date and for so long as the Transferred Employees continue in the employment of any member of the Purchaser’s Group, the Transferred Employees will be eligible to participate in those share-based incentive schemes or other long-term incentive plans that are operated by the Purchaser or relevant members of the Purchaser’s Group from time to time for employees of equivalent status, subject always to the rules of such share-based incentive schemes or long-term incentive plans and any qualifying conditions.

5.3The Seller shall provide or shall cause to be provided to any member of the Purchaser’s Group such information reasonably requested in writing by any member of the Purchaser’s Group to enable the Purchaser to comply with its obligations in paragraph 5.1 above.

5.4If the employment of any Transferred Employee is terminated by reason of redundancy within 24 months following the Closing Date, the Purchaser shall procure that there shall be provided to such Transferred Employee benefits which are equivalent to those provided under such redundancy and severance policies and benefits (whether contractual or otherwise and giving due credit to the Transferred Employees for any additional service or earnings from the Closing Date onwards) (but excluding Employee Benefits) as were applicable in respect of the particular Transferred Employee immediately prior to the Closing Date, to the extent that such policies and benefits are notified in writing to the Purchaser prior to the Closing Date.  If, at any time during the 24 month period immediately following the Closing Date, the Purchaser places any Transferred Employee into a redundancy selection process, the Purchaser undertakes that, in determining such selection, it will or will procure that the relevant member of the Purchaser’s Group will take no account of the costs of dismissal of any person within the relevant selection pool (including such Transferred Employee). For the avoidance of doubt, redundancy payments of the type described in this paragraph 5.4 (whether paid within 24 months of Closing or later) are not intended to be covered by the apportionment mechanism at paragraph 4.4 above.

5.5For the avoidance of doubt, the provisions of this paragraph 5 are without prejudice to the operation of any rule of law in relation to the terms and conditions of employment of the Transferred Employees.

6Benefits arrangements/service continuity

6.1Each Transferred Employee shall have their service with the Seller’s Group and their respective predecessors recognised under any employee benefit plans or arrangements of the Purchaser’s Group for all purposes of eligibility, vesting and accrual of benefits to the extent past service was recognised for such Transferred Employee under a comparable plan or arrangement immediately prior to the Closing Date. Notwithstanding the foregoing, nothing in this paragraph 6.1 shall be construed to require recognition of service for the purposes of calculation of Employee Benefits or that would result in:

6.1.1any additional liability being assumed by the Purchaser’s Group in respect of Employee Benefits other than subject to and in accordance with the provisions of Schedule 12;

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6.1.2duplication of benefit;

6.1.3recognition of service for any purposes under any plan or arrangement for which participation, service and/or benefits accrual is frozen or any post-retirement medical plan; or

6.1.4recognition of service under a newly established plan or arrangement for which prior service is not taken into account for employees of the Purchaser’s Group generally.

6.2Without limiting the foregoing, with respect to the Transferred Employees, the Purchaser shall, or shall cause such other member of the Purchaser’s Group to, be responsible for all paid time off benefits, including vacation pay, sick pay, banked leave, flexitime and other payments for time off of normal work hours accrued by the Transferred Employees up to the Closing Date, provided that, if the value of such matters (excluding normal accrued but untaken annual leave for the year current as at the Closing Date) would exceed US$7.5 million if accrued for in a balance sheet in accordance with IFRS prior to the Effective Time, then the Seller shall compensate the Purchaser for such matters accrued prior to the Effective Time (again excluding normal accrued but untaken annual leave for the year current as at the Closing Date) by paying the Purchaser an amount equal to that value, less any amount actually accrued and transferred to the Purchaser for such matters.

6.3With respect to any welfare plan maintained by the Purchaser or any other member of the Purchaser’s Group in which Transferred Employees are eligible to participate after the Closing Date, the Purchaser shall:

6.3.1waive all limitations as to pre-existing conditions, exclusions, evidence of insurability provisions, waiting periods with respect to such participation and coverage requirements or similar provisions under a Purchaser’s benefit plans that are welfare plans (as defined in section 3(1) of ERISA or any equivalent Applicable Law) applicable to such employees to the extent such conditions, exclusions and waiting periods or other provisions were satisfied or did not apply to such employees under welfare plans maintained by the Seller or other members of the Seller’s Group prior to the Closing Date; and

6.3.2provide each Transferred Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any analogous deductible or out-of-pocket requirements to the extent applicable under any such plan in the year in which Closing occurs, to the extent credited under the welfare plans maintained by the Seller or other members of the Seller’s Group prior to the Closing Date.

7US Transferred Employees

With effect on and from the Closing Date, the Purchaser shall, or shall procure that such other members of the Purchaser’s Group shall, assume the responsibility and obligation to provide COBRA continuation coverage to all Transferred Employees who are employed in the United States and/or covered by US Benefit Plans and whose employment is terminated after the Closing Date and their eligible dependents.

8Shared Employees

After the date of this Agreement, the Seller shall identify any Shared Employees who work wholly or substantially in the Business (as carried on by the Vaccines Group) but who are not Vaccines Group Company Employees or Vaccines Business Employees. In

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consultation with the Purchaser, the Seller will procure that a Vaccines Group Company will offer employment to any such employee before the Closing Date, to take effect from immediately before the Closing Date (provided that such employee continues to work wholly or substantially in the Business (as carried on by the Vaccines Group) until the Closing Date) or, where that is not reasonably practicable or there is no Vaccines Group Company in the country in which the employee works, the Purchaser shall treat such employee as if he or she were a Vaccines Business Employee (provided that such employee continues to work wholly or substantially in the Business (as carried on by the Vaccines Group) until the Closing Date) and the provisions of this Schedule 11 will apply to him or her and further provided, however, that these arrangements will apply to no more than 10 full time equivalent employees.

9International Assignees

Where Applicable Law does not provide for the automatic transfer of employment of any International Assignee and/or the other terms governing their international assignment, the Purchaser shall assume and agree to be bound by the individual contract of employment and such other terms governing their international assignment including any tax equalisation agreement entered into between an International Assignee and a member of the Seller’s Group provided that such employee becomes a Transferred Employee and the Seller has disclosed to the Purchaser the template international assignment terms of the Seller’s Group prior to the Closing Date.

10Liability for retention arrangements

The Seller or any other member of the Seller’s Group has or will put in place certain retention arrangements (in the form of cash) to retain key employees in connection with the matters contemplated by this Agreement. To the extent that details of such retention arrangements are disclosed to the Purchaser prior to the Closing Date, and in respect of arrangements put in place after the date of this Agreement, with the agreement of the Purchaser, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, make the cash retention payments when due to the relevant Transferred Employees on or after Closing and shall deduct and/or pay and account for any Tax payable or accountable for by the employer in respect of such cash payments. The Seller covenants to reimburse the Purchaser in respect of any cash retention payments, whether or not disclosed (including any Tax payable or accountable for by the employer in respect of such payments), which are put in place prior to the Closing Date. The Seller acknowledges that the Purchaser may ask the Seller to put in place more generous retention arrangements than those proposed by the Seller (including, where practicable, putting in place retention arrangements which last for a period of at least six months following Closing) and will not unreasonably withhold consent to such arrangements provided that any incremental cost of such arrangements over and above the cost of the Seller’s own proposals will be for the Purchaser’s account. The Seller will provide the Purchaser with all information and documentation reasonably necessary to allow such payments to be made.

11Share-based incentive schemes

11.1This paragraph 11 applies notwithstanding any other provision of this Agreement.

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11.2Subject to paragraph 11.11, the Seller undertakes to use its best endeavours to ensure that share-based awards held by Transferred Employees pursuant to a share-based incentive scheme operated by the Seller or another member of the Seller’s Group (“Relevant Awards”) shall be treated in a manner consistent with the “good leaver treatment” in the share-based incentive schemes operated by the Purchaser, to the extent possible under the relevant plan rules and any Applicable Law.  Where Relevant Awards are subject to performance (or other) conditions and it is not possible to determine whether or not such conditions have been met at the applicable early vesting date (or within a reasonable period thereafter), the Seller and Purchaser agree that performance shall be deemed “on target”.

For the avoidance of doubt:

(a)where necessary and subject to (b), the Seller shall rely on the exercise of existing discretions in the relevant plan rules and (provided the approval of the Seller’s shareholders is not required) shall be expected to amend the relevant plan rules to achieve the “good leaver treatment”;

(b)the Seller (or relevant member of the Seller’s Group) shall not take any action which would require shareholder approval or which could trigger any significant legal, Tax or operational issues for the relevant Transferred Employee (including the loss of any Tax-favourable treatment), the Seller’s Group or the Purchaser’s Group.

For the purposes of this paragraph 11.2, the “good leaver treatment” shall be that:

(c)Relevant Awards shall not lapse or be forfeited as a result of Closing except to the extent that they do not vest in accordance with (D) and/or (E) below;

(d)Relevant Awards shall vest early as a result of Closing and shall be time pro-rated to take account of the reduced period of time, as a proportion of the original vesting period, that the relevant Transferred Employee worked within the Seller’s Group (calculated on the basis of the number of years of service as at the Closing Date, where part years of service are rounded up); and

(e)Relevant Awards that vest after the Closing Date shall remain subject to any relevant performance (or other) conditions, adjusted as necessary to take account of Closing and measured up to the applicable early vesting date.

For the purposes of this paragraph 11.2, “on target” performance shall not be construed as permitting share-based awards to vest in full.

11.3The Seller agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for any Liabilities borne by the Purchaser’s Group in connection with the Relevant Awards, including any Tax.  The Purchaser agrees to use its best endeavours to seek any applicable Tax relief in respect of the Relevant Awards and to indemnify the Seller in respect of any Tax relief obtained, provided always that the Seller provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner.

11.4Subject to paragraph 11.5, the Seller undertakes to inform the Purchaser of the vesting or exercise (as applicable) of the Relevant Awards and to provide, in a timely manner, details of the Relevant Awards that so vest or are exercised so that the Purchaser’s Group can make any applicable withholdings for Tax and pay any Tax for which the Purchaser’s

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Group is liable in respect of the Relevant Awards to the relevant Tax Authority within any applicable timescale.

11.5To the extent permitted under the relevant plan rules and any Applicable Law, the Seller undertakes to sell such number of the shares underlying the Relevant Awards as may be necessary for the sale proceeds to satisfy any applicable Tax withholdings and to pay such amounts to the Purchaser in sufficient time for the Purchaser to pay such Tax to the relevant Tax Authority within any applicable timescale, provided always that the Purchaser provides the Seller with any information that the Seller may reasonably request in this respect in a timely manner.

11.6The Seller undertakes to procure that each relevant member of the Seller’s Group will pay any Tax for which such member is liable in respect of the Relevant Awards to the relevant Tax Authority within any applicable timescale.

11.7The Seller undertakes to procure the completion of any relevant Tax Return in respect of the Relevant Awards and to procure the submission of any such Tax Return to the relevant Tax Authority within any applicable timescale.

11.8This paragraph shall apply where Relevant Awards lapse or are forfeited (or will lapse or be forfeited) either in whole or in part as a result of Closing. As soon as practicable following Closing with the intention being, where possible, to grant within 30 days of the Closing Date or the first date after the Closing Date when dealing restrictions do not apply (and, in any event, by the later of 90 days from the Closing Date and 90 days from the first date after the Closing Date when the granting of share-based awards is not prevented by dealing restrictions) subject in both cases to the relevant plan rules and any Applicable Law, the Purchaser (or member of the Purchaser’s Group) shall grant each relevant Transferred Employee a share-based award over shares in the capital of the Purchaser substantially equal in value (valued as at the date of grant) to the value of the portion of their Relevant Awards which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing (valued as at the Closing Date), where relevant, disregarding any loss (or expected loss) of Tax-favourable treatment (each a “Compensation Award”).  To the extent that (i) it could reasonably have been expected that any related matching share award and/or free share award would have been granted to a Transferred Employee following Closing in connection with any Relevant Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing (each a “Relevant Matching Award”), and (ii) such Relevant Matching Award has not been granted (or will not be granted) as a result of Closing, on or around the date on which such Relevant Matching Award would, in the ordinary course of business, have been made by the Seller (or member of the Seller’s Group), the Purchaser (or member of the Purchaser’s Group) shall grant each relevant Transferred Employee a share-based award over shares in the capital of the Purchaser substantially equal in value (valued as at the date of grant) to the value of such Relevant Matching Award (valued as at the date of grant of the related Matching Award, defined below), where relevant, disregarding any loss (or expected loss) of Tax-favourable treatment (each a “Matching Award”), subject to the relevant plan rules and any Applicable Law.

Such Compensation Awards and Matching Awards shall be granted pursuant to the rules of whichever share-based incentive plan operated by the Purchaser’s Group at the time of grant the Purchaser considers most closely aligned to the share-based incentive plan operated by the Seller’s Group pursuant to which the related Relevant Award had been granted (or related Relevant Matching Award would have been granted) but will vest

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according to a vesting schedule substantially similar to the vesting schedule that would have otherwise applied to the related Relevant Award or related Relevant Matching Award if Closing had not occurred.  In such cases:

(a)the Purchaser undertakes to seek any applicable Tax relief in respect of the Compensation Awards and Matching Awards and to indemnify the Seller in respect of 50 per cent of any Tax relief obtained, provided always that the Seller provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner;

(b)where a Compensation Award or Matching Award is granted in the form of a restricted share award, the Purchaser undertakes to obtain a valid election pursuant to section 431 of the Income Tax (Earnings and Pensions) Act 2003 (or, as applicable, any similar Tax election that is available pursuant to any Applicable Law in another jurisdiction), provided that, if either party makes representations to the other party to waive this obligation in respect of certain Compensation Awards or certain Matching Awards and the other party consents to such waiver (such consent not to be unreasonably withheld), this paragraph (B) shall not apply in respect of such Compensation Awards or Matching Awards; and

(c)the Seller agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for 50 per cent. of any Liabilities borne by the Purchaser’s Group in connection with such Compensation Awards and Matching Awards, including any Tax, provided that:

(i)the Seller shall not indemnify the Purchaser (or relevant member of the Purchaser’s Group) to the extent that the Purchaser (or member of the Purchaser’s Group) compensates Transferred Employees for any loss (or expected loss) of Tax-favourable treatment in respect of Relevant Awards or for any Liabilities to Tax as contemplated in paragraph 11.9 below;

(ii)the Seller only agrees to indemnify the Purchaser (or member of the Purchaser’s Group) to a maximum of 50 per cent of the total of (i) the value of the portion of such Relevant Awards that lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing, (ii) the value of the Relevant Matching Awards, and (iii) any related Liabilities, including any Tax; and

(iii)for the avoidance of doubt, the Seller shall not indemnify the Purchaser (or member of the Purchaser’s Group) for any lapse or forfeiture (or expected lapse or forfeiture) due to a failure to meet any applicable performance (or other) conditions.

For these purposes, the compensation in respect of the portion of a Relevant Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing shall not exceed the difference between (i) the value of the Relevant Award which could reasonably have been expected to vest on the normal vesting date but for Closing (subject, where applicable, to performance (or other) conditions), and (ii) the value of the Relevant Award which actually vested (or will vest) as a result of Closing.

For the purposes of this paragraph 11.8:

(a)the portion of a Relevant Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing shall be valued on the basis of the average price of

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an ordinary share in the capital of the Seller over the five trading days immediately prior to Closing;

(b)the value of a Compensation Award to be granted shall be valued on the basis of the average price of an ordinary share in the capital of the Purchaser over the five trading days immediately prior to the date of grant;

(c)the value of a Relevant Matching Award shall be valued on the basis of the average price of an ordinary share in the capital of the Seller over the five trading days immediately prior to the date of grant of the related Matching Award;

(d)the value of a Matching Award to be granted shall be valued on the basis of the average price of an ordinary share in the capital of the Purchaser over the five trading days immediately prior to the date of grant; and

(e)any currency conversion shall be made in accordance with Clause 1.13.1 of this Agreement.

11.9To the extent that any payment to a Transferred Employee (whether by the Seller’s Group or by the Purchaser’s Group) would trigger Liabilities to Tax under section 280G of the United States Internal Revenue Code (“Section 280G”), the relevant Transferred Employee shall be allowed to choose whether to accept the full payment (and pay any relevant Section 280G Tax) or to receive such lower payment as may be necessary in order to fall below the Section 280G threshold for Tax.  To the extent that any similar Tax would arise pursuant to any Applicable Law in another jurisdiction, this paragraph 11.9 shall apply mutatis mutandis.

11.10This paragraph shall apply where: (i) a Transferred Employee would, in the ordinary course of business, have been granted a share-based award pursuant to a share-based incentive scheme operated by the Seller or another member of the Seller’s Group on the basis of performance criteria linked to the Seller’s Group’s 2014 financial year (which may, for the avoidance of doubt, be business and/or individual performance criteria and assessment) (each a “2014 Performance Award”), and (ii) Closing occurs prior to the grant of such 2014 Performance Award.  As soon as practicable following Closing (and, in any event, by the later of 30 days from the Closing Date and 30 days from the date when the value of each 2014 Performance Award has been determined), the Seller shall notify the Purchaser in writing of the value of each 2014 Performance Award and under which share-based incentive plan operated by the Seller’s Group the related 2014 Performance Award would have been granted.  As soon as practicable following the receipt of such notice (and, in any event, by the later of 30 days from the receipt of such notice and 30 days from the first date following the receipt of such notice when the granting of share-based awards is not prevented by dealing restrictions, subject in both cases to the relevant plan rules and any Applicable Law), the Purchaser (or member of the Purchaser’s Group) shall grant each relevant Transferred Employee a share-based award over shares in the capital of the Purchaser substantially equal in value (valued as at the date of grant) to the value of the 2014 Performance Award which would have been granted but for the occurrence of Closing. Such 2014 Performance Awards shall be granted pursuant to the rules of whichever share-based incentive plan operated by the Purchaser’s Group at the time of grant the Purchaser considers most closely aligned to the share-based incentive plan operated by the Seller’s Group pursuant to which the related 2014 Performance Award would have been granted. In such cases:

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(a)the Purchaser undertakes to seek any applicable Tax relief in respect of the 2014 Performance Awards and to indemnify the Seller in respect of any Tax relief obtained, provided always that the Seller provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner;

(b)where a 2014 Performance Award is granted in the form of a restricted share award, the Purchaser undertakes to obtain a valid election pursuant to section 431 of the Income Tax (Earnings and Pensions) Act 2003 (or, as applicable, any similar Tax election that is available pursuant to any Applicable Law in another jurisdiction), provided that, if either party makes representations to the other party to waive this obligation in respect of certain 2014 Performance Awards and the other party consents to such waiver (such consent not to be unreasonably withheld), this paragraph (b) shall not apply in respect of such 2014 Performance Awards; and

(c)the Seller agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for any Liabilities borne by the Purchaser’s Group in connection with such 2014 Performance Awards, including any Tax.

The grant of a 2014 Performance Award to a Transferred Employee shall be taken into account by the Purchaser when determining the extent to which that Transferred Employee shall participate in incentive arrangements (other than any Compensation Award or Matching Award) operated by the Purchaser’s Group following Closing.

For the purposes of this paragraph 11.10:

(d)the value of a 2014 Performance Award to be granted shall: (i) be determined by the Seller acting reasonably and in good faith, (ii) be consistent with past practice and with the level of similar awards granted to employees remaining in service within the Seller’s Group, (iii) take into account the relevant business and/or individual performance criteria linked to the Seller’s Group’s 2014 financial year, and (iv) if Closing occurs before 31 December 2014, be time pro-rated to take account of the reduced period of time, as a proportion of the Seller’s Group’s 2014 financial year, that the relevant Transferred Employee worked within the Seller’s Group (calculated on the basis of the number of complete months of service as at the Closing Date);

(e)the number of shares to be placed under a 2014 Performance Award shall be valued on the basis of the average price of an ordinary share in the capital of the Purchaser over the five trading days immediately prior to the date of grant; and

(f)any currency conversion shall be made in accordance with Clause 1.13.1 of this Agreement.

11.11This paragraph shall apply if any member of the Seller’s Group’s corporate executive team (or similar body) is a Transferred Employee (each a “CET Member”). The treatment of share-based awards held by CET members shall be determined by the remuneration committee of the board of directors of the Seller (acting reasonably and in good faith and following informal consultation with the Purchaser), subject to the rules of any relevant share-based incentive scheme and any Applicable Law, and the provisions of paragraphs 11.8 and 11.10 shall apply.

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12Delayed Employees

12.1In this Schedule:

“Controlled Business Instruction” has the meaning given to it in Schedule 25;

“Delayed Business Employees” means (i) the Relevant Vaccines Business Employees who immediately prior to the Closing Date work in any of the Delayed Vaccines Group Businesses, and (ii) any employees of any member of the Seller’s Group who are appointed to their position (whether by internal or external hire) on or after the Closing Date in accordance with a Controlled Business Instruction or Seller Involvement Instruction to work wholly or substantially in the Business (as carried on by the Vaccines Group) (other than the Delayed Company Employees), and in each case for so long as they are not assigned to work other than wholly or substantially in the Business (as carried on by the Vaccines Group);

“Delayed Closing Date” has the meaning given to it in Schedule 25;

“Delayed Company Employees” means (i) the Relevant Vaccines Company Employees who immediately prior to the Closing Date are employees of any of the Delayed Vaccines Group Companies, and (ii) any employees of any of the Delayed Vaccines Group Companies who are appointed to their position (whether by internal or external hire) on or after the Closing Date to work wholly or substantially in the Business (as carried on by the Vaccines Group) in accordance with a Controlled Business Instruction or Seller Involvement Instruction, and in each case for so long as they are not assigned to work other than wholly or substantially in the Business (as carried on by the Vaccines Group);

“Delayed Employees” means the Delayed Business Employees and the Delayed Company Employees;

“Delayed Vaccines Group Business” has the meaning given to it in Schedule 25;

“Delayed Vaccines Group Company” has the meaning given to it in Schedule 25; and

“Seller Involvement Instruction” has the meaning given to it in Schedule 25.

12.2The parties intend and agree that:

12.2.1the employment of the Delayed Employees shall not be transferred by the Seller or another member of the Seller’s Group to a member of the Purchaser’s Group on and from the Closing Date but shall transfer on and from the Delayed Closing Date which relates to the Delayed Vaccines Group Company or Delayed Vaccines Group Business associated with that Delayed Employee;

12.2.2notwithstanding the intention at paragraph 12.2.1 above, if the contract of employment of any Delayed Employee is found or alleged to have effect at any time prior to the Delayed Closing Date as if originally made with the Purchaser or another member of the Purchaser’s Group (including any Vaccines Group Company) as a consequence of this Agreement, paragraph 3 shall not apply in relation to that Delayed Employee and as a result the parties shall in good faith seek to agree as soon as reasonably practicable how best to deal with such unintended transfer or allegation of transfer having regard to the reason why the individual’s transfer to the Purchaser or another member of the Purchaser’s Group (including any Vaccines Group Company) was delayed but provided that, if the parties are unable to reach such agreement within a reasonable period and if it is

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agreed that such Delayed Employee’s contract of employment has so transferred, then such Delayed Employee shall be treated from the time he actually became so employed as a “Transferred Employee” (and no longer a Delayed Employee) for the purposes of this Agreement;

12.2.3no provisions in paragraph 2 shall require the Purchaser or another member of the Purchaser’s Group (including any Vaccines Group Company) to employ, or make an offer to employ, a Delayed Employee, on and from the Closing Date;

12.2.4paragraph 2.2 shall be amended to the extent required so that it applies to Delayed Business Employees and, in respect of such Delayed Business Employees, references to the “Closing Date” shall be replaced with references to the “Delayed Closing Date which relates to the Delayed Vaccines Group Business associated with that Delayed Employee”;

12.2.5paragraph 2.3 shall be amended to the extent required so that it applies to Delayed Business Employees and, in respect of such Delayed Business Employees, references to the “Closing Date” or “Closing” shall be replaced with references to the “Delayed Closing Date which relates to the Delayed Vaccines Group Business associated with that Delayed Employee”; and

12.2.6paragraph 3 shall be amended to the extent required so that it applies on each Delayed Closing Date in respect of any person who is not at that time a Delayed Business Employee or Delayed Company Employee and any references to the “Closing Date” or “Closing” shall be replaced with references to that “Delayed Closing Date”.

12.3Notwithstanding the provisions of paragraph 12.2 above, the parties agree that each Delayed Employee shall, with effect from and including the Closing Date, be treated for economic purposes as if he is employed by a member of the Purchaser’s Group, and as a consequence will be deemed to be a “Transferred Employee” (meaning that the Purchaser will be economically responsible for all costs and liabilities relating to his employment on and from the Effective Time or termination of his employment on and from the Effective Time) provided that such treatment shall not result, in relation to any Delayed Employee, in any member of the Purchaser’s Group being liable for any costs and liabilities under this Schedule to the extent that any such costs and liabilities arise from (i) any failure by the relevant member of the Seller’s Group prior to a Delayed Employee’s Delayed Closing Date, without good reason, to comply with any Controlled Business Instruction or Seller Involvement Instruction in relation to that Delayed Employee; or (ii) any claim by a Delayed Employee as a result of any breach of contract or Applicable Law by the relevant member of the Seller’s Group (other than in express compliance with any Controlled Business Instruction or Seller Involvement Instruction or as otherwise expressly agreed in writing by the Purchaser) in respect of such Delayed Employee. Any amount payable pursuant to this paragraph 12.3 shall be paid in accordance with Part 4 of Schedule 25, For the avoidance of doubt, no provision of this paragraph 12.3 shall entitle the Seller or any member of the Seller’s Group to recover any amount in respect of any Delayed Employee if that would entitle that Seller or member of the Seller’s Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement.

12.4For the purposes of paragraphs 11.2 and 11.8 above, references to “Closing” and the “Closing Date” shall be construed as references to the relevant Closing, Closing Date or Delayed Closing Date which applies to each of the relevant Transferred Employees.

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Schedule 12
Employee Benefits
 (Clause 2.4.2)

In this Schedule 12:

“Delayed Business Employees” has the meaning given to it in Schedule 11;

“Delayed Company Employees” has the meaning given to it in Schedule 11;

“Delayed Employees” has the meaning given to it in Schedule 11;

“Employee Benefits” means benefits to or in respect of any current or former employee, including without limitation, any pension, early retirement, disability, death benefit, long service awards, termination indemnity (such as Italian TFR) or post-retirement medical benefits or deferred compensation linked to retirement, disability or death benefits or old age part-time benefits (such as German ATZ) and jubilee payments;

“Employee Benefit Liabilities” means liabilities and obligations (whether funded or unfunded) in respect of any employee benefit promise, scheme, plan, fund, program, policy, practice or other individual or collective arrangement providing Employee Benefits;

“Purchaser Funding Assumptions” means, in relation to any Transferred Employee Benefits, where a member of the Purchaser’s Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc), and there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund those similar or comparable benefits to a funding target which is determined by reference to a method and assumptions other than IFRS (such as would, for example, be the case in relation to UK HMRC-registered defined benefit pension obligations), then that method and those assumptions as in force in relation to those similar or comparable benefits immediately prior to the date of this Agreement (so, taking the example of UK defined benefit obligations, this would be the method and assumptions used to determine the relevant plan’s technical provisions as at the date of this Agreement — regardless of whether the plan is in fact fully funded on that basis at any relevant time);

“Purchaser IFRS Assumptions” means, in relation to any Transferred Employee Benefits, where a member of the Purchaser’s Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc), the method and assumptions used most recently prior to the date of this Agreement to value those similar or comparable benefits by the Purchaser’s Group (or any relevant member thereof) for IFRS accounting purposes;

“Seller Funding Assumptions” means, in relation to any Transferred Employee Benefits, if there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund those Transferred Employee Benefits to a funding target which is determined by reference to a method and assumptions other than IFRS (such as would, for example, be the case in relation to UK HMRC-registered defined benefit pension obligations), then that method and those assumptions as in force in relation to those Transferred Employee Benefits immediately prior to the date of this Agreement (so, taking the example of UK defined benefit obligations, this would be the method and assumptions used to determine the relevant plan’s technical provisions as at the date of this Agreement — regardless of whether the plan is in fact fully funded on that basis at any relevant time);

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“Seller IFRS Assumptions” means, in relation to any Transferred Employee Benefits, the method and assumptions used by the Seller’s Group (or the most relevant member thereof) most recently prior to the date of this Agreement to value those Transferred Employee Benefits for IFRS accounting purposes;

“Swiss Actuary” means an actuary: (a) who can reasonably be viewed: (i) as independent of both the Purchaser and the Seller; and (ii) as familiar with Swiss pension issues; and (b) whom the Purchaser and Seller have agreed should be jointly appointed by them for the purposes of determining the Swiss Assumptions or who in default of such agreement has been appointed by the Swiss Association of Actuaries or other industry body of actuaries in Switzerland as agreed by the Seller and the Purchaser;

“Swiss Assets” means cash with a value equal to the aggregate of:

(i)the value of the vested benefits, as at the Effective Time, held by the Swiss Pension Providers on behalf of each Transferred Employee in Switzerland;

multiplied by

(ii)the applicable coverage ratio as determined by the board of trustees of the Swiss Pension Providers in accordance with Article 44 BVV2 (Swiss Ordinance on Occupational Retirement, Survivors’ and Disability Pension Plans) under the partial liquidation regulations of each of Novartis Pensionskasse 1, Novartis Pensionskasse 2 and Kaderkasse Novartis on the assumption that the Swiss Assets were to transfer to the Purchaser’s replacement pension vehicle at the Effective Time;

“Swiss Assumptions” means, in relation to any Transferred Employee Benefits in Switzerland, the Seller IFRS Assumptions adjusted:

(a)by replacing any assumed “cash balance” annuity conversion rate in the Seller IFRS Assumptions with a conversion rate which the Swiss Actuary certifies to the Purchaser and the Seller as representing a reasonable estimate of the likely effective overall blended conversion rate which will apply in relation to the Transferred Employee Benefits in question, having regard to the changes to the rate which can (having regard to longevity projections, legal and governance constraints around Swiss pension structures and such other matters as the Swiss Actuary considers relevant) in the Swiss Actuary’s opinion reasonably be expected to occur during the expected service lives of the Transferred Employees to whom the Transferred Employee Benefits relate, and weighting the impact of those changes by reference to the ages of the relevant employees (and so the extent to which the changes will in fact operate to reduce the effective liability on the Purchaser); and

(b)by removing any reserve for death or disability benefits to the extent that the Swiss Actuary certifies to the Purchaser and the Seller that it constitutes a reserve for liabilities to and in respect of the relevant Transferred Employees which could reasonably be externally insured by the Purchaser without introducing a new ongoing cost on the Purchaser which was not reflected in the Accounts;

“Swiss EB Liabilities” means those of the Transferred Employee Benefit Liabilities that are attributable to the Transferred Employees in Switzerland;

“Swiss Employee Benefits” means the benefits to which the Swiss EB Liabilities relate;

“Swiss Pension Providers” means the provider(s) of Swiss Employee Benefits;

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“Swiss Post-Closing Employers” means the Vaccines Group Companies, and any relevant members of the Purchaser’s Group which employ the Transferred Employees in Switzerland on and from Closing;

“Temporary Participation Plan” means any plan or arrangement (whether funded or unfunded) for the provision of Employee Benefits in which Transferred Employees participate prior to Closing and continue (for any reason, whether by special arrangement as is the case for the Swiss Post-Closing Employers or because they are Delayed Business Employees or Delayed Company Employees, or otherwise) to participate for a temporary period after Closing; and

“Temporary Participation Cessation Date” means, in relation to any Temporary Participation Plan, the date on which Transferred Employees cease to participate in the relevant plan or arrangement.

For the purposes of each of the Purchaser Funding Assumptions, the Purchaser IFRS Assumptions, the Seller Funding Assumptions, the Seller IFRS Assumptions and the Swiss Assumptions, any economic and financial assumptions which are based (whether expressly or implicitly) on yields, rates or indices shall be updated for the purposes of such definitions to take account of those yields, rates or indices as at the Effective Time (or the latest practicable time prior to the Effective Time).

1Except to the extent otherwise requested by the Seller and expressly agreed by the Purchaser before Closing (such Purchaser agreement not to be unreasonably withheld to the extent that it is not reasonably possible for the Seller or its Affiliates to retain the relevant Employee Benefit Liabilities — for example, where a Vaccines Group Company operates its own standalone arrangement, liability for which cannot lawfully be assumed by another member of the Seller’s Group, or where liability unavoidably transfers by operation of law under European Council Directive 2001/23/EC or its local implementing legislation), any Employee Benefit Liabilities in respect of service in the Vaccines Group or with any member of the Seller’s Group (including any Vaccines Group Company) or in any plan or arrangement in which any member of the Seller’s Group (including any Vaccines Group Company) participates or has participated:

(a)(in the case of a Transferred Employee) prior to Closing; or

(b)(in the case of any other person) at any time,

(together, “Pre-Closing EB Liabilities”) will stay with or be assumed by the Seller or its Affiliates (excluding any Vaccines Group Company) and the Seller shall fully indemnify the Purchaser and its Affiliates and/or any Vaccines Group Company) against any such Employee Benefit Liabilities and against any liabilities and obligations to or in respect of any plan or arrangement for the provision of Employee Benefits in which any member of the Seller’s Group (including any Vaccines Group Company) participates or participated prior to Closing.  For the avoidance of doubt, the Purchaser’s agreement under this paragraph 1 may, if the Purchaser so determines, relate only to certain specified categories or tranches of Pre-Closing EB Liabilities under a particular benefit programme (in other words, it does not need to be “all or nothing”), in which case it is only those specified Pre-Closing EB Liabilities which are excluded from the scope of the Purchaser’s indemnity entitlement  hereunder.

2Where and to the extent that the Purchaser agrees under paragraph 1 that any Pre-Closing EB Liabilities may transfer to or remain with the Purchaser and/or its Affiliates and/or any Vaccines Group Company (such Pre-Closing EB Liabilities being the

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“Transferred Employee Benefit Liabilities” and the benefits to which they relate being the “Transferred Employee Benefits”), the Purchaser will be compensated in respect of such Transferred Employee Benefit Liabilities as set out in the rest of this Schedule 12. Subject to being so compensated but without prejudice to paragraphs 9 and 11, the Purchaser shall, or shall procure that its relevant Affiliate shall, assume, with a full discharge for the Seller and its Affiliates, the Transferred Employee Benefit Liabilities. The Purchaser acknowledges its agreement to the principle that the post-retirement medical healthcare plan to which it admits US Transferred Employees who immediately before Closing were members of such a plan will take account of periods of employment with the Seller’s Group to the extent previously recognised under the equivalent Seller’s Group plan for the purposes of determining eligibility, contributions, and vesting; again, therefore, subject to appropriate identification during the period before Closing of such liabilities and to the operation of the compensation mechanism set out in this Schedule 12, they will become Transferred Employee Benefit Liabilities.

2AThis paragraph 2A applies where there are Transferred Employee Benefits in a Temporary Participation Plan.  In such a case, notwithstanding that the Transferred Employee Benefit Liabilities may (subject to the Purchaser’s agreement as per 1 above) include liabilities in respect of service after the Effective Time, the Transferred Employee Benefit Liabilities which are included in the calculation of the Employee Benefit Indemnification Amount as per paragraph 3 below shall (unless the Seller and the Purchaser agree otherwise in any particular case) comprise only those liabilities attributable to service before the Effective Time.  Conversely, although the Transferred Employee Benefit Liabilities will not for the purposes of paragraph 1 and 2 above include liabilities in respect of Transferred Employees or other individuals who leave employment or crystallise benefits before the Temporary Participation Cessation Date in relation to the relevant Temporary Participation Plan (unless the Seller and the Purchaser agree otherwise in any particular case and without prejudice to the Purchaser or its Affiliates’ obligation to comply with any requirements in relation to such individuals before they leave employment or crystallise benefits), the parties agree that the calculation of the Employee Benefit Indemnification Amount under paragraph 3 below in relation to any Temporary Participation Plan shall be carried out on the basis of a conclusive presumption (regardless of any actual knowledge to the contrary) that:

2A.1any individual who is a Delayed Employee on the day after the Closing Date is or will become a Transferred Employee, and

2A.2no Contingent Individual will leave employment or crystallise benefits before the relevant Temporary Participation Cessation Date. For these purposes a “Contingent Individual” is a Transferred Employee or other individual who on the day after the Closing Date has not left employment or crystallised benefits and in respect of whom liabilities: (a) would become Transferred Employee Benefit Liabilities if he does not leave employment or crystallise benefits before the relevant Temporary Participation Cessation Date; but (b) would not otherwise become Transferred Employee Benefit Liabilities.

United Kingdom

For the avoidance of doubt, it is also agreed that no UK defined benefit pension liabilities are to be Transferred Employee Benefit Liabilities.

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3The value of the Transferred Employee Benefit Liabilities shall be determined on employee census data and plan provision as at the Effective Time (and making the conclusive presumptions at 2A.1 and 2A.2 above) on:

3.1in relation to any Transferred Employee Benefits in Switzerland, the Swiss Assumptions; and

3.2in relation to any other Transferred Employee Benefits, the Seller IFRS Assumptions, PROVIDED that if any of the following values is available and is greater than the value derived using the Seller IFRS Assumptions then that value will be used instead (and if more than one of these values is available then the one which would place the greatest value on the relevant Transferred Employee Benefit Liabilities will be used):

3.2.1if a member of the Purchaser’s Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc), the value which is midway between the value based on the Seller IFRS Assumptions and the Purchaser IFRS Assumptions;

3.2.2if there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund the Transferred Employee Benefits to a funding target which is determined by reference to a method and assumptions other than IFRS, the value derived using the Seller Funding Assumptions; and

3.2.3if there is both: (i) a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund the Transferred Employee Benefits to a funding target which is determined by reference to a method and assumptions other than IFRS; and (ii) a member of the Purchaser’s Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc), the value which is midway between the value based on the Seller Funding Assumptions and the Purchaser Funding Assumptions.

Where there are any Transferred Employee Benefit Liabilities which prior to Closing were externally funded by assets held in a trust or other vehicle established for the purposes of meeting such Transferred Employee Benefit Liabilities, and the actuary chosen by the Seller and the actuary chosen by the Purchaser agree under paragraph 4 (or it is otherwise determined under paragraph 5) that, having regard to all relevant matters as they subsisted immediately after Closing, it would be reasonable to expect all or part of such assets to be  or remain available to the Purchaser or its Affiliates to meet the cost of such Transferred Employee Benefit Liabilities (whether by transfer out to another vehicle or because a Vaccines Group Company is expected to remain affiliated to the vehicle on more than a merely temporary basis), then the value as at the Effective Time of the assets which, ignoring matters arising after Closing, the actuaries would expect to be made or remain so available (the “Available Assets”) (including for the avoidance of doubt, in the case of Switzerland, the Swiss Assets to the extent that they are so agreed or determined) as agreed under paragraph 4 or determined under paragraph 5 will be deducted from the value of the Transferred Employee Benefit Liabilities, and the remaining value of the Transferred Employee Benefit Liabilities (if any) is the “Employee Benefit Indemnification Amount”. The determination of the Employee Benefit Indemnification Amounts shall be carried out on a country-by-country basis and, where necessary, on a plan-by-plan basis.

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If the Employee Benefit Indemnification Amount for any country (or plan, where applicable) is greater than 95% of the estimate of the Employee Benefit Indemnification Amount for that country (or plan) set out in the Seller’s notification pursuant to Clause 6.4.3 (or, where no such estimate was made, greater than zero), then the Seller shall pay or procure payment, by way of a reduction in the Purchase Price attributable to the relevant Shares or the particular part of the Vaccines Group to which the payment relates, an amount equal to the difference (or, where no such estimate was made, the full Employee Benefit Indemnification Amount for that country (or plan)) to the Purchaser, or at the request of the Purchaser to an Affiliate of the Purchaser, as compensation for the Transferred Employee Benefit Liabilities. If the Employee Benefit Indemnification Amount for any country (or plan, where applicable) is less than 95% of the estimate of the Employee Benefit Indemnification Amount for that country (or plan) set out in the Seller’s notification pursuant to Clause 6.4.3 (if any), the Purchaser shall pay an amount equal to the difference to the Seller.

4The Seller and its Affiliates shall, within 45 days after Closing, provide its actuary, the Swiss Actuary (if relevant) and the actuary chosen by the Purchaser with all relevant plan, asset, assumptions and employee census information needed to calculate the Employee Benefit Indemnification Amounts in respect of any Transferred Employees or Delayed Employees to the extent not otherwise within the control of the Purchaser or its Affiliates (including any Vaccines Group Company). The actuary chosen by the Seller shall provide the actuary chosen by the Purchaser with its calculation of the Employee Benefit Indemnification Amounts (including, but not limited to, any supporting documentation on which it relied as well as the methodologies it employed in calculating the Employee Benefit Indemnification Amounts), on a plan-by-plan basis, within 90 days following Closing. The actuary chosen by the Purchaser shall review the calculation of the Employee Benefit Indemnification Amounts of the Seller’s actuary within 120 days following Closing. The Employee Benefit Indemnification Amounts shall be determined, on a plan-by-plan basis, by mutual agreement between the parties within 180 days following the Closing Date.

5If the parties cannot agree on any Employee Benefit Indemnification Amount within the 180-day period referred to in paragraph 4, the parties shall appoint within 5 days an independent actuary acceptable to both parties, or such actuary shall be selected by the President of the Institute and Faculty of Actuaries in the UK if they cannot agree, and the independent actuary thus appointed shall review their calculations and, within 75 days after appointment, render a final and binding decision on the amount of that Employee Benefit Indemnification Amount, and, in making such decision, shall be limited to adopting the position taken by either one of the parties. The cost of any independent actuary shall be borne jointly by the parties.

6In connection with the procedures referred to in this Schedule 12, the parties shall provide each other and the actuaries referred to in this Schedule 12 with access to the relevant business records and other relevant documents and information as may reasonably be requested. All documents, records and information provided for the purposes of this Schedule 12 must be accurate and complete in all material respects.

7Each payment in respect of an Employee Benefit Indemnification Amount shall be made by the Seller (by way of a reduction in the Purchase Price attributable to the relevant Shares or the particular part of the Vaccines Group to which the payment relates) within 14 days following its final determination. The Seller may make an accelerated or advance  payment at its own discretion (which, for the avoidance of doubt, includes in relation to each

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Employee Benefit Indemnification Amount so much (if any) of the Estimated Employee Benefit Adjustment as the Seller notified pursuant to Clause 6.4 was intended to relate to that Employee Benefit Indemnification Amount). Each Employee Benefit Indemnification Amount shall include interest calculated from  the Effective Time to (and including) the date of payment at a rate per annum of LIBOR (but where amounts are prepaid or paid in stages or treated as paid via inclusion in the Estimated Employee Benefit Adjustment then the interest will cease to accrue on so much of the Employee Benefit Indemnification Amount as has been paid). Such interest shall accrue from day to day. Any such payment shall be made in US dollars (and any underlying values shall be expressed in US dollars) and any currency other than US dollars shall be converted into US dollars at the exchange rates determined in accordance with Clause 1.13 of this Agreement on the Closing Date.

8To the extent (if any) that there are any Transferred Employee Benefit Liabilities which prior to Closing were externally funded by assets held in a trust or other vehicle established for the purposes of meeting such Transferred Employee Benefit Liabilities, the Purchaser will, if requested by the Seller before Closing (or the relevant Temporary Participation Cessation Date) and unless it is not reasonably practicable to do so, establish or nominate a trust or other vehicle which is capable of receiving a transfer of assets from the pre-Closing trust or other vehicle to the extent that such assets relate to the Transferred Employee Benefit Liabilities.

9If, within one year of Closing, the Seller or the Purchaser notifies the other that the membership or other benefit data (the “Data”) used for calculating any Employee Benefit Indemnification Amount may be inaccurate, other than by reason of an Excluded Matter, then a “Data Dispute” has arisen and the following provisions shall apply:

9.1On such notification, the Seller shall procure that its actuary and the Purchaser shall procure that its actuary consult each other with a view to agreeing whether the Data is inaccurate and if so, what the accurate Data should be.  If the Seller’s actuary and the Purchaser’s actuary agree that the Data is inaccurate, they will jointly certify this to be the case and advise on what the accurate Data should be.  The notification is deemed to have occurred on the date of the certification.

9.2If the Seller’s actuary and the Purchaser’s actuary fail to agree whether the Data is inaccurate within 60 days of the notification by one party to the other that the Data may be inaccurate, paragraph 5 shall apply mutatis mutandis.  The notification is deemed to have occurred when the independent actuary advises that the Data is inaccurate and what the accurate Data should be.

9.3On the occurrence of the Data Dispute, the Seller and the Purchaser shall respectively procure that a valuation of the relevant Employee Benefit Indemnification Amount is carried out in accordance with paragraphs 3 and 4 (mutatis mutandis) but on the basis of the accurate Data as agreed under paragraph 9.1 or determined under paragraph 9.2.

9.4If as a consequence of paragraph 9.3, the Seller has paid to the Purchaser an amount which on the basis of the further valuation is not payable, such amount (the “Overpayment”) shall be repaid within 21 days of the amount of the Overpayment being agreed or determined. Any such payment shall bear interest calculated from (and including) the date the Overpayment was made to (and including) the date the payment is made in full in accordance with this paragraph 9.4 at a rate per annum of LIBOR. Such interest shall accrue from day to day.

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9.5If as a consequence of paragraph 9.3, the Seller has not paid to the Purchaser an amount which on the basis of the further valuation is payable, such amount (the “Outstanding Amount”) shall be paid within 21 days of the amount of the Outstanding Amount being agreed or determined. Any such payment shall bear interest calculated from (and including) the Closing Date to (and including) the date the payment is made in full in accordance with this paragraph 9.5 at a rate per annum of LIBOR. Such interest shall accrue from day to day.

For the purposes of this paragraph 9, the “Excluded Matters” are:

(i)assets which were assumed to be Available Assets ultimately turning out not to be available to the Purchaser or its Affiliates to meet the cost of the Transferred Employee Benefit Liabilities to which they related, and

(ii)liabilities in respect of individuals being assumed to be Transferred Employee Benefit Liabilities but turning out not to be because the individuals leave service or crystallise benefits before the date liabilities are transferred.

10Except as otherwise agreed by the Seller, the Purchaser shall where a trust or other vehicle has been established under paragraph 8, procure that all of the assets transferred as envisaged by paragraph 8 are paid into such trust or other vehicle. If, after such payment or transfer, or after payment of an Employee Benefit Indemnification Amount or after making an Estimated Employee Benefit Adjustment, the Purchaser and/or its Affiliates achieves a reduction in its liability to any Tax in respect of or in connection with the payment or transfer, the Purchaser shall pay to Seller (for itself or on behalf of the relevant Share Seller or Business Seller as applicable), within 30 days after the Purchaser would otherwise have been liable to pay the saved Tax, a sum equal to the amount of that Tax reduction by way of an increase in the Purchase Price in respect of the relevant Shares or the particular part of the Vaccines Group.  This paragraph 10 applies for a period of four years following the later of the date on which a transfer of assets is made, or payment of any Employee Benefit Indemnification Amount or Estimated Employee Benefit Adjustment is made to the Purchaser.

11The Seller covenants with the Purchaser to pay to the Purchaser an amount equal to any cost, claim or liability incurred by any member of the Purchaser’s Group which it is or becomes liable to make on or at any time after Closing by reason of any change or purported change made to the terms of any Transferred Employee Benefits prior to Closing proving to be or have been legally ineffective or by reason of such terms and/or benefits failing to comply with any mandatory legal requirements (excluding any obligation to equalise guaranteed minimum pensions in the United Kingdom). The Seller shall not be liable under this paragraph 11 in respect of any individual claim (or a series of claims arising from similar or identical facts or circumstances) unless the liability in respect of such claim or series of claims exceeds US$100,000. If the Purchaser becomes aware of any fact, matter or circumstance that may give rise to a claim against the Seller under this paragraph 11, the Purchaser shall as soon as reasonably practicable give notice in writing to the Seller of such facts, matters or circumstances as are then available regarding the potential claim. Failure to give such notice within such period shall not affect the rights of the Purchaser to make a relevant claim under this paragraph 11, except that the Seller shall not be liable for any increase in the amount of such claim arising from such failure. The latest date on which the Purchaser may give notice of a claim under this paragraph 11 is the fourth anniversary of the Closing Date.

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12Notwithstanding any general provision to the contrary in Schedule 11 and subject to being compensated in accordance with this Schedule 12, the Purchaser shall admit Transferred Employees in the United States who participated in a post-retirement medical plan immediately prior to Closing to its own post-retirement medical plan. Subject to being compensated in accordance with this Schedule 12, periods of employment with the Seller’s Group (including, without limitation, any current or former Affiliate of the Seller, to the extent previously recognised under the applicable benefit plan arrangement provided by the Seller’s Group), shall be taken into account for the purposes of determining, as applicable, the eligibility for participation, contributions, and vesting for any employee under such post-retirement medical plan.

13Notwithstanding any general provision to the contrary in Schedule 11, the US Transferred Employees shall, as of the Closing Date, become eligible to participate in a US tax-qualified defined contribution plan to the extent such plan is sponsored by the Purchaser or a relevant member of the Purchaser’s Group. The Purchaser agrees that it will use commercially reasonable efforts to cause such plan to accept rollovers of the account balances of the US Transferred Employees (including participant loan promissory notes) from the relevant employer’s tax-qualified retirement plans; provided that (i) the Purchaser will not be required to accept any such rollovers that might result in material liability to the Purchaser or may otherwise cause the relevant plan to cease to qualify under Section 401(a) of the Code and (ii) the Purchaser will not be required to amend any plan to permit participant loans.

14The parties agree that where any Transferred Employee has accrued defined contribution benefits prior to Closing in a Seller’s Group arrangement then:

14.1the Seller shall use commercially reasonable efforts to procure the vesting of those benefits (if they would otherwise lapse as a result of Closing);

14.2the parties shall, provided this will not impose unreasonable administrative burdens on the Purchaser’s Group, co-operate in good faith to procure a transfer of the account balances of such Transferred Employee from the Seller’s Group arrangement to a Purchaser’s Group arrangement; and

14.3for the avoidance of doubt, the Purchaser will comply with the provisions of paragraph 6.1 of Schedule 11.

Switzerland: temporary period of participation

15The Seller and Purchaser shall use all reasonable endeavours to procure that, with effect from Closing, the Swiss Post-Closing Employers shall be admitted to participate in the relevant plans operated by the Swiss Pension Providers, to enable the Swiss Post-Closing Employers to continue to provide Swiss Employee Benefits to, and in respect of, the Transferred Employees in Switzerland for the period from Closing up to 31 December 2015 or such earlier date as the Swiss Pension Providers may permit under their temporary affiliation agreements with the Swiss Post-Closing Employers.

16The Purchaser shall use all reasonable endeavours to procure that the Swiss Post-Closing Employers shall each enter into a temporary affiliation agreement with the board of trustees of the Swiss Pension Providers on such terms as the Seller and the Purchaser may have agreed prior to Closing.

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17The Seller and the Purchaser agree that, if, during the period on and from the Effective Time up to and including the Temporary Participation Cessation Date in relation to the plans operated by the Swiss Pension Providers, there is underperformance in the investment returns achieved in respect of the assets held by the Swiss Pension Providers in respect of the Transferred Employees in Switzerland who are cash balance members (so that the assets are not sufficient to provide the mandatory 1.5% p.a interest rate accrual), then there may be payment due from the Swiss Post-Closing Employers to the Swiss Pension Providers in accordance with the terms of the relevant affiliation agreement. If such a payment is demanded by the Swiss Pension Providers, then the Seller undertakes to pay to the Purchaser 50% of the amount demanded from the Purchaser or any Affiliate (including without limitation a Swiss Post-Closing Employer) to the Swiss Pension Providers within 14 days of being notified of such demand.  The Purchaser shall, as soon as reasonably practicable, pay (or procure that its Affiliate pays) any such amount received from the Seller to the Swiss Pension Providers, to the extent that the amount is still owed to the Swiss Pension Providers by the Purchaser or its Affiliate.

Other jurisdictions: temporary periods of participation

18The Seller and Purchaser may agree that an employing entity in the Purchaser’s Group shall be admitted to participate, for a temporary period with effect from Closing, in one or more Employee Benefit plans operated by a member of the Seller’s Group, or in which a member of the Seller’s Group participates.

19In such event, the Seller and Purchaser shall use all reasonable endeavours to enter into an agreement with the provider or board of trustees of the relevant Employee Benefit plan on such terms as the provider or board of trustees may reasonably require.

Specific assurance in relation to plans operated by Swiss Pension Providers

20The Seller warrants to the Purchaser that, assuming the Temporary Participation Cessation Date is on or before 31 December 2015,  the regulations governing the plans operated by the Swiss Pension Providers would oblige the Swiss Pension Providers to transfer to the replacement pension arrangement put in place for the Transferred Employees, in addition to amounts calculated as at Closing in respect of benefits accrued to that date, the contributions paid after the Effective Time in respect of the retirement accounts of the Transferred Employee by the employees or their employers. For the avoidance of doubt, the Seller gives no warranty as to whether the Swiss Pension Providers will comply with this obligation.

Jubilee payments

21For the purposes of calculating the amount of jubilee payments and long service awards falling within the definition of “Transferred Employee Benefit Liabilities” the following principles shall apply:

21.1in relation to Vaccines Group Company Employees, liabilities to make jubilee payments and grant long service awards will be treated as falling within Transferred Employee Benefit Liabilities and shall be calculated on the basis of the value of such liabilities determined in accordance with the preceding provisions of this Schedule;

21.2in relation to Vaccines Business Employees in respect of whom each of the following applies:

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21.2.1liabilities to make jubilee payments or grant long service awards transfer to a member of the Purchaser’s Group by operation of law; and

21.2.2the relevant member of the Purchaser’s Group replicates or will replicate the benefits which applied while they were employees of the Seller’s Group,

liabilities to make jubilee payments or grant long service awards will be treated as falling within the Transferred Employee Benefit Liabilities and shall be calculated on the basis of the benefit scales which applied while the Vaccines Business Employees were employees of the Seller’s Group;

21.3in relation to Vaccines Business Employees for whom either:

21.3.1liabilities to make jubilee payments or grant long service awards do not transfer by operation of law but the relevant member of the Purchaser’s Group provides or will provide replacement benefits which replicate the benefits provided by the Seller’s Group); or

21.3.2the relevant member of the Purchaser’s Group provides or will provide replacement jubilee or long service benefits but does not or will not replicate the benefits which applied while they were employees of the Seller’s Group,

liabilities to make jubilee payments or grant long service awards will be treated as falling within the Transferred Employee Benefit Liabilities and shall be calculated on the basis of the benefit scales which applied while the Vaccines Business Employees were employees of the Seller’s Group or, if less, the value of the actual benefit to be provided by the relevant members of the Purchaser’s Group.

21.4for the avoidance of doubt, no amount will be included within “Transferred Employee Benefit Liabilities” in respect of jubilee payments or long service awards in relation to Vaccines Business Employees for whom liabilities to make such payments or grant such awards do not transfer by operation of law and no replacement benefits are provided by any member of the Purchaser’s Group;

21.5the Purchaser and the Seller will negotiate in good faith with a view to agreeing an appropriate and simple method in each jurisdiction for valuing jubilee payments and long service awards which are not disproportionate to the amounts of such payments but which is suitably even-handed as between the parties. Any such agreement will override the foregoing provisions of this paragraph 21 to the extent there is any inconsistency.

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Schedule 13
Allocation of Purchase Price
(Clauses 3.3 and 7.6)

1The Seller and the Purchaser agree that the Purchase Price (and any adjustments thereto) and the Assumed Liabilities shall be allocated for Tax purposes among the Shares and the Vaccines Group Businesses in accordance with Applicable Law  (the “Allocation”).

1Prior to the Closing Date and subject always to paragraph 1, the Seller and the Purchaser shall negotiate in good faith to reach an agreement as to the Allocation of the Purchase Price and the Assumed Liabilities including by ascribing a value to that part of the Vaccines Group comprising the Products Encepur and Ixiaro (which, if disposed of by the Seller’s Group prior to the Closing Date shall be the amount payable by the Seller to the Purchaser pursuant to Clause 3.6.1) to the Shares, and to any Vaccines Group Businesses that are subject to transfer Taxes or VAT, or where a valuation of a particular Vaccines Group Business prior to Closing is otherwise required by Applicable Law (each a “Required Item”).

2Failing agreement between the parties on the Allocation in respect of any Required Item in accordance with this Schedule 13, the Allocation shall be determined by the Reporting Accountants on the application of the Seller or the Purchaser. Paragraphs 1.6 to 1.12 of Part 1 of Schedule 16 shall apply mutatis mutandis to the engagement and determination of the Reporting Accountants pursuant to this paragraph 2.

3The Seller and the Purchaser shall negotiate in good faith to further allocate the Purchase Price and Assumed Liabilities among the Vaccines Group Businesses for which an allocation was not agreed prior to Closing within 90 calendar days after the Closing Date. If the Seller and the Purchaser reach written agreement within such 90 day period, the Allocation, as so amended, shall become binding upon the Seller and the Purchaser as the “Final Allocation Schedule”.

4The Seller and the Purchaser shall, and shall procure that each of their Affiliates will, file all Tax Returns in a manner consistent with the Final Allocation Schedule, unless otherwise required by Applicable Law, and shall take no position inconsistent with the Final Allocation Schedule in any proceedings before any Governmental Entity or otherwise.

5If the Seller and the Purchaser are unable to agree to an Allocation pursuant to paragraph 4, the matter shall be determined by the Reporting Accountants on the application of the Seller or the Purchaser. Paragraphs 1.6 to 1.12 of Part 1 of Schedule 16 shall apply mutatis mutandis to the engagement and determination of the Reporting Accountants pursuant to this paragraph 5.

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Schedule 14
VAT
(Clause 3.4)

1VAT: Records

1.1The Seller may, on or before the date of Closing, obtain a direction from the relevant Tax Authority for the retention and preservation by it of any VAT records relating to its period of ownership of the relevant part of the Vaccines Group and, where any such direction is obtained, the Seller shall:

1.1.1preserve the records to which that direction relates in such a manner and for such period as may be required by the direction or by Applicable Law; and

1.1.2allow the Purchaser, upon the Purchaser giving reasonable notice, reasonable access to and copies of such records where reasonably required by the Purchaser for its Tax purposes.

1.2If no such direction as is referred to in paragraph 1.1 above is obtained or before the date of Closing and any documents in the possession or control of a member of the Seller’s Group are required by law to be preserved by the Purchaser, the Seller shall, as soon as reasonably practicable after Closing, deliver such documents to the Purchaser.

2VAT: Going Concern - EU Member States

2.1The Seller and the Purchaser shall use reasonable endeavours (including, for the avoidance of doubt, the making of an election or application in respect of VAT to any Tax Authority or entering into a written agreement) to secure that, to the extent reasonably possible, the sale of all or any part of the Vaccines Group Businesses, so far as carried on in the European Union, is treated as neither a supply of goods nor a supply of services for the purposes of the laws governing VAT in each relevant member state.

2.2Each Business Seller shall have the right to seek a ruling from the relevant Tax Authority as to whether the sale of all or part of the Vaccines Group Businesses, so far as carried on in the relevant member state, should be treated as neither a supply of goods nor a supply of services for the purposes of the laws governing VAT in that member state and to account for VAT (and accordingly to seek an additional payment from the Purchaser under Clause 3.4.2) in accordance with that ruling. The Seller shall not be obliged to challenge (or to procure that any relevant Business Seller challenges) that ruling unless required to do so by the Purchaser. If the Purchaser wishes to challenge, or to require the relevant Business Seller to challenge, any such ruling it may do so, provided that it bears the full cost of, and agrees to indemnify the relevant Business Seller in respect of any loss arising from or in connection with, that challenge and that such challenge shall not affect the date on which VAT must be paid to the Seller under paragraph 4 below.

2.3Insofar as no ruling has been obtained from a relevant Tax Authority prior to Closing, the Seller shall determine in good faith if (or the extent to which) VAT is payable in respect of the sale of the Vaccines Group Businesses and shall be entitled to charge (or not to charge) VAT to the Purchaser in accordance with such determination.

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3VAT: Going Concern - non-EU Jurisdictions

3.1To the extent that any state outside the European Union provides for relief or exemption from VAT on the transfer of a business or a company or treats such a transaction as being non-taxable for VAT purposes, the Seller and the Purchaser shall, use reasonable endeavours (including, for the avoidance of doubt, the making of an election or application in respect of VAT to any Tax Authority or entering into a written agreement) to secure such relief, exemption or treatment, to the extent reasonably possible, as regards the sale of all or part of the Vaccines Group Businesses (insofar as the business of the Vaccines Group is carried on in the relevant state) under this Agreement.

3.2The relevant Business Seller shall have the right to seek a ruling from the relevant Tax Authority as to whether the sale of all or part of the Vaccines Group Businesses, so far as the business of the Vaccines Group is carried on in the relevant state, is eligible for a relief or exemption or is otherwise eligible to be treated as non-taxable for the purposes of the laws governing VAT in that state and to account for VAT and accordingly seek an additional payment from the Purchaser under Clause 3.4.2) in accordance with that ruling. The Seller shall not be obliged to challenge (or to procure then the relevant Business Seller challenges) that ruling unless required to do so by the Purchaser. If the Purchaser wishes to challenge, or to require the relevant Business Purchaser to challenge, any ruling it may do so, provided that it bears the full cost of, and agrees to indemnify the relevant Business Seller in respect of any loss arising from or in connection with, that challenge and that such challenge shall not affect the date on which VAT must be paid to the Seller under paragraph 4 below. Insofar as no ruling has been obtained from a relevant Tax Authority prior to Closing, the Seller shall determine in good faith if (or the extent to which) VAT is payable in respect of the sale of the Vaccines Group Businesses and shall be entitled to charge (or not to charge) VAT to the Purchaser in accordance with such determination.

4VAT: Time, Manner and Currency of Payment

4.1Any amounts which the Purchaser is obliged to pay to the Seller under this Agreement in respect of VAT shall be paid by the Purchaser, on its own account or on behalf of another member of the Purchaser’s Group, to the Seller or to such member of the Seller’s Group as the Seller may direct. Such amounts shall be paid in the currency in which the VAT in question must be accounted for to the relevant Tax Authority.

4.2Subject to any provision or express agreement to the contrary (including the terms of any Ancillary Agreements or other agreements entered into between members of the Seller’s Group and members of the Purchaser’s Group in respect of the provision of transitional services dealing with payments of amounts in respect of VAT arising in connection with the supply of goods or services to members of the Purchaser’s Group at Closing), any amounts in respect of VAT payable in any jurisdiction in respect of the transfer at Closing of any of the Vaccines Group Businesses or Shares shall be paid in accordance with paragraph 4.1 above at Closing against production of a valid VAT invoice (or equivalent, if any).

4.3Notwithstanding any other provision of this Agreement, the Purchaser shall not be liable to account to the Seller or any member of the Seller’s Group for or in respect of penalties or interest arising solely from the failure of the Seller or any other member of the Seller’s Group to account promptly for VAT to the relevant Tax Authority following the Seller having been placed in the appropriate amount of funds for that purpose by the Purchaser.

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Schedule 15
Closing Obligations
(Clause 6)

1General Obligations

1.1The Seller’s Obligations

On Closing, the Seller shall deliver or make available to the Purchaser the following:

1.1.1the Ancillary Agreements (other than the France SPA and the Netherlands APA and, if they have not been agreed, the Transitional Services Agreement, the Transitional Distribution Services Agreement and the Influenza Business Manufacturing and Supply Agreement) duly executed by the relevant members of the Seller’s Group;

1.1.2a valid power of attorney or such other evidence reasonably satisfactory to the Purchaser that the Seller, and each of its relevant Affiliates, are authorised to execute this Agreement, the Ancillary Agreements and the Local Transfer Documents (including, where relevant, any notarial deeds referred to in this Schedule 15), in each case to the extent that they are parties thereto;

1.1.3the Certificate duly executed by the Seller;

1.1.4the statutory books of the Vaccines Group Companies (which shall be written up to but not including the Closing Date), the certificate of incorporation (and certificate of incorporation on change of name) and common seal (if any) of each Vaccines Group Company and share certificates (or other documents of title) in respect of all the issued share capital of each Vaccines Group Company;

1.1.5In addition, the Seller shall, if requested by the Purchaser by notice in writing not less than five Business Days prior to the Closing Date:

(i)procure any then present directors and officers (if any) of each Vaccines Group Company that are not Transferred Employees resign their offices to take effect at the Closing Date as such and to relinquish any rights which they may have under any contract of employment with any Vaccines Group Company or under any statutory provisions (including any right to damages or compensation for breach of contract, loss of office, redundancy or unfair dismissal or on any other account whatsoever) and to confirm that no agreement or arrangement is outstanding under which any Vaccines Group Company has or could have any obligation to any of them including in respect of remuneration or expenses;

(ii)procure the present auditors of each Vaccines Group Company to resign their office as such, such resignations to take effect as at the Closing Date; and

(iii)procure board meetings of the relevant Vaccines Group Companies are held, or written resolutions of the board are passed, at or by which:

it shall be resolved that each of the transfers relating to the Shares shall, so far as possible, be approved for registration and

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any person nominated by the Purchaser shall be appointed director, such appointments to take effect on the Closing Date.

1.2The Purchaser’s Obligations

On Closing, the Purchaser shall deliver or make available to the Seller the following:

1.2.1the Ancillary Agreements (other than the France SPA and the Netherlands APA and, if they have not been agreed, the Transitional Services Agreement, the Transitional Distribution Services Agreement and the Influenza Business Manufacturing and Supply Agreement) duly executed by the relevant members of the Purchaser’s Group;

1.2.2evidence reasonably satisfactory to the Seller that the Purchaser, and each of its relevant Affiliates, are authorised to execute this Agreement, the Ancillary Agreements and the Local Transfer Documents (including, where relevant, any notarial deeds referred to in this Schedule 15), in each case to the extent that they are parties thereto.

2Transfer of the Shares and Vaccines Group Businesses

2.1General Transfer Obligations

On Closing or such other date as agreed between the parties, the Seller shall procure that the Share Sellers and Business Sellers shall, and the Purchaser shall, execute and/or deliver and/or make available Local Transfer Documents and take such steps as are required to transfer the Shares and Vaccines Group Businesses in accordance with this Agreement.

2.2Specific Transfer Obligations

For the purposes of compliance with paragraph 2.1, the Seller and the Purchaser shall, between the date of this Agreement and Closing, negotiate in good faith any and all Local Transfer Documents and other such steps as are required to transfer the Shares and Vaccines Group Businesses in accordance with this Agreement.

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Schedule 16
Post Closing Adjustments
(Clause 7)

Part 1

Preparation of Closing Statement

1Preparation

1.1No later than 60 days following Closing, the Seller shall deliver to the Purchaser the Draft Closing Statement. Prior to such delivery, the Seller shall so far as is practicable consult with the Purchaser with a view to reducing the potential areas of disagreement.

1.2In order to enable the Seller to prepare the Draft Closing Statement, the Purchaser shall keep up-to-date and, subject to reasonable notice, make available to the Seller’s representatives and to the Seller’s accountants all books and records relating to the Vaccines Group during normal office hours and co-operate with them with regard to the preparation, review and agreement or determination of the Draft Closing Statement. The Purchaser agrees to make available the services of the employees of the Vaccines Group to assist the Seller in the preparation, review and agreement or determination of the Draft Closing Statement.

In order to allow the Purchaser to review the Draft Closing Statement, the Seller shall, subject to reasonable notice, make available to the Purchaser’s representatives and to the Purchaser’s accountants all books and records relating to the Vaccines Group during normal office hours and co-operate with them with regard to their review of the Draft Closing Statement. The Seller agrees to make available the services of the employees of the Seller and its Affiliates to assist the Purchaser in its review of the Draft Closing Statement.

1.3If the Purchaser does not within 60 days of presentation to it of the Draft Closing Statement give notice to the Seller that it disagrees with the Draft Closing Statement or any item thereof, such notice stating the reasons for the disagreement in reasonable detail and specifying the adjustments which, in the Purchaser’s opinion should be made to the Draft Closing Statement (the “Purchaser’s Disagreement Notice”), the Draft Closing Statement shall be final and binding on the parties for all purposes. If the Purchaser gives a valid Purchaser’s Disagreement Notice within such 60 days, the Seller and the Purchaser shall attempt in good faith to reach agreement in respect of the Draft Closing Statement and, if they are unable to do so within 30 days of such notification, the Seller or the Purchaser may by notice to the other require that the Draft Closing Statement be referred to the Reporting Accountants (an “Appointment Notice”).

1.4Within 30 days of the giving of an Appointment Notice, the Seller may by notice to the Purchaser indicate that, in the light of the fact that the Purchaser has not accepted the Draft Closing Statement in its entirety, it wishes the Reporting Accountants to consider matters relating to the Draft Closing Statement in addition to those specified in the Purchaser’s Disagreement Notice, provided that such matters as are related to the matters specified in the Purchaser’s Disagreement Notice and that the notice states in reasonable detail the reasons why and in what respects the Seller believes that the Draft Closing Statement should be altered in respect of such matters (the “Seller’s Disagreement Notice”).

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1.5The Reporting Accountants shall be engaged jointly by the Seller and the Purchaser on the terms set out in this paragraph 1 and otherwise on such terms as shall be agreed; provided that neither the Seller nor the Purchaser shall unreasonably (having regard, inter alia, to the provisions of this paragraph 1) refuse its agreement to terms proposed by the Reporting Accountants or by the other party. If the terms of engagement of the Reporting Accountants have not been settled within 45 days of their identity having been determined (or such longer period as the Seller and the Purchaser may agree) then, unless the Seller or the Purchaser is unreasonably refusing its agreement to those terms, those accountants shall be deemed never to have become the Reporting Accountants and new Reporting Accountants shall be selected in accordance with the provisions of this Agreement.

1.6Except to the extent that the Seller and the Purchaser agree otherwise, the Reporting Accountants shall determine their own procedure but:

1.6.1apart from procedural matters and as otherwise set out in this Agreement shall determine only:

(i)whether any of the arguments for an alteration to the Draft Closing Statement put forward in the Purchaser’s Disagreement Notice or the Seller’s Disagreement Notice is correct in whole or in part; and

(ii)if so, what alterations should be made to the Draft Closing Statement in order to correct the relevant inaccuracy in it;

1.6.2shall apply the accounting principles, policies, procedures, practices and estimation techniques as set out in Part 2 of this Schedule;

1.6.3shall make their determination pursuant to paragraph 1.6.1 as soon as is reasonably practicable;

1.6.4the procedure of the Reporting Accountants shall:

(i)give the Seller and Purchaser a reasonable opportunity to make written and oral representations to them;

(ii)require that each party supply the other with a copy of any written representations at the same time as they are made to the Reporting Accountants;

(iii)permit each party to be present while oral submissions are being made by the other party; and

(iv)for the avoidance of doubt, the Reporting Accountants shall not be entitled to determine the scope of their own jurisdiction.

1.7The Reporting Accountants shall send the Seller and the Purchaser a copy of their determination pursuant to paragraph 1.6.1 within one month of their appointment. Such determination:

1.7.1shall be made available to the Seller and the Purchaser in writing; and

1.7.2unless otherwise agreed by the Seller and the Purchaser, shall include reasons for each relevant determination.

1.8The Reporting Accountants shall act as experts and not as arbitrators and their determination of any matter falling within their jurisdiction shall be final and binding on the Seller and the Purchaser save in the event of manifest error (when the relevant part of their

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determination shall be void and the matter shall be remitted to the Reporting Accountants for correction). In particular, their determination shall be deemed to be incorporated into the Draft Closing Statement.

1.9The expenses (including amounts in respect of VAT) of the Reporting Accountants shall be borne as they shall direct at the time they make any determination under paragraph 1.6.1(i) or, failing such direction, equally between the Purchaser and the Seller.

1.10The Seller and the Purchaser shall co-operate with the Reporting Accountants and comply with their reasonable requests made in connection with the carrying out of their duties under this Agreement. In particular, the Purchaser shall keep up-to-date and, subject to reasonable notice, make available to the Seller’s representatives, the Seller’s accountants and the Reporting Accountants all books and records relating to the Vaccines Group during normal office hours as the Seller or the Reporting Accountants may reasonably request during the period from the appointment of the Reporting Accountants down to the making of the relevant determination.

1.11Nothing in this Schedule 16 shall entitle a party or the Reporting Accountants access to any information or document which is protected by legal professional or litigation privilege, provided that neither the Seller nor the Purchaser shall be entitled to refuse to supply such part or parts of documents as contain only the facts on which the relevant claim or argument is based.

1.12Each party and the Reporting Accountants shall, and shall procure that its accountants and other advisers shall, keep all information and documents provided to them pursuant to this paragraph 1 confidential and shall not use the same for any purpose, except for disclosure or use in connection with the preparation of the Draft Closing Statement, the proceedings of the Reporting Accountants or another matter arising out of this Agreement.

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Part 2

Closing Statement Principles

This Part 2 of Schedule 16 comprises the specific rules, principles, policies and practices, without limitation, for preparing the Closing Statement.

The Closing Statement sets out the Working Capital, the Working Capital Adjustment, the Vaccines Group Companies’ Cash Balances, the Intra-Group Non-Trade Receivables, the Third Party Indebtedness, the Intra-Group Non-Trade Payables and the Tax Adjustment, in each case as prepared in accordance with the specific rules, principles, policies and practices set forth in this Part 2 of Schedule 16. The Closing Statement shall be prepared in the form of the Illustrative Closing Statement in Part 3 of this Schedule 16 which also sets forth, for illustrative purposes only, a computation of each of the components of the Closing Statement as of the close of business on 31 December 2013.

For the avoidance of doubt, the Closing Statement as referred to in this Part 2 of Schedule 16 shall inclusively apply to each of the Draft Closing Statement and the Closing Statement.

1Closing Statement Rules

1.1The Closing Statement shall be prepared as follows:

1.1.1in accordance with the specific accounting treatments set out in paragraph 2 of this  Part 2 of Schedule 16; and, subject thereto

1.1.2adopting the same accounting principles, methods, procedures and practices utilized in preparing the Statement of Net Assets, as detailed in the Statement of Net Asset Rules, applied on a consistent basis using consistent estimation methodologies and judgments and with consistent classifications as were used to prepare the Statement of Net Assets; and subject thereto

1.1.3in accordance with IFRS.

1.2For the avoidance of doubt, paragraph 1.1.1 shall take precedence over paragraphs 1.1.2 and 1.1.3, and paragraph 1.1.2 shall take precedence over paragraph 1.1.3.

2Specific requirements

2.1Cut-off

The Closing Statement (including the Draft Closing Statement) shall not take into account any additional events and any additional information that becomes available after the Statement time up to the date that such Closing Statement is prepared.

2.2Change of Ownership

The Closing Statement shall not be adjusted for any charges, provisions, reserves or write-offs in respect of any costs, liabilities or charges that may be incurred by the Vaccines Group prior to or after the Closing as a consequence of the change of ownership of the Vaccines Group or any changes in the management strategy, direction or priority or possible closure of any part of the Vaccines Group by the Purchaser after Closing, whether or not resulting from the change in ownership.

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2.3Deferred Tax

The Closing Statement (including the Draft Closing Statement) shall not take into account or provide for deferred Tax.

2.4Other Taxes

The Closing Statement (including the Draft Closing Statement) shall take account of or provide for all income taxes and sales taxes, to which lines BS14_120 Taxes other than income taxes (Liability account) and BS13_108 Value added tax receivable apply.

3Illustrative Working Capital Statement

3.1Part 4 of this Schedule 16 sets forth, for illustrative purposes only a computation of the Working Capital as of the close of business on 31 December 2013 (the “Illustrative Working Capital Statement”).

4Base Working Capital

4.1Base Working Capital is US$575 million to US$700 million and references in this Agreement to amounts being in excess of, greater than or less than Base Working Capital shall mean less than US$575 million and greater than or in excess of US$700 million.

4.2In relation to the France Business and the Netherlands Business, if one or both businesses is not transferred to the Purchaser under the terms of this Agreement at Closing, the Working Capital relating to such business (or businesses) shall not be included in the determination of the Working Capital at the Effective Time. If one or both of the France Business or the Netherlands Business are transferred to the Purchaser after Closing, then a further adjustment shall be made to the Closing Statement on the assumption that the France Business and/or the Netherlands Business were included in the Closing Statement taking the relevant items for the relevant business as of the date they are transferred to the Purchaser. Any adjustment arising as a result of including the France Business or the Netherlands Business in the Closing Statement after the date of this Agreement shall be agreed and paid on the same basis as the Closing Statement was agreed and paid in respect thereof made.

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Part 3

Illustrative Closing Statement

[***]

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Part 4

Illustrative Working Capital Statement

[***]

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Schedule 17
Milestone and Royalty Payments

1Milestone Payments

1.1MenABCWY Single Milestone Payment

1.1.1The Purchaser shall promptly pay, or cause to be paid, to the Seller (or one of its Affiliates as designated by the Seller) a milestone payment in cash of US$450 million (the “MenABCWY Milestone Payment”) upon issuance to the Purchaser or any of its Affiliates or their respective authorised sub-licensees or assignees (the “Relevant Parties”) on or before 31 December 2018 of a letter of approval of a Biologics License Application or supplemental Biologics License Application (a “BLA”) issued by the FDA for any meningococcal vaccine (groups A, B, C, W-135 and Y) whether adjuvanted, combined or otherwise (the “MenABCWY Product”) for use in, at a minimum, Adolescents.

1.1.2The Purchaser shall not be obliged to make the MenABCWY Milestone Payment more than once under this paragraph 1.1 and its maximum aggregate liability under this paragraph 1.1 shall not exceed the amount of the MenABCWY Milestone Payment.

1.2Bexsero Single Milestone Payment

1.2.1The Purchaser shall promptly pay, or cause to be paid, to the Seller (or one of its Affiliates as designated by the Seller) a milestone payment in cash of US$450 million (the “Bexsero Milestone Payment”) following the first Calendar Year during which Net Sales of Bexsero worldwide excluding the US in excess of [***] are achieved.

1.2.2The Purchaser shall not be obliged to make the Bexsero Milestone Payment more than once under this paragraph 1.2 and its maximum aggregate liability under this paragraph 1.2 shall not exceed the amount of the Bexsero Milestone Payment.

1.3ACIP Category A Single Milestone Payment

1.3.1The Purchaser shall promptly pay, or cause to be paid, to the Seller (or one of its Affiliates as designated by the Seller) a milestone payment in cash of US$450 million (the “ACIP Category A Milestone Payment”) upon any positive Category A recommendation by the Advisory Committee on Immunization Practices to the U.S. Centers for Disease Control and Prevention (or its successor) (“ACIP”), before 31 December 2019, regardless of the population, sub-population, age group or risk-factor-based group to which the recommendation pertains, with respect to either (i) the MenABCWY Product; or (ii) Bexsero (whichever is earlier, and provided such milestone is paid only once).

1.3.2The Purchaser shall not be obliged to make the ACIP Category A Milestone Payment more than once under this paragraph 1.3 and its maximum aggregate liability under this paragraph 1.3 shall not exceed the amount of the ACIP Category A Milestone Payment.

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1.4GBS Single Milestone Payment

1.4.1The Purchaser shall promptly pay, or cause to be paid, to the Seller (or one of its Affiliates as designated by the Seller) a milestone payment in cash of US$450 million (the “GBS Milestone Payment”) upon any positive Category A or Category B recommendation by ACIP, regardless of the population, sub-population, age group or riskfactor-based group to which the recommendation pertains, with respect to any Group B streptococcus vaccine, whether adjuvanted, combined or otherwise (the “GBS Product”).

1.4.2The Purchaser shall not be obliged to make the GBS Milestone Payment more than once under this paragraph 1.4 and its maximum aggregate liability under this paragraph 1.4 shall not exceed the amount of the GBS Milestone Payment.

2Notification and Settlement of Milestone Payments

2.1As promptly as practicable, but in any event within five days, the Purchaser shall notify the Seller in writing of any Milestone Payment becoming due.

2.2The Purchaser shall pay each Milestone Payment within 30 days of achievement of the relevant Milestone.

2.3All Milestone Payments due from the Purchaser to the Seller shall be made to the Seller or to an entity designated by the Seller by wire transfer of immediately available funds in US dollars to the credit of such bank account or accounts as may be designated by the Seller from time to time.

3Royalty Payments

3.1GBS Worldwide Royalty Payments

Subject to paragraph 3.5, the Purchaser shall pay, or cause to be paid, royalty payments to the Seller (or one of its Affiliates as designated by the Seller) on the aggregate Net Sales of the GBS Product and any adjuvanted or combined versions thereof, in the world in each Calendar Year, at the rate of 10% of such Net Sales in the world (the “GBS Royalty Payments”).

3.2MenABCWY US Royalty Payments

Subject to paragraph 3.5, the Purchaser shall pay, or cause to be paid, royalty payments to the Seller (or one of its Affiliates as designated by the Seller) on the aggregate Net Sales of the MenABCWY Product and any adjuvanted or combined versions thereof, in the US in each Calendar Year, at the rate of 10% of such Net Sales in the US (the “MenABCWY US Royalty Payments”).

3.3US Royalty Payments

Subject to paragraph 3.5, the Purchaser shall pay, or cause to be paid, royalty payments to the Seller (or one of its Affiliates as designated by the Seller) on the aggregate Net Sales of Bexsero and any adjuvanted or combined versions (excluding, for the avoidance of doubt, MenABCWY) thereof, in the US in each Calendar Year, at the rate of 10% of such Net Sales in the US (the “Bexsero US Royalty Payments”).

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3.4Bexsero Ex-US Royalty Payments

Subject to paragraph 3.5, the Purchaser shall pay, or cause to be paid, royalty payments to the Seller (or one of its Affiliates as designated by the Seller) on the aggregate Net Sales of Bexsero and any adjuvanted or combined versions (excluding, for the avoidance of doubt, MenABCWY) thereof, in the world (excluding the US) in each Calendar Year, at the rate of 10% of such Net Sales in the world (excluding the US) in excess of [***] in such Calendar Year (the “Bexsero Ex-US Royalty Payments”).

3.5Combinations

If the GBS Product, the MenABCWY Product or Bexsero is sold as part of the combination (each a “Combination Product”) then, for the purposes of paragraph 3.1, 3.2, 3.3 or 3.4 (as applicable), the figure of Net Sales of the relevant Combination Product shall be calculated by multiplying the total amount of Net Sales of that Combination product by the fraction A/(A+B), where A is the invoice price of the GBS Product, the MenABCWY Product or Bexsero (as applicable) sold separately and B is the invoice price of the other active ingredients and/or active antigens and/or adjuvants in the Combination Product.

4Settlement of Royalty Payments

4.1Each Royalty Payment shall be an independent obligation of the Purchaser (not linked to any Royalty Payment in respect of another Applicable Product or Calendar Year) and shall continue to be due and payable indefinitely in accordance with the terms of this Agreement.

4.2Each Royalty Payment shall be payable on a Calendar Quarter basis in accordance with paragraph 5.

4.3In respect of any period between the Closing Date and the start of the next Calendar Quarter (the “Stub Period”), the amount of any Royalty Payments due in respect of the Stub Period shall be adjusted on a pro rata basis to reflect the number of days in the Stub Period as a proportion of the number of days in the Calendar Quarter in which Closing occurs.

5Reporting of Royalty Payments

5.1Within 10 Business Days of the end of:

5.1.1each Calendar Quarter, the Purchaser shall provide to the Seller a Sales & Royalties Report; and

5.1.2each Calendar Year, the Purchaser shall provide to the Seller an Annual Reconciliation Report.

5.2The Seller shall submit an invoice to the Purchaser in a form agreed by the Seller and the Purchaser from time to time with respect to any Royalty Payment and/or Estimated Quarterly Bexsero Ex-US Royalty Payment shown as due in a Sales & Royalties Report.

5.3The Purchaser shall pay each Royalty Payment and/or Estimated Quarterly Bexsero Ex-US Royalty Payment due within 30 days of receipt of an invoice in respect of the same pursuant to paragraph 5.2.

5.4All Royalty Payments due from the Purchaser to the Seller shall be made to the Seller or to an entity designated by the Seller by wire transfer of immediately available funds in US

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dollars to the credit of such bank account or accounts as may be designated by the Seller from time to time.

6Reconciliation of Bexsero Ex-US Royalty Payments

6.1Following agreement or determination of the amount of the Bexsero Ex-US Royalty Payment due in respect of each Calendar Year (a “Final Bexsero Ex-US Royalty Payment”) either as set out in any Annual Reconciliation Report or as subsequently agreed or determined in accordance with paragraphs 7 and 8:

6.1.1if the Paid Bexsero Ex-US Royalty Payment is greater than the Final Bexsero Ex-US Royalty Payment, the Seller shall repay to the Purchaser an amount equal to the excess; or

6.1.2if the Paid Bexsero Ex-US Royalty Payment is less than the Final Bexsero Ex-US Royalty Payment, the Purchaser shall pay to the Seller an additional amount equal to the deficiency.

6.2The Seller or the Purchaser (as applicable) shall pay any amount due under paragraph 6.1 within 30 days of the agreement or determination of the Final Bexsero Ex-US Royalty Payment due in respect of such Calendar Year.

6.3Any payment to be made in accordance with paragraph 6.2 shall include interest thereon calculated from the date on which the amount would have been due for payment (had the Estimated Bexsero Ex-US Royalty Payments for the Calendar Year been equal to the Bexsero Ex-US Royalty Payment for such Calendar Year) to the date of payment at a rate per annum of two  per cent. above LIBOR. Such interest shall accrue from day to day.

7Records and Audit

7.1The Purchaser shall, and, so far as it is able to do so, shall cause the Relevant Parties to, keep in all material respects complete, true and accurate books and records in accordance with its Accounting Standards in relation to this Agreement including in relation to Net Sales and Royalty Payments. The Purchaser shall, and, so far as it is able to do so, shall cause the Relevant Parties to, keep such books and records for at least five years following the Calendar Year to which they pertain.

7.2The Seller shall have the right, for a period of five years after receiving each Report, to audit such Report, whether by itself or through its Affiliates and/or to appoint an internationally-recognised independent accounting firm to audit (whether the Seller, its Affiliates, or the accounting firm, the “Auditor”) such Report, and to inspect the relevant records of the Relevant Parties to verify such Report and the underlying statements, records or books of accounts, as applicable. Where the Auditor is not the Seller, the Auditor shall have the right to disclose to the Seller and/or other Affiliates its conclusions regarding any payments owed hereunder to the Seller.

7.3The Purchaser shall, and shall cause the other Relevant Parties to, make their records available for inspection by the Auditor during regular business hours at such place or places where such records are customarily kept upon receipt of reasonable advance notice from the Auditor to verify the accuracy of each Report and compliance with this Schedule 17.

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7.4The Seller shall bear the cost of any audit pursuant to this paragraph 7, as well as its own costs, fees and expenses associated with enforcing its rights with respect to any payments hereunder, except that, if it is determined by the Auditor that the amounts set out in the Sales & Royalties Report for any Calendar Quarter are more than three per cent. below the amounts actually due pursuant to this Schedule 17, the reasonable costs, fees and expenses charged or incurred by the Auditor shall be paid or reimbursed by the Purchaser.

7.5In the event that the final result of the inspection reveals an undisputed underpayment or overpayment by the Purchaser, the underpaid or overpaid amount, as applicable, shall be settled promptly by the Seller or the Purchaser (as applicable).

8Disputes

In the event of any dispute between the parties in respect of whether a Milestone Payment or a Royalty Payment is due, or the amount of any such payment due, in accordance with this Schedule 17, the dispute shall be determined by the Reporting Accountants on the application of the Seller or the Purchaser. Paragraphs 1.6 to 1.12 of Part 1 of Schedule 16 shall apply mutatis mutandis to the engagement and determination of the Reporting Accountants pursuant to this paragraph 8.

9Covenants

9.1The Purchaser agrees to procure that, following Closing, the Purchaser’s Group uses its commercially reasonable endeavours to satisfy each of the Milestones.

9.2The Purchaser agrees that it will not, and it shall procure that no member of the Purchaser’s Group will, take any action or omit to take any action, in either case which is intended to frustrate the achievement of any of the Milestones, or which is intended to reduce the amount of any Milestone Payment or Royalty Payment due pursuant to this Schedule 17.

10Definitions

The following further definitions apply in this Schedule 17:

“Accounting Standards” means, with respect to a Relevant Party, IFRS as generally and consistently applied by the Relevant Party’s Group. The Purchaser shall promptly notify the Seller in writing in the event that it or its Group changes the Accounting Standards pursuant to which its records are maintained, it being understood that the Purchaser and its Group may only use internationally recognised accounting principles;

“Adolescents” means individuals aged anywhere between 11 and 18 years old;

“Annual Reconciliation Report” means a written report or reports in a form to be agreed by the Seller and the Purchaser from time to time showing a reconciliation of the amount of the Estimated Bexsero Ex-US Royalty Payment to the amount of the Bexsero Ex-US Royalty Payment due in respect of such Calendar Year;

“Applicable Product(s)” means the GBS Product, the MenABCWY Product and Bexsero;

“Calendar Quarter” means each of the four periods of 3 consecutive calendar months, starting on 1 January, 1 April, 1 July and 1 October;

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“Calendar Year” means each period of 12 consecutive calendar months starting on 1 January and ending on 31 December;

“Estimated Bexsero Ex-US Royalty Payment” means the Purchaser’s reasonable estimate of the Bexsero Ex-US Royalty Payment that will be payable pursuant to paragraph 3.4 in respect of the current Calendar Year;

“Estimated Quarterly Bexsero Ex-US Royalty Payment” means one quarter of the Estimated Bexsero Ex-US Royalty Payment;

“Milestone Payments” means the MenABCWY Milestone Payment, the Net Sales Milestone Payment, the ACIP Category A Milestone Payment and the GBS Milestone Payment, and “Milestone Payment” means any one of them;

“Milestones” means the facts, matters and circumstances giving rise to the requirement for the Purchaser to make the Milestone Payments;

“Net Sales”  means, in respect of an Applicable Product, the net sales by the Relevant Parties for the Applicable Product(s) sold to Third Parties other than sublicensees or assignees, as determined in accordance with Accounting Standards consistently applied by the Purchaser. The deductions booked by the Relevant Parties to calculate the recorded net sales from gross sales shall include the following:

(i)normal trade, quantity  and cash discounts;

(ii)sales taxes, value added taxes and other taxes directly linked to the sale of Products to the extent included in the gross amount invoiced;

(iii)amounts repaid or credited by reasons of defects, rejections, recalls or returns;

(iv)rebates, commissions and chargebacks to customers and Third Parties;

(v)any amounts recorded in gross revenue associated with goods provided to customers for free, with the exception of samples;

(vi)amounts provided or credited to customers through coupons, other discount programs and co-pay assistance programs;

(vii)delayed ship order credits, discounts or payments related to the impact of price increases between purchase and shipping dates; and

(viii)fees for service payments to customers for any non-separate services (including compensation for maintaining agreed inventory levels and providing information),

and with respect to the calculation of Net Sales:

(a)Net Sales only include the value charged or invoiced on the first sale to a Third Party and sales between or among Respective Parties shall be disregarded for purposes of calculating Net Sales;

(b)if a Product is delivered to the Third Party before being invoiced (or is not invoiced), Net Sales will be calculated at the time all the revenue recognition criteria under Accounting Standards are met; and

(c)distributors shall not be considered as sublicensees/assignees;

“Paid Bexsero Ex-US Royalty Payment” means the aggregate of all Estimated Quarterly Bexsero Ex-US Royalty Payments paid by the Purchaser in each Calendar Year;

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“Report” means any Annual Reconciliation Report or Sales & Royalties Report;

“Royalty Payments” means the GBS Royalty Payments, the MenABCWY US Royalty Payments, the Bexsero US Royalty Payments and the Bexsero Ex-US Royalty Payments, and “Royalty Payment” means any one of them;

“Sales & Royalties Report” means a written report or reports in a form to be agreed by the Seller and the Purchaser from time to time showing, on an Applicable Product-by-Applicable Product basis:

(i)each of (a) gross sales; (b) Net Sales; and (c) Royalty Payments (other than the Bexsero Ex-US Royalty Payments) payable, for each such Applicable Product in respect of the relevant Calendar Quarter;

(ii)the Purchaser’s reasonable estimate of gross sales and Net Sales of the Bexsero Product in the world (excluding the US) in the current Calendar Year;

(iii)the Estimated Quarterly Bexsero Ex-US Royalty Payment; and

(iv)the information in paragraphs (i) to (iii) for (a) the equivalent Calendar Quarter in the prior Calendar Year; and (b) the cumulative totals for the current Calendar Year;

“Third Party” means any person other than a party or an Affiliate of a party; and

“US” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia; and “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

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Schedule 18
Warranties given under Clause 10.1

1Authority and Capacity

1.1Incorporation

The Seller and each Share Seller and Business Seller is validly existing and is a company duly incorporated and registered under the law of its jurisdiction of incorporation.

1.2Authority to enter into Agreement

1.2.1The Seller and each Share Seller and Business Seller has the legal right and full power and authority to enter into and perform this Agreement, any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Ancillary Agreement.

1.2.2The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Seller and each Share Seller and Business Seller in accordance with their respective terms.

1.2.3Except as referred to in this Agreement, the Seller:

(i)is not required to make any announcement, consultation, notice, report or filing; and

(ii)does not require any consent, approval, registration, authorisation or permit,

in each case in connection with the performance of this Agreement or any other document referred to in paragraph 1.2.1.

1.2.4The execution and delivery of the documents referred to in paragraph 1.2.1 and the performance by the Seller, each Share Seller and each Business Seller of their respective obligations under them, will not:

(i)result in a breach of any provision of the memorandum or articles of association or by laws or equivalent constitutional document of the relevant member of the Seller’s Group;

(ii)result in a breach of, or constitute a default under, any instrument or contract to which the relevant member of the Seller’s Group is party or by which the relevant member of the Seller’s Group is bound where such breach is material to their ability to perform their obligations under such documents;

(iii)result in a breach of any existing order, judgment or decree of any court, Governmental Entity by which the relevant member of the Seller’s Group is bound and where such breach is material to their ability to perform their obligations under such documents.

1.3Authorisation

The Seller and each Share Seller and Business Seller has taken, or will have taken by Closing, all corporate action required by it to authorise it to enter into and to perform this Agreement, any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Ancillary Agreement.

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2Vaccines Group

2.1Organisation and Standing of the Vaccines Group Companies

2.1.1Schedule 2 sets out a complete and accurate list of each of the Vaccines Group Companies, together with its jurisdiction of organisation, its authorised and outstanding capital stock or other equity interests, all of which equity interests are held by the Seller or an Affiliate of the Seller unless otherwise stated in Schedule 2.

2.1.2Each Vaccines Group Company is duly incorporated, validly existing and in good standing, under the laws of its jurisdiction of organisation and has all necessary corporate power under its constitutional documents to conduct its portion of the Business as at the date of this Agreement.

2.2The Shares

2.2.1Either the Seller or one of its Affiliates is the legal and beneficial owner of the Shares.

2.2.2There is no option, right to acquire, mortgage, charge, pledge, lien or other form of security or Encumbrance or equity on, over or affecting the Shares or the shares, capital stock or other equity interests in the Subsidiaries or any of them and there is no agreement or commitment to give or create any.

2.2.3All of the Shares and all of the shares, capital stock or other equity interests in the Subsidiaries have been duly authorised and validly issued and are fully paid and non-assessable. There are no options, warrants, rights, convertible, exercisable or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which any of the Vaccines Group Companies is a party or by which it is bound obligating any of the Vaccines Group Companies to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible into, or exercisable or exchangeable for, any capital stock of, or other equity interest in, such Vaccines Group Company.

2.2.4There are no outstanding Contracts to which any of the Vaccines Group Companies is a party or is otherwise bound to repurchase, redeem or otherwise acquire any shares, capital stock or other equity interest of such Vaccines Group Company.

2.2.5None of the Shares, and the shares, capital stock and other equity interests in the Subsidiaries and Minority Interest Entities is subject to and was not issued in violation of any purchase option, call option, right of first refusal, pre-emptive right, subscription right or similar right or any provision of Applicable Law or the constitutional documents of the Vaccines Group Companies.

2.3The Assets

Save in relation to the Transferred Intellectual Property Rights, either the Seller or another member of the Seller’s Group has good and valid title to the assets listed in Clause 2.3.1 free and clear of all Encumbrances other than Permitted Encumbrances.

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2.4Accounts

The Accounts of each Vaccines Group Company:

2.4.1were prepared in accordance with accounting practices generally accepted in the jurisdiction of incorporation of the relevant Vaccines Group Company at the time they were audited; and

2.4.2show in accordance with applicable legal requirements:

(i)the assets and liabilities of the relevant Vaccines Group Company at the Accounts Date; and

(ii)of the profits or losses of the relevant Vaccines Group Company for the accounting period ended on the Accounts Date.

2.5Income Statements

2.5.1The 2013 Income Statement:

(i)is based on information properly extracted from the Seller’s Group accounting records without adjustment; and

(ii)presents fairly in all material respects the results of operations of the  Vaccines and Diagnostics division of the Seller’s Group as  reported in the “Vaccines and Diagnostics” segment in the Novartis 2013 Annual Report for the period from and including 1 January 2013 up to and including 31 December 2013 excluding the Diagnostics Business but including the Influenza Business and the Out-Licensing Programme.

2.6Statement of Net Assets

2.6.1Schedule 23 sets out the Statement of Net Assets.

2.6.2The Statement of Net Assets was prepared, in all material respects, in accordance with the Statement of Net Assets Rules, and on that basis fairly presents, in all material respects, the financial position of the Vaccines Group as of the date thereof, subject to year-end audit adjustments and the absence of footnote discussions and similar presentation items therein.

2.7Changes Since 31 December 2013

Except as a result of the execution and delivery of this Agreement and, other than as contemplated by Clause 2.3.5 or Clause 5, from 31 December 2013 to the date of this Agreement:

2.7.1the Business of the Vaccines Group has been conducted in all material respects in the ordinary and usual course;

2.7.2the Vaccines Group has not entered into any material contract or commitment outside the ordinary course of business as conducted prior to 31 December 2013; and

2.7.3to the Seller’s knowledge, there has been no event or circumstance arising which is reasonably likely to have had a Material Adverse Effect (as if reference in the definition of “Material Adverse Effect” to the date of this Agreement were to 31 December 2013).

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2.8Third Party Indebtedness and financial instruments

None of the Vaccines Group Companies: (i) has any Third Party Indebtedness exceeding $1 million (other than short-term bank borrowings in the ordinary course of business) or (ii) is a party to any financial instruments (including any swaps or derivatives)

2.9Gross Profit and DCOGS

2.9.1So far as the Seller is aware, based on management allocations and adjustments, and having regard to the purpose for which it was prepared, the 2013 Gross Profit does not materially misstate the gross profit of the Vaccines Group for the period from and including 1 January 2013 up to and including 31 December 2013.

2.9.2So far as the Seller is aware, the 2013 DCOGS:

(i)is derived from information extracted from the Seller’s Group reporting systems with reasonable care and attention; and

(ii)having regard to the purpose for which the 2013 DCOGS was prepared, does not materially misstate the direct cost of goods of each of the Products identified in the 2013 DCOGS for the period from and including 1 January 2013 up to and including 31 December 2013.

3Real Property and Key Sites

3.1Company Real Properties

3.1.1The Company Real Properties are the only material freehold, leasehold or other immovable property in any part of the world owned, used or occupied by the Vaccines Group Companies or in respect of which any Vaccines Group Company has any estate, or any material interest, right or liability.

3.1.2Each of the Company Real Properties is used and occupied for the purpose of the business of a member of a Vaccines Group Company.

3.1.3A member of the Seller’s Group is solely legally and beneficially entitled to such Company Real Property.

3.1.4No person has or will have any right to possession, occupation or use of such Company Real Property in a manner that has or will have a material adverse effect on the use of, or operations at, such Company Real Property.

3.1.5There are no mortgages or charges affecting any of the Company Real Properties other than those registered in the relevant Land Register.

3.1.6There are no material outstanding disputes, actions, claims or demands in respect of any Company Real Property, nor has the Seller or any member of the Seller’s Group received any notice threatening the same.

3.1.7In respect of each Company Leased Real Property, all material covenants and conditions contained in the Company Lease have been observed and performed to date.

3.2Transferred Real Properties

3.2.1The Transferred Real Properties are the only material freehold, leasehold or other immovable property in any part of the world owned or occupied by the Vaccines

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Group Businesses or in respect of which any Vaccines Group Business has any estate, or any material interest, right or liability.

3.2.2Each of the Transferred Real Properties is used and occupied for the purpose of the business of the Vaccines Group Business.

3.2.3A member of the Seller’s Group is solely legally and beneficially entitled to such Transferred Real Property.

3.2.4No person has or will have any right to possession, occupation or use of such Transferred Real Property in a manner that has or will have a material adverse effect on the use of, or operations at, such Transferred Real Property.

3.2.5There are no mortgages or charges affecting any of the Transferred Real Properties other than those registered in the relevant Land Register.

3.2.6There are no material outstanding disputes, actions, claims or demands in respect of any Transferred Real Property, nor has the Seller or any member of the Seller’s Group received any notice threatening the same.

3.2.7In respect of each Transferred Leased Real Property, all material covenants and conditions contained in the Lease have been observed and performed to date.

3.3Key Sites

3.3.1The Key Sites are the only properties used or occupied by the Seller’s Group for the purpose of Manufacturing in respect of the Business.

3.3.2No consents, licences, approvals, permits, authorisations or waivers are required from any Landlord, superior landlord or other third party to transfer any Key Site to the Purchaser (or any other member of the Purchaser’s Group) indirectly (through the transfer of the Vaccines Group Companies).

3.3.3There is no circumstance which would entitle any third party to exercise a right of power of entry or to take possession which would materially adversely restrict the continued possession, enjoyment or existing use of each Key Site and there are no material restrictive conditions of servitude or public easements attaching to each Key Site.

3.3.4No member of the Seller’s Group has had any notice from any competent authority to make any alteration, repair or addition to any Key Site, including with regards to the disposal of effluent or the state of buildings or the number of legally required parking spaces which is presently outstanding.

4Intellectual Property and Information Technology

4.1Schedule 4 sets out, as of the date of this Agreement, complete and accurate details of Registered Vaccines Group Intellectual Property Rights, including for each such item, as applicable, (i) the identity of the record owner, (ii) the registration or application number, and (iii) the jurisdiction of issuance or registration.

4.2In relation to Products or Pipeline Products which are material to the Business, all documents and instruments necessary to maintain and preserve any extension of patent terms including Patent Term Extensions and patent term adjustments in relation to: the (i) Registered Vaccines Group Intellectual Property Rights; and (ii) any Registered Intellectual Property Rights licensed under any Vaccines Group Intellectual Property Contracts for

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which the Seller controls the prosecution and maintenance; and in each case, where such applications have a reasonable prospect of success, have been validly executed, delivered and filed in a timely manner with the appropriate Governmental Entity.

4.3Each of the Patents: (i) included within the Registered Vaccines Group Intellectual Property Rights for the Products or Pipeline Products which are material to the Business; and (ii) to the Seller’s Knowledge, included within the Registered Intellectual Property Rights licensed under the Vaccines Group Intellectual Property Contracts for Products or Pipeline Products material to the Business, in each case, correctly identifies by name each inventor thereof as determined in accordance with the Applicable Law of each jurisdiction in which such Patent issued and/or is pending.

4.4To the Seller’s Knowledge, the Patents forming part of (i) the Registered Vaccines Group Intellectual Property Rights, and (ii) the Registered Intellectual Property Rights licensed under the Vaccines Group Intellectual Property Contracts in each case for the Products or Pipeline Products which are material to the Business are subsisting, valid and enforceable and have not lapsed or been abandoned.

4.5All renewal, application and other registry fees required for the maintenance, prosecution and enforcement of the Registered Vaccines Group Intellectual Property Rights relating to Products or Pipeline Products that are material to the Business have been paid.

4.6Schedule 4 sets out, a complete and accurate list of each material Vaccines Group Intellectual Property Contract. Neither the Seller nor any of its Affiliates has given, or received, written notice to terminate any material Vaccines Group Intellectual Property Contract or the Merck 2012 Licence, and neither the Seller nor any Affiliate of the Seller is in default of any material Vaccines Group Intellectual Property Contract or the Merck 2012 Licence. To the Seller’s Knowledge, no third party is in default under any material Vaccines Group Intellectual Property Contract or the Merck 2012 Licence.

4.7The Seller and its Affiliates between them own all Registered Vaccines Group Intellectual Property Rights and the Beta Interferon Patent Rights free of all Encumbrances except Permitted Encumbrances. The Seller and its Affiliates have taken reasonable steps to protect the confidentiality of Proprietary Information and Know-How relating to the Products.

4.8To the Seller’s Knowledge: (i) the conduct of the Business as currently conducted does not infringe or misappropriate the Intellectual Property Rights of any third party; and (ii) there is no material judicial, administrative or arbitral action, suit, hearing, inquiry, investigation or other proceeding (public or private) before any Governmental Entity pending against the Seller or any of its Affiliates in which it is alleged that the conduct of the Business as currently conducted by the Seller and its Affiliates infringes or misappropriates any Intellectual Property Rights of any third party.  Neither the Seller nor any of its Affiliates has received any written notice of such infringement or misappropriation.

4.9To the Seller’s Knowledge, no third party is infringing or misappropriating any Vaccines Group Intellectual Property Rights or Proprietary Information and neither the Seller nor its Affiliates have made any such claims against any such persons, nor, to the Seller’s knowledge is there any basis for such a claim.

4.10The Vaccines Group Intellectual Property Rights, the Intellectual Property Rights licensed under the Vaccines Group Intellectual Property Contracts, and the Intellectual Property Rights licensed under the Purchaser Intellectual Property Licence Agreement constitute all

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the material Intellectual Property Rights used in the conduct of the Business as currently conducted by the Seller and its Affiliates on a worldwide basis; provided however, that the foregoing is not a representation of non-infringement, non-misappropriation, or any other non-violation of Intellectual Property Rights of any third party, which representation is solely set out in paragraph 4.8 above.

4.11No entity within the Seller’s Group (excluding the Vaccines Group Companies) which is not an Assignor (as that term is defined in the Intellectual Property Assignment Agreement) under the Intellectual Property Assignment Agreement holds any right, title or interest in or to the Vaccines Group Intellectual Property Rights, with the exception of any right, title or interest that is held under any agreement or other arrangement (whether written or unwritten) which will terminate immediately after (i) the date upon which the Vaccines Group Intellectual Property Rights that are registered in, or held exclusively for use in relation to, Ukraine transfer to a member of the Purchaser’s Group pursuant to the terms of the Intellectual Property Assignment Agreement; or (ii) Closing in respect of all other Vaccines Group Intellectual Property Rights.

4.12The Business has not, in the 12 months prior to the date of this Agreement, experienced any material disruption in its operations as a result of any failure of its Information Technology.

5Contracts

5.1No Vaccines Group Company or Business Seller is a party to or subject to any Contract, transaction, arrangement, understanding or obligation (other than in relation to any Property, lease or contract of employment, Information Technology or Intellectual Property Right) which is material to the business of the Vaccines Group and which:

5.1.1is not in the ordinary course of business or is unduly onerous;

5.1.2is not on an arm’s length basis;

5.1.3has an unexpired term or likely duration of 10 years or more;

5.1.4restricts its freedom to carry on its business in any part of the world in such manner as it thinks fit;

5.1.5involves an aggregate outstanding expenditure by it of more than US$50 million, exclusive of VAT;

5.1.6can be terminated in the event of a change of underlying ownership or control of a Vaccines Group Company; or

5.1.7involves the supply of goods and services, the aggregate sales value of which (exclusive of VAT) will be more than 5 per cent of turnover of the Vaccines Group (exclusive of VAT) for the preceding financial year.

5.2Save in relation to any Vaccines Group Intellectual Property Contract, no Vaccines Group Company is in material default under any material Contract to which it is party and no third party is in material default under any material Contract to which a Vaccines Group Company is party and, to the Seller’s knowledge, there are no circumstances in either case likely to give rise to such a material default.

5.3Save in relation to any Vaccines Group Intellectual Property Contract, no Business Seller is in material default under any material Contract to which it is party and no third party is in material default under any material Contract to which a Business Seller is party and, to the

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Seller’s knowledge, there are no circumstances in either case likely to give rise to such a material default.

6Joint Ventures etc.

No Vaccines Group Company or Business Seller is, or has agreed to become, a member of any joint venture, consortium, partnership or other unincorporated association (other than a recognised trade association in relation to which the Vaccines Group Company or Business Seller has no liability or obligation except for the payment of annual subscription or membership fees).

7Agreements with Connected Parties

7.1There are no existing contracts or arrangements material to the business of the Vaccines Group between, on the one hand, any Business Seller or Vaccines Group Company and, on the other hand, the Seller, any Relevant Seller other than on normal commercial terms in the ordinary course of business.

7.2No Affiliate Contract is required to run the Business and the termination of any Affiliate Contract will not, when taken together with the rights and services under the Ancillary Agreements and for the respective terms thereof, have a material effect on the Business.

7.3The Vaccines Group Companies do not currently carry on any Seller’s Group Retained Business (other than the Influenza Business).

8Sufficiency of Vaccines Group

8.1Each of the assets listed in Clause 2.3.1 is owned both legally and beneficially by the Seller or its Affiliates and each of those assets capable of possession is, save where in the possession of third parties in the ordinary course of business, in the possession of the Seller or its Affiliates.

8.2Save for Permitted Encumbrances, no option, right to acquire, mortgage, charge, pledge, line or other form of security or Encumbrance (excluding licences of Intellectual Property or Know-How) or equity on, over or affecting the whole or any part of the assets listed in Clause 2.3.1 is outstanding and, save in relation to Permitted Encumbrances, there is no agreement or commitment entered into by any member of the Seller’s Group to give or create any and no claim has been made against any member of the Seller’s Group by any person entitled to any.

8.3The Vaccines Group Businesses, assets of the Vaccines Group Companies and the assets of the Minority Interest Entities, when taken together with the rights and services under the Ancillary Agreements and for the respective terms thereof:

(i)comprise all of the assets required to carry out the Business of the Vaccines Group in substantially the same manner as it has been during the twelve months prior to the date of this Agreement; and

(ii)are sufficient in all material respects to carry out the Business of the Vaccines Group after the Closing substantially as conducted by the Seller and its Affiliates as of the date of this Agreement,

provided however, that the foregoing is not a warranty of non-infringement, non-misappropriation or any other non-violation of Intellectual Property Rights of any third party, which warranty is solely set out in paragraph 4.8.

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8.4The Vaccines Group Businesses, assets of the Vaccines Group Companies and the assets of the Minority Interest Entities, when taken together with the rights and services under the Ancillary Agreements and for the respective terms thereof, are sufficient in all material respects to carry out the Purchaser’s obligations under the Influenza Business Transitional Services Agreement and under any other arrangements the Purchaser is required to enter into pursuant to Clause 8.14.1(i), substantially as conducted by the Seller and its Affiliates as of 22 April 2014, provided however, that the foregoing is not a warranty of non-infringement, non-misappropriation or any other non-violation of Intellectual Property Rights of any third party, which warranty is solely set out in paragraph 4.8.

9Compliance with Laws, Permits and Anti-Bribery

9.1None of the Seller or its Affiliates is in breach of any Applicable Law where such breach is reasonably likely to be material to the Vaccines Group.

9.2Neither the Seller nor any of its Affiliates has received any written notice from any Governmental Entity that it is not in compliance (or any warning letter that it may not be in compliance) with any Applicable Law or is not in possession of any permits, licences, certificates or other authorisations or consents of a Governmental Entity in each case as is necessary for the conduct of the Business of the Vaccines Group in all material respects as presently conducted (each a “Permit” and, collectively, the “Permits”), except where such non-compliance or non-possession does not remain outstanding or uncured as of Closing or would not reasonably be expected to have a material effect on the Business.

9.3With respect to the Vaccines Group, since 1 January 2009, neither the Seller nor any of its Affiliates, nor any of their respective directors, officers or employees and, to the Seller’s Knowledge, no Seller Partner has, directly or indirectly: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity or to influence official action; (ii) made or offered to make any unlawful payment to any foreign or domestic government official or employee, or agent, political party or any official of such party, or political candidate from corporate funds; (iii) made or offered to make any bribe, rebate, payoff, influence payment, money laundering, kickback or other unlawful payment; or (iv) violated or is in violation of any provision of any applicable Anti-Bribery Law; and with respect to the Vaccines Group, the Seller and its relevant Affiliates have instituted and maintain policies and procedures reasonably designed to ensure compliance with applicable Anti-Bribery Law.

9.4With respect to the Vaccines Group, neither the Seller nor any of its Affiliates, nor any of their respective directors, officers or employees and, to the Seller’s Knowledge, no Seller Partner: (i) is currently the subject of, nor has it been since 1 January 2009, the subject of, any action alleging a violation, or possible violation, of any Anti-Bribery Law, or been since 1 January 2009, the recipient of a subpoena, letter of investigation or other document alleging a violation, or possible violation, of any Anti-Bribery Law, or (ii) has, since 1 January 2009, improperly or inaccurately recorded in any books and records (A) any payments, cash, contributions, gifts, hospitalities or entertainment to a foreign or domestic government official, employee of an enterprise owned or controlled in whole or in part by any foreign government, official of a foreign or domestic political party or campaign, or a foreign or domestic candidate for political office; or (B) other expenses related to political activity or lobbying.

9.5With respect to the Vaccines Group, since 1 January 2009, neither the Seller nor any of its Affiliates, nor any of their respective directors or officers, and, to the Seller’s Knowledge,

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none of their respective employees has received notice that any such person is or has been alleged to be in violation of any sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or by the U.S. Department of State or equivalent measures of the United Kingdom, European Union, or the United Nations (the “Sanctions Law”). With respect to the Vaccines Group, neither the Seller nor any of its Affiliates, nor any of their respective directors or officers, and, to the Seller’s Knowledge, none of their respective employees has conducted any of their business activities whatsoever with, or for the benefit of, a government, national or legal entity to the extent such actions would violate any Sanctions Law. None of the execution, delivery and performance of this Agreement and the direct or indirect use of proceeds from any transaction contemplated hereby or the fulfilment of the terms hereof will result in a violation by any person of any Sanctions Law.

9.6Each member of the Seller’s Group, in connection with the Products, the Product Approvals, the Product Applications, the Transferred Contracts and the Transferred Intellectual Property Contracts requires its Service Providers to act in accordance with the requirements of applicable Anti-Bribery Law and uses all reasonable endeavours to procure that they do so. Each such Service Provider has in place policies, systems, controls and procedures designed to prevent, and which are reasonably expected to continue to prevent, it and its Associated Persons from violating applicable Anti-Bribery Law.

10Product Approvals

10.1The Seller or one of its Affiliates is the registered holder of each of the Product Approvals.  All material Product Approvals held by Seller or its Affiliates are in full force and effect. No material deficiencies have been asserted by any applicable Government Entity with respect to any Product Approval or Product Filing, nor, to the Seller’s knowledge, are there any facts or circumstances that would be likely to lead to such assertions being made.

10.2Each Product was and is being researched, developed, manufactured, marketed or sold in all material respects in accordance with the specifications and standards contained in the relevant Product Approval and the related Marketing Authorisation Data and in accordance with Applicable Law.

10.3Neither the Seller or any of its Affiliates has received any written notice that any Governmental Entity with jurisdiction over the Products has commenced or will commence any action: (i) to withdraw the approval of any Product or otherwise revoke or materially amend any Product Approval or Marketing Authorisation Data; or (ii) enjoin production, marketing or sale of any Product and, to the Seller’s knowledge, no such action has been threatened.

10.4All application and renewal fees due and payable with respect to all material Product Approvals have been paid.

10.5All preclinical and clinical investigations with respect to the Products are being and have been conducted in compliance with Applicable Law in all material respects. The Seller and its Affiliates have not, and to the Seller’s Knowledge, none of its Product Partners or any other third party under any Licensed Intellectual Property Contract has received since 1 January 2009, any written notices or other correspondence from any Governmental Entity with respect to any on-going clinical or pre-clinical studies or tests of any Product requiring the termination, suspension or material modification of such studies or tests.

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10.6None of the Seller or its Affiliates or, to the Seller’s Knowledge, any Product Partner or any other third parties pursuant to any Licensed Intellectual Property Contract, has any knowledge of any adverse event, arising since the date three years prior to the date of this Agreement, reportable with respect to the safety or efficacy of any Product which is expected to be material.

11Product Recall

11.1No Product (or any component thereof) has been recalled, suspended, withdrawn,  seized, discontinued or the subject of a refusal to file, clinical hold, deficiency or similar action letter (including any correspondence questioning data integrity) as a result of any action by any Governmental Entity, by the Seller or any of its Affiliates; nor are any such actions pending or under consideration (or any facts, conditions, or circumstance known) by the Seller or any of its Affiliates, or, to the Seller’s Knowledge, by any Governmental Entity.  There is not, to the Seller’s Knowledge, pending or threatened litigation anywhere in the world seeking the recall, withdrawal, suspension, seizure or discontinuance of any of the Products.

12Product Liability

The Products sold by the Business during the Relevant Period have complied in all material respects with all applicable product specifications and have been Manufactured in all material respects in accordance with applicable requirements of then current GMP and any Applicable Law, except for any such non-compliance that  has not had, and would not reasonably be expected to have, a materially adverse impact on the relevant Product.

13Taxes

13.1Each Vaccines Group Company and each Tax Group to which it belongs has, and every member of the Seller’s Group with an interest in the Vaccines Group has in respect of the Vaccines Group, duly, and within any appropriate time limits, filed all Tax Returns required to be filed and has maintained all records required to be maintained for tax purposes in relation to the assets comprised in the Vaccines Group; all such information was and remains complete and accurate in all material respects and all such Tax Returns were complete and accurate in all material respects and were made on the proper basis.

13.2There are no Tax liens on any asset comprised in the Vaccines Group Businesses (other than Permitted Encumbrances).

13.3No Vaccines Group Company and no Tax Group to which a Vaccines Group Company belongs is currently under audit or examination by a Tax Authority that could result in the assessment of a material amount of Tax and neither the Seller nor any Vaccines Group Company (nor any Tax Group to which a Vaccines Group Company belongs) has received notice from a Tax Authority of any dispute or disagreement outstanding or contemplated at the date of this Agreement with any Tax Authority regarding liability or potential liability to any Tax recoverable from any Vaccines Group Company or regarding the availability of any relief from Tax to any Vaccines Group Company and, so far as the Seller is aware, there are no circumstances which make it likely that any such dispute or disagreement will commence.

13.4The Disclosure Letter lists every written agreement that a Vaccines Group Company has entered into, in each case, which is currently in force, to have its Tax affairs dealt with on a consolidated basis and for any Tax sharing arrangement (including without limitation any arrangement under which Tax losses or Tax reliefs are surrendered or agreed to be

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surrendered or claimed) in respect of the profits, gains or losses of that Vaccines Group Company with any company not being another Vaccines Group Company.

13.5No Vaccines Group Company, and no Tax Group to which a Vaccines Group Company belongs, has received or requested any extension of time to file a Tax Return that remains unfiled or has granted or requested a waiver or extension of a limitation on any period for audit and examination or assessment and collection of Tax for any taxable period as to which Tax could be assessed.

13.6No member of the Seller’s Group with an interest in the Vaccines Group has received notice from a Tax Authority of, and so far as the Seller is aware, there is not any dispute or disagreement outstanding at the date of this Agreement with any Tax Authority regarding the proper method of computing the profits of the Vaccines Group (or any part of it) for Tax purposes or the proper treatment for VAT purposes of any supplies of goods or services made (or treated as made) in the course of the Vaccines Group and, so far as the Seller is aware, there are no circumstances which make it likely that any such dispute or disagreement will commence.

13.7So far as the Seller is aware, no Vaccines Group Company benefits from any preferential Tax regime, granted by law or by special authorisation issued by any Tax Authority or by any other authority, which would in whole or in part be withdrawn as a result of the signature of this Agreement.

13.8So far as the Seller is aware, no Tax Authority has within the past three years operated or agreed to operate any special arrangement (being an arrangement which is not based on relevant legislation or any published practice) in relation to any assets comprised in the Vaccines Group.

13.9In respect of all documents which establish or are necessary to establish the title of the relevant member of the Seller’s Group to each material asset comprised in the Vaccines Group, or by virtue of which the relevant member of the Seller’s Group has any right in respect of each such asset, all applicable stamp duties, transfer taxes, registration charges or similar duties or charges have been duly paid.

13.10So far as the Seller is aware, other than any payments which are of a nature or type (such as expenditure on business entertainment or marketing) which are not deductible for Tax purposes by reason of a general restriction on deductibility applicable to payments of that nature or type under the laws of the jurisdiction in which the relevant Vaccines Group Company is resident for Tax purposes or carries on its business, no Vaccines Group Company is under any obligation to make any future payment which will not be deductible for Tax purposes in an amount which, if the payment were deductible for Tax purposes, would reduce the Tax liability of the relevant Vaccines Group Company by an amount exceeding US$5 million.

13.11The country of incorporation which is given in Schedule 2 for each Vaccines Group Company is also the Tax residence of each Vaccines Group Company, and is the only country whose Tax Authorities seek to charge Tax on the worldwide profits or gains of that Vaccines Group Company and no Vaccines Group Company has, within the past three years, carried on the Business of the Vaccines Group through a permanent establishment in any other country.

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14Environmental Matters

14.1To the Seller’s Knowledge, each Business Seller (with respect to its conduct of the Business and any Transferred Real Property) and Vaccines Group Company is in compliance in all material respects with all Environmental Laws.

14.2To the Seller’s Knowledge, each Vaccines Group Company and each Business Seller (with respect to its conduct of the Business and any Transferred Real Property) possesses all material Permits required under applicable Environmental Laws necessary to conduct its portion of the Business.

14.3To the Seller’s Knowledge, no Vaccines Group Company nor any Business Seller (with respect to its conduct of the Business and any Transferred Real Property) has received any written notice alleging a material violation of any Environmental Laws, other than matters that have been resolved in all material respects.

14.4To the Seller’s Knowledge, no Vaccines Group Company nor any Business Seller (with respect to its conduct of the Business and any Transferred Real Property) has received any written notice or claim alleging that it is or may be liable to any person in any material respect under any applicable Environmental Law as a result of a release or threatened release of any Hazardous Substance at any Transferred Real Property, other than matters that have been resolved in all material respects.

14.5To the Seller’s Knowledge, no Vaccines Group Company nor any Business Seller (with respect to its conduct of the Business and any Transferred Real Property) is a party to any pending proceedings relating to any Environmental Laws, other than proceedings that would not reasonably be expected to have a Material Adverse Effect.

15Employees

15.1The Employees are all employed by a Vaccines Group Company or a Business Seller and work wholly or substantially in the Business (as carried on by the Vaccines Group).

15.2The Disclosure Letter contains a true, complete and correct list of the following information in respect of each Vaccines Business Employee and each Vaccines Group Company Employee as of 17 April 2014 (organised by country and, in relation to any Vaccines Group Company, by legal employer): (A) employee identification details; (B) date of birth; (C) employment status (part-time or full-time); (D) employment start date; (E) base salary; (F) target annual incentive for 2014 (and actual bonus for 2013); and (G) target long-term incentive for 2014 (and actual long-term incentive for 2013).

15.3In each of the Material Employee Jurisdictions except as would not be reasonably expected to have a Material Adverse Effect:

15.3.1as of the date of this Agreement there is not, and in the two years prior to the date of this Agreement there has not been, nor to the Seller’s Knowledge is there pending or threatened, any labour strike, dispute, work stoppage or lockout by any group of either Vaccines Business Employees or Vaccines Group Company Employees;

15.3.2no trade union or works council is recognised in any way for bargaining, information or consultation purposes in relation to any of the Vaccines Business Employees or Vaccines Group Company Employees and no collective bargaining negotiations, whether voluntary or mandatory, are currently taking place with respect to any of the Vaccines Business Employees or Vaccines Group Company

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Employees and, as of the date of this Agreement, no Vaccines Group Company or Business Seller is a party to any agreement (whether legally binding or not) with any trade union or works council affecting any Vaccines Business Employee or Vaccines Group Company Employee and there is no existing dispute with any such representative body (or, to the Seller’s Knowledge, pending or threatened) in relation to the Business (as carried on by the Vaccines Group);

15.3.3there is no material litigation, claim or other dispute existing, nor to the Seller’s Knowledge, pending or threatened by or in respect of any Employees (or any former employees of the Vaccines Group Companies) in respect of their employment or any matter arising from their employment; and

15.3.4no Vaccines Group Company or Business Seller has, within the 2 years prior to the date of this Agreement, closed any plant or facility, effectuated any layoffs of employees or implemented any early retirement, separation or similar programme in each case in violation of the WARN Act, nor has any Vaccines Group Company or Business Seller announced any such action or programme for the future.

15.4No Key Personnel has given notice terminating his or her contract of employment, nor is under notice of dismissal.

15.5To the Seller’s Knowledge, and subject to the next sentence, no Vaccines Group Company Employee will, as a result of the entering into of this Agreement or Closing, be entitled to receive any payment or benefit which he would not otherwise be entitled to receive (including, without limitation, an enhanced severance package on a subsequent termination) or be entitled to treat either such event as amounting to a breach of his terms and conditions of employment or to treat himself as redundant or dismissed or released from any obligation. This warranty shall not apply to any retention arrangements (in the form of cash or shares) put in place by the Seller or any member of the Seller’s Group to retain key employees in connection with the matters contemplated by this Agreement as described in paragraphs 10 and 11 of Schedule 11, or any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 11 of Schedule 11.

15.6Since the Statement of Net Assets Date, no material change has been made, announced or proposed to the emoluments or other terms of employment of any Employee, and no such change, and no negotiation or request for such a change, is due or expected within 12 months from the date of this Agreement, and the employing company is under no obligation to make such a change (with or without retrospective operation) other than any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 11 of Schedule 11.

15.7All the employees needed to carry on the Business (as carried on by the Vaccines Group) at the date of this Agreement at the Key Sites are employed by a Vaccines Group Company and, to the Seller’s Knowledge (other than insofar as would not reasonably be expected to have a Material Adverse Effect) have not resigned and are not expected to resign their employment as a result of this Agreement or the transactions it contemplates.

16Employee Benefits

16.1The Disclosure Letter contains a true, complete and correct list of all bonus, staff incentives (including any share-based incentive schemes), redundancy or other benefits payable on termination of employment (whether voluntary or involuntary but excluding

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arrangements required in accordance with Applicable Law), ill-health, Employee Benefits or other benefits which are the material benefits available to the Vaccines Business Employees and the Vaccines Group Company Employees in the Material Employee Jurisdictions. To the Seller’s Knowledge, other than any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 11 of Schedule 11, no Vaccines Group Company or Business Seller has made any promises or commitments to make available any additional benefits to the Vaccines Business Employees and the Vaccines Group Company Employees in the Material Employee Jurisdictions, or to modify or change in any material way any existing benefits in the Material Employee Jurisdictions, or to continue or maintain the level of any existing benefits generally for any period, which in each case could reasonably be expected to have a Material Adverse Effect.

16.2The Disclosure Letter contains true and complete copies of all documents of any written benefit schemes, plans or arrangements referred to in paragraph 16.1 above applicable to either Vaccines Business Employees or Vaccines Group Company Employees in the Material Employee Jurisdictions containing material terms (including governing documents, and for benefit plans that are not share-based incentive schemes, related trust agreements or other funding documents) and a true, complete and correct summary of the material terms of any unwritten benefit schemes, plans or arrangements referred to in paragraph 16.1 above.

16.3Benefit Plans

16.3.1In the Material Employee Jurisdictions all benefit and compensation schemes, plans, funds, contracts, policies, agreements or arrangements (other than the US Benefit Plans and any schemes, plans, funds, contracts, policies, agreements or arrangements operated by any Governmental Entity) (A) operated by or on behalf of a Vaccines Group Company or Business Seller, with respect to Vaccines Group Company Employees or Vaccines Business Employees or current or former employees or directors of a Vaccines Group Company, (B) in respect of which any Vaccines Group Company or Business Seller, with respect to Vaccines Group Company Employees or Vaccines Business Employees, the Seller or any member of the Seller’s Group contributes or has contributed or (C) in respect of which any Vaccines Group Company or Business Seller, with respect to Vaccines Group Company Employees or Vaccines Business Employees, has any liability (whether actual or contingent), including, but not limited to, plans providing Employee Benefits or during periods of sickness or disablement, or any deferred or incentive compensation, welfare, healthcare, medical, stock or stock-related award plans, including individual pension commitments, “jubilee” pension benefits and retirement and termination indemnity arrangements, and in relation to Switzerland, all plans, funds, contracts, policies,  agreements or arrangements providing pension or other benefits on retirement (such schemes, plans, funds, contracts, policies, agreements and arrangements hereinafter being referred to as “Non-US Benefit Plans”) and the US Benefit Plans have been administered in accordance with their terms and are in compliance with Applicable Law, except for any failures to so administer or be in compliance that, individually and in the aggregate, would not reasonably be expected to have a Material Adverse Effect. All required filings for all Benefit Plans have been made on time and with the appropriate Governmental Entity, except for any failures to timely file that, individually and in the aggregate, would not reasonably be expected to have a Material Adverse Effect. As of the date

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of this Agreement, there is no existing, pending or, to the Seller’s Knowledge, threatened material litigation, claim or other dispute relating to Benefit Plans.

16.3.2The Vaccines Group Companies or Business Sellers, with respect to Vaccines Group Company Employees or Vaccines Business Employees in each Material Employee Jurisdiction, (A) are in material compliance with all Applicable Law respecting employment, employment practices, terms and conditions of employment, occupational health, safety, wages and hours, (B) have withheld all amounts required by Applicable Law, collective bargaining agreements or the Benefit Plans to be withheld from the wages, salaries or other payments to the Vaccines Group Company Employees or the Vaccines Business Employees and former employees of the Vaccines Group Companies, (C) in respect of the Vaccines Group Company Employees or Vaccines Business Employees or former employees of the Vaccines Group Companies, are not liable under any applicable provisions of the Benefit Plans and any Applicable Law for any arrears, wages, Taxes, other than payments not yet due, or any penalty for failure to comply with the foregoing and (D) are not liable under any applicable provisions of the Benefit Plans and any Applicable Law for any payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation benefits, workers compensation, social security or other benefits for Vaccines Group Company Employees or Vaccines Business Employees or former employees of the Vaccines Group Companies, other than payments not yet due, except, in each case, for any failures to comply, failures to withhold or liabilities that, individually and in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

16.3.3All material contributions that the Vaccines Group Companies or Business Sellers, with respect to Vaccines Business Employees or the Vaccines Group Company Employees in a Material Employee Jurisdiction and Switzerland, are required to make to any Benefit Plan in respect of the period on or before the date of this Agreement have been fully and timely paid when due.

17Litigation

17.1No Vaccines Group Company or Business Seller is involved whether as claimant or defendant or other party in any claim or Proceeding (other than as claimant in the collection of debts arising in the ordinary course of its business none of which exceeds US$5 million) which is material to the Business.

17.2To the Seller’s Knowledge, no such claim or Proceeding of material importance is pending or threatened by or against any Vaccines Group Company or Business Seller.

18Insolvency

18.1No order has been made and no resolution has been passed for the winding up of any Share Seller or any Business Seller, or for the appointment of any administrator, receiver (including administrative receiver) or liquidator (provisional or otherwise) over the whole or any part of the property, assets and/or undertaking of any Share Seller or any Business Seller.

18.2No petition has been presented or meeting convened for the purpose of considering a resolution or resolution circulated for the winding up of any Share Seller or any Business Seller, or for the appointment of any administrator, receiver (including administrative

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receiver) or liquidator (provisional or otherwise) over the whole or any part of the property, assets and/or undertaking of any Share Seller or any Business Seller.

18.3Neither any Share Seller nor any Business Seller has stopped payment or suspended payment of its debts generally, is insolvent or deemed unable to pay its debts as they fall due.

19Insurance

All material insurance policies relating to the Vaccines Group are in full force and effect and, to the Seller’s Knowledge, no notice of cancellation, termination or default has been received with respect to any such insurance policy. All premiums due and payable on such policies covering periods up to Closing have been paid in full or accrued.

20Consents and Licences

20.1All governmental and quasi-governmental licences, consents, permissions, waivers, exceptions and approvals required for carrying on the Business of the Vaccines Group, the absence of which, individually or in the aggregate, would be material to the Vaccines Group, are in force and, to the Seller’s Knowledge, no written notice has been received by the Seller or any member of the Seller’s Group which indicates that any such licence, consent, permission, waiver, exception or approval is likely to be revoked or which may confer a right of revocation.

21Delinquent and Wrongful Acts

21.1To the Seller’s Knowledge, no member of the Seller’s Group has, during the Relevant Period, committed any criminal or illegal act which relates to the Vaccines Group Companies or the Vaccines Group Businesses.

21.2No member of the Seller’s Group has, during the Relevant Period, received notification that any investigation or inquiry is being or has been conducted by any supranational, national or local authority or governmental agency specifically related to the Vaccines Group, which is material in respect of the Vaccines Group.

22Compliance

22.1No member of the Seller’s Group has received in the Relevant Period any written notification or written claim (in each case, which remains outstanding) that it has conducted the Business of the Vaccines Group with respect to the research, development, manufacturing, distribution and sale of the Products in a manner which does not in any respect comply with all Applicable Law, or which in any respect is defective or dangerous, where the pursuit of any such notification or claim is, or would reasonably be expected to be, material in respect of the Vaccines Group.

22.2So far as the Seller is aware, the Vaccines Group has, and has during the Relevant Period been, operated in all material respects in compliance with all Applicable Law or standards and to the Seller’s Knowledge there are no circumstances that could involve or lead to a material violation of any material Applicable Law or standards.

23Pipeline Products

23.1The Seller or one of its Affiliates is the registered holder of each of the Pipeline Product Approvals, and the benefit of each Pipeline Product Approval can be transferred to the Purchaser (or another member of the Purchaser’s Group) regardless as to whether such

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transfer occurs directly (whether by way of transfer, reissuance or any other equivalent mechanism under Applicable Law of the relevant jurisdiction) or indirectly (through the transfer of the Vaccines Group Companies).

23.2All development activities in relation to the Pipeline Products have been conducted in the ordinary course and in accordance with all Applicable Law and standards and to the Seller’s Knowledge there are no circumstances relating to the development of the  Pipeline Products that could involve or lead to a material violation of any material Applicable Law or standards.

23.3No material regulatory, clinical or safety event has occurred in relation to the Pipeline Products and no member of the Seller’s Group has received any notification or claim from any person of any such event (or the possibility of any such event).

24Manufacturing Licences and Manufacture

24.1All Manufacturing Licences which are material to the Vaccines Group, are in effect and are validly held by a member of the Seller’s Group and during the Relevant Period, to the Seller’s Knowledge, no member of the Seller’s Group has received any written notice of any suit, action or proceeding regarding the revocation or modification of any such Manufacturing Licence.

24.2No directive, order or notice has been given to the Seller or any member of the Seller’s Group by any relevant regulatory authority to update, modify, amend, vary, supplement or delete any process and/or methodology relevant to the manufacture at the Sites of any Product currently manufactured at the Sites and, so far as the Seller is aware, no such directive, order or notice is pending.

25No Industrial Action

To the Seller’s Knowledge, there is no industrial action currently taking place, threatened or expected which is, or is expected to be, material to the Business.

26Ongoing Clinical Trials

Schedule 22 contains a complete list of all Ongoing Clinical Trails.

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Schedule 19
Warranties given by the Purchaser under Clause 10.3

1Authority and Capacity

1.1Incorporation

The Purchaser is validly existing and is a company duly incorporated and registered under the law of its jurisdiction of incorporation.

1.2Authority to enter into Agreement

1.2.1The Purchaser and each member of its Group has the legal right and full power and authority to enter into and perform this Agreement, any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Ancillary Agreement.

1.2.2The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Purchaser and each member of its Group in accordance with their respective terms.

1.2.3Except as referred to in this Agreement, the Purchaser:

(i)is not required to make any announcement, consultation, notice, report or filing; and

(ii)does not require any consent, approval, registration, authorisation or permit,

in each case in connection with the performance of this Agreement or any other document referred to in paragraph 1.2.1.

1.2.4The execution and delivery of the documents referred to in paragraph 1.2.1 and the performance by the Purchaser and each member of its Group of their respective obligations under them, will not:

(i)result in a breach of any provision of the memorandum or articles of association or by laws or equivalent constitutional document of the relevant member of the Purchaser’s Group;

(ii)result in a breach of, or constitute a default under, any instrument or contract to which the relevant member of the Purchaser’s Group is party or by which the relevant member of the Purchaser’s Group is bound where such breach is material to their ability to perform their obligations under such documents;

(iii)result in a breach of any existing order, judgment or decree of any court, Governmental Entity by which the relevant member of the Purchaser’s Group is bound and where such breach is material to their ability to perform their obligations under such documents.

1.3Authorisation

The Purchaser has taken, or will have taken by Closing, all corporate action required by it to authorise it to enter into and to perform this Agreement, any Ancillary Agreement to

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which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Ancillary Agreement.

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Schedule 20
Pre-Closing Obligations
(Clause 5.2)

Part 1

Seller Restrictions

The actions for the purposes of Clause 5.1.2 are:

1amend or otherwise modify the constitutional documents of any Vaccines Group Company other than minor or administrative amendments or modifications which are not adverse to the Business or to the Purchaser of any member of the Purchaser’s Group;

2create, allot or issue, or grant an option or right to subscribe for or purchase, any share capital or other securities or loan capital of any Vaccines Group Company;

3repay, redeem or repurchase any share capital, or other securities of any Vaccines Group Company;

4make any acquisition or disposal which has a value in excess of US$10 million, exclusive of VAT;

5grant any guarantee or indemnity for the obligations of any person which has a value in excess of US$5 million (other than in the ordinary course of trading);

6dispose of, or agree to dispose of, any material asset or material stock at below market value other than in the ordinary course of business;

7acquire or agree to acquire any share, shares or other interest in any company, partnership or other venture, other than an investment of 5 per cent or less of the total shares or interest in such company, partnership or venture and provided the investment is not more than US$5 million;

8enter into, extend, amend, give notice to terminate or vary in any material respect any lease of real property or change the existing use of such property which is material to the Vaccines Group;

9cease, compromise or settle any dispute including litigation, arbitration or administrative proceedings in relation to (or otherwise compromise or settle) any claim by Pfizer which relates to any form of meningococcal vaccine (Group B) whether adjuvanted, combined or otherwise (or any similar product) of Pfizer or enter into any licensing arrangements with Pfizer in relation to such products or Intellectual Property Rights relevant to them;

10enter into any borrowing facility which has a value in excess of US$10 million;

11enter into any off-balance sheet finance arrangements;

12sell, lease, license, transfer or dispose of, or create any Encumbrance over, any material assets of the Vaccines Group other than (i) in the ordinary course of business (including any sale of inventory); or (ii) any Permitted Encumbrance;

13(a) terminate, materially amend (or amend in any respect in relation to a Product or Pipeline Product which is material to the Business) or grant any material waiver under (or any waiver in relation to a Product or Pipeline Product which is material to the Business)

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any Vaccines Group Intellectual Property Contract or the Merck 2012 Licence or (b) terminate any Transferred Contract other than in the ordinary course of business or terminate any Contract held by the Vaccines Group Companies other than in the ordinary course of business;

14fail to comply in all material respects with all Applicable Law, Product Approvals, Pipeline Product Approvals and Marketing Authorisations applicable to the operation of the Business;

15assign, dispose of, license (save in respect of non-exclusive licences relating to the Seller’s research, development or Commercialisation of the Products) abandon any material Vaccines Group Intellectual Property Rights (or any Vaccines Group Intellectual Property Rights in respect of a Product or Pipeline Product which is material to the Business), or cease to prosecute or otherwise dispose of, fail to maintain, defend or pursue applications for any material Registered Vaccines Group Intellectual Property Rights (or any Registered Vaccines Group Intellectual Property Rights in respect of a Product or Pipeline Product which is material to the Business).  Notwithstanding the foregoing, the parties agree that the restrictions set out in this paragraph will not apply in respect of the Abandoned Patents abandoned prior to 22 April 2014;

16save where requested in writing by the Purchaser or required by any applicable Governmental Entity, cancel, surrender or materially amend (or amend in any respect in relation to a Product or Pipeline Product which is material to the Business) any applications, submissions or filings with respect to Registered Vaccines Group Intellectual Property Rights;

17instigate, cease, compromise or settle any litigation or arbitration proceedings related to the Vaccines Group in relation to a claim for which the potential liability attaching thereto is in excess of US$5 million;

18make any material amendment to any Marketing Authorisation, Manufacturing Licence or Environmental Permit, in each case except to the extent required by: (a) Applicable Law; (b) any Governmental Entity, or (c) the standards, policies and procedures of the Seller’s Group as then in force;

19enter into or amend in any material respect any Transferred Contract, or incur any commitment, which is not capable of being terminated without compensation at any time with twelve months’ notice or less or which is not in the ordinary course of business, or which involves or may involve total annual expenditure in excess of US$10 million, exclusive of VAT;

20enter into any contract which would materially restrict the freedom of the Vaccines Group to operate in any part of the world;

21terminate (except for good cause) the employment of any Key Personnel;

22take any steps to increase or reduce the proportion of time spent working in the Business (as carried on by the Vaccines Group) by any employee of any member of the Seller’s Group or to transfer the employment of any Employee to another member of the Seller’s Group or to employ or offer to employ or engage any new persons  in the Business (as carried on by the Vaccines Group) other than in the ordinary course of business consistent with past practice and subject to an aggregate increase of not more than 2.5 per cent. in total staff costs of the Business (as carried on by the Vaccines Group) per annum,

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provided that this restriction shall not apply to the redeployment of any Vaccines Group Company Employee who is not wholly or substantially engaged in the Business (as carried on by the Vaccines Group) before the Closing Date to employment with another member of the Seller’s Group;

23make, or commit to make, any changes to the terms and conditions of employment (including pension fund commitments or any increase to remuneration) or to any employee benefit plan of any Employee, other than (a) those required by Applicable Law or (b) pursuant to normal annual pay reviews in the ordinary course of business consistent with past practice and subject to an aggregate increase of not more than five per cent. in total staff costs of the Business (as carried on by the Vaccines Group) per annum or (c) retention arrangements in the form of cash or shares to retain key employees in connection with the matters contemplated by this Agreement as described in paragraphs 10 and 11 of Schedule 11, or (d) those changes to the share-based incentive schemes made for the purpose of complying with paragraph 11 of Schedule 11;

24make any promises or commitment to any Employees or employee representative body concerning the matters contemplated by this Agreement or offer or otherwise give any assurances to any Employees as to the possibility of continued employment with the Purchaser’s Group after Closing;

25make any change or commitment to make any change to the terms of any redundancy policy or practice applying to the Employees (including amounts payable on redundancy);

26enter into (where there is no existing agreement) or materially amend any collective bargaining agreement or other contract with a labour organisation, works council or employee organisation to create new or additional obligations for any member of the Seller’s Group, in each case in relation to the Business (as carried on by the Vaccines Group); and

27undertake any recall or withdrawal of any Product (other than in the ordinary course of business or to comply with Applicable Law).

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Part 2

Seller Obligations

1Obligations Prior to be Satisfied prior to the Closing Date

At least five Business Days prior to the Closing Date, the Seller shall provide the Purchaser with a list of any required actions that must be taken within three (3) months after Closing with respect to the payment of any registration, maintenance, or renewal fees or the filing of any documents, applications or certificates in order to maintain any Registered Vaccines Group Intellectual Property Rights in full force and effect. Upon the Purchaser’s reasonable request, the Seller shall execute and deliver assignment agreements and other transfer documentation, including, where applicable, duly executed assignments of such Registered Vaccines Group Intellectual Property Rights for recording with the applicable Governmental Entity, and to take such further actions, in each case at the Purchaser’s reasonable cost and expense and as may be required, to give effect to the foregoing assignments.

2Obligations from the Date of the Agreement to the Closing Date

The requirements for the purposes of Clause 5.1.3 are:

2.1so far as permitted by Applicable Law, the Seller shall procure that each member of the Seller’s Group informs the Purchaser promptly if the Seller becomes aware of, or has reasonable grounds for suspecting any violation of Anti-Bribery Law which is reasonably likely to have an impact on the Vaccines Group, and

2.2carry out capital expenditure in relation to any site operated by the Vaccines Group where the Products are manufactured in a manner materially consistent (and within a variance of 10 per cent. in aggregate) with the Seller’s capital expenditure programme for the Business as at the date of this Agreement;

2.3maintain and keep any Registered Vaccines Group Intellectual Property Rights and ensure that all filings and notifications required to be made in respect of the same are made in accordance with past practice;

2.4progress, in accordance with past practice any applications, submissions, filings or other correspondence relating to the grant of new Registered Vaccines Group Intellectual Property Rights;

2.5progress, in accordance with past practice during the Relevant Period, any applications, submissions, filings or other correspondence initiated by such member of the Seller’s Group relating to the grant of new Manufacturing Licences and Environmental Permits in respect of the Vaccines Group;

2.6continue to promote, market and Commercialise the Products in accordance with past practice during the Relevant Period and do not materially accelerate or increase the quantity of Products distributed to the relevant distributors and/or wholesalers, in each case except in respect of a bona fide increase in demand for the relevant Product by the relevant distributor and/or wholesaler which has not been stimulated in any way by discounts, rebates, claw-backs or the like outside of the ordinary course of business or the grant of preferred terms offered by the Seller’s Group outside of the ordinary course;

2.7not discontinue or cease to operate or materially reduce the resources applied to any part of the Business;

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2.8maintain the level of Manufacturing Stocks and Manufacturing Inventory held for use in the Business materially in accordance with the Seller’s Group’s operating policies as applied to the Vaccines Group from time to time in force;

2.9maintain the level of In-Market Inventory held for use in the Business materially in accordance with the Seller’s Group’s operating policies as applied to the Vaccines Group from time to time in force;

2.10use all reasonable endeavours to ensure that the manufacture of the Products by the Seller’s Group comply with Applicable Law;

2.11use all reasonable endeavours to ensure that the Products sold by the Business comply with Applicable Law;

2.12continue to conduct the Ongoing Clinical Trials in accordance with GCP and the Seller Group’s policies and procedures; and

2.13notify the Purchaser in writing of any actual safety or quality issue in respect of any Product or the manufacture of any Product (as soon as reasonably practicable after becoming aware of the same) which issue the relevant member of the Seller’s Group, acting reasonably and in good faith, considers material in the context of the manufacture or commercialisation of such Product.

2.14so far as permitted by Applicable Law, report periodically to the Purchaser concerning the status of the Business, including delivering to the Purchaser as soon as reasonably practicable each month:

2.14.1an update on material commercial developments in relation to the Business and the Products during the previous month;

2.14.2the gross profit for each Product in respect of the previous month; and

2.15a report on the month-end in-trade inventory in respect of each Product for the previous month prepared in the ordinary course of business consistent with past practice, together with a comparison against the comparable period of trading for the prior year;

2.16use all reasonable endeavours to obtain a waiver in relation to the Transaction from the joint venture partner in Zhejiang Tianyuan Bio-Pharmaceutical Co. Ltd in respect of the joint venture partner’s rights of first refusal; and

2.17shall or shall procure that each member of the Seller’s Group continues to respond to any Calls For Tender  in accordance with past practices in the relevant market.

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Part 3

Exceptions

Clause 5.1 shall not operate so as to prevent or restrict the declaration, making or payment of any dividend or other distribution to shareholders.

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Schedule 21
Key Employees
(Clause 1.1)

[***]

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Schedule 22
Ongoing Clinical Trials
(Clause 1.1)

[***]

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Schedule 23
Statement of Net Assets
(Clause 1.1)

Part 1

Statement of Net Assets Rules

Part 1 of Schedule 23 comprises the Statement of Net Assets Rules.

Part 2 of Schedule 23 sets forth, for illustrative purposes only, a computation of the Statement of Net Assets as of the close of business on 31 December 2013 (the “Statement of Net Assets”).

1Preparation of the Statement of Net Assets

1.1Period

The Statements of Net Assets is prepared as of the close of business on the final day of the relevant calendar month.

1.2Translation of Reporting Entity’s Statements of Net Assets

A reporting entity reports in local currency. All reports are translated into US dollars by the Seller for reporting purposes. The Statement of Net Assets is translated with the period-end exchange rates which are the rates provided by Novartis Group Treasury and are based on Bloomberg’s mid-morning CET exchange rates and are published in the Group Treasury section of the Novartis intranet.

1.3Novartis Reporting System and Materiality:

1.3.1Financial information is obtained from the Financial Consolidation & Reporting System of Novartis and the supporting general ledgers are prepared in accordance with Novartis’ Accounting Manual (the “NAM”). The Financial Consolidation & Reporting System is the system of record for Novartis external reporting. References in the Statement of Net Assets included as part 2 of this Schedule 23 shown as “BS01 lines 010-671” relate to the groupings shown in Novartis’ monthly reporting form “BS01 — Balance sheet”.

1.3.2For the Seller’s reporting purposes, the financial reporting of a legal entity is separated into a divisional part, which includes operating items and a corporate part, which mainly captures the amounts related to taxes, post-employment benefit obligations and most of the financial assets and liabilities. The Statement of Net Assets contains the business of the Vaccines division (including the Influenza Business) as included in Novartis’ segment reporting (column C - “Vaccines Divisional Reported Statement of Net Assets”), and items of the corporate Statement of Net Assets for the Vaccines Group Companies (Column D — “Vaccines Statement of Net Assets of the Corporate part of the Vaccines Group Companies” and items related to the Statement of Net Assets for the Novartis Vaccines Institute for Global Health (column E — “Statement of Net Assets of the part of Novartis Vaccines Institute for Global Health”) as well as adjustments for certain items which are either excluded from or added to the transaction (columns F -”Excluded items”). A US$10 million threshold was applied. Column H shows the impact of the Influenza Business which is excluded from the transaction. For the purpose of the carve out of the Influenza Business allocations have been made

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based on management’s best estimate of the contribution of the Influenza Business. For Receivables own BU (BS01_130) and Payables own BU (BS01_620) items related to the entity in Liverpool, which will not transfer have been added back into the statement of net assets. For other entities amounts related to the Influenza Business have not been added back in as they are offsetting each other.  Payables and Receivables to Other BU’s related to the Influenza Business have been left in the statement of net assets as they are not expected to be material on a net basis. A materiality threshold of US$ 50million applies to the Influenza Business.

1.3.3The Statement of Net Assets has been prepared as follows:

(i)in accordance with the specific accounting treatments set out below; and, subject thereto,

(ii)adopting the same accounting principles, methods, procedures and practices utilized in preparing the consolidated financial statements of Novartis AG as described in the Novartis Accounting Manual applied on a consistent basis using consistent estimation methodologies and judgments and with consistent classifications and, subject thereto,

(iii)in accordance with IFRS.

1.3.4For the avoidance of doubt, paragraph 1.3.3(i) shall take precedence over paragraphs 1.3.3(ii) and 1.3.3(iii), and paragraph 1.3.3(ii) shall take precedence over paragraph 1.3.3(iii).

2Specific Policies

The following supplement the description in the NAM for certain items included in the Vaccines Group Statement of Net Assets:

2.1Non-Current assets

2.1.1Property, plant and equipment (BS01_010)

For the purpose of the Vaccines Divisional Statement of Net Assets an amount of US$122 million is included for assets which are not dedicated to the Vaccines Group and will not transfer to the Purchaser (as reflected in Column F). These assets comprise all property, plant and equipment located in Emeryville, California and in Pernambuco, Brazil.

2.1.2Financial assets &— subsidiaries/JV (BS01_040)

This line reflects equity investments that Vaccines Group Companies hold in other Vaccines Group Companies. These relationships have been eliminated in the Statement of Net Assets (as reflected in Column F).

2.1.3Total financing and loans to subsidiaries/JV (BS01_050)

This line represents financing owed by any member of the Seller’s Group to a Transferred Subsidiary. For the purpose of the Statement of Net Assets balances within the Vaccines Group have been excluded (as reflected in Column F).

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2.2Current Assets:

2.2.1Trade receivables (BS01_120)

An amount of US$51 million of trade receivables is excluded from this Statement of Net Assets (as reflected in Column F) as it relates to non-Vaccines business activity such as licence fee receivables related to HCV and HIV patents.

2.2.2Receivables own BU (BS01_130)

Column C of the Statement of Net Assets represents receivables against other entities within the Vaccines division, which are offset by an equivalent amount in the line Payables own BU. These amounts have been eliminated in Column F of the Statement of Net Assets.

2.2.3Receivables own BU — Corporate and Institute for Global Health (BS01_130)

Columns D and E of the Statement of Net Assets represent receivables against other members of the Seller’s Group as well as other Vaccines Group Companies.  The receivables against other Vaccines Group Companies have been eliminated in Column F of the Statement of Net Assets.

2.2.4Receivables other BU’s (BS01_140)

Receivables recognized on this line are due from members of the Seller’s Group operating in the Pharmaceuticals and Sandoz segments which are selling vaccines in markets where the Vaccines Group is not represented. The receivable of the Vaccines Institute for Global Health relates to a Transferred Subsidiary and has therefore been eliminated.

2.2.5Other current assets (BS01_160)

An amount of US$5 million is related to current assets of the divested Diagnostics business, which did not transfer to the purchaser of the Diagnostics business. They are excluded from the Statement of Net Assets as they do not relate to the activities of the Vaccines Group (as reflected in Column F). Furthermore, an amount of US$1 million is related to assets of the plant in Pernambuco, Brazil which will not be transferred and has therefore been excluded (as reflected in Column F) from the Statement of Net Assets.

2.2.6Prepaid share-based payments (BS01_161)

An asset for prepaid share-based compensation is recognized to reflect Novartis’ internal charge-out mechanism for its equity settled share-based compensation plans. For entities settling the charge for the shares at the beginning of the vesting period, it reflects the expense yet to be recognized for the unvested part of a share-based compensation plan. This asset has been excluded (as reflected in Column F) and is not reflected in the Statement of Net Assets.

2.3Long-term Liabilities:

2.3.1Total financing and loans from subsidiaries/JV (BS01_520)

This line represents financing received from any member of the Seller’s Group. For the purpose of the Statement of Net Assets, balances within the Vaccines Group have been excluded (as reflected in Column F).

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2.3.2Other non-current liabilities (BS01_540)

Column F excludes net liabilities for post-employment benefits of US$90 million included in the corporate part of the Vaccines Group Companies as their treatment is addressed separately in Schedule 12.

2.4Current Liabilities:

2.4.1Trade payables (BS01_610)

An amount of US$11 million included in this line relates to the construction of the plant in Pernambuco, Brazil which will not be transferred and has therefore been excluded (as reflected in Column F) from the Statement of Net Assets.

2.4.2Payables own BU (BS01_620)

Column C of the Statement of Net Assets represents payables against other entities within the Vaccines division, which are offset by an equivalent amount in the line Receivables own BU. These amounts have been eliminated in the Statement of Net Assets.

2.4.3Payables own BU — Corporate (BS01_620)

Column D of the Statement of Net Assets represents payables against other Vaccines Group Companies as well as payables against other members of the Seller’s Group. The corporate payables against Vaccines Group Companies have been eliminated in Column F of the Statement of Net Assets.

2.4.4Payables other BU’s (BS01_630)

Payables recognized on this line are due to members of the Sellers’ Group, except for a payable recognized by the Vaccines Institute for Global Health, which is owed to a Vaccines Group Company and has therefore been eliminated.

2.4.5Accrued and other current liabilities (BS01_670)

An amount of US$35 million is related to short term liabilities of the divested Diagnostics business, which did not transfer to the purchaser of this Diagnostics business. They are excluded from the Statement of Net Assets (as reflected in Column F) as they do not relate to the activities of the Vaccines Group. Furthermore, an amount of US$3 million relates to the construction of the plant in Pernambuco, Brazil, which will not be transferred and has therefore also been excluded (as reflected in Column F) from the Statement of Net Assets. An amount of US$1 million relates to legal fees for litigation not related to the Vaccines Group.

2.4.6Accrued share-based payments (BS01_671)

A liability for share-based compensation is recognized to reflect Novartis’ internal charge-out mechanism for its equity-settled share-based compensation plans. For entities settling the charge for the shares after the vesting period, it reflects the expense recognized for the vested part of a share based compensation plan. This liability has been excluded (as reflected in Column F) and is not reflected in the Statement of Net Assets.

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Part 2

Statement of Net Assets

[***]

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Schedule 24
Regulatory Approvals

The following table provides the additional jurisdictions and applicable antitrust, merger control, or foreign investment rules referenced in Clause 4.1.3.

This list of jurisdictions and statutes is not meant to be indicative of a known filing or approval requirement in these jurisdictions. To the extent that clearances, approvals, waivers, no action letters or consents are not required to be obtained or not otherwise agreed by the parties to be appropriate, and waiting periods are not required to have expired in these jurisdictions, prior to Closing, such clearances, approvals, waivers, no action letters, consents, and waiting period expirations will not be conditions precedent to Closing

Country	Statute Under Which Filing/Approval is Required
Australia	The Competition and Consumer Act of 2010
Brazil	Law No. 12,529 of November 30, 2011
Canada	The Competition Act
China	The Chinese Anti-Monopoly Law
India	The Competition Act of 2002, as amended by The Competition (Amendment) Act of 2007
Israel	The Restrictive Trade Practices Law, 5748-1988
Japan	The Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade No. 54 of 1947
Mexico	The Federal Law on Economic Competition
New Zealand	The Commerce Act of 1986
Russia	Federal Law No. 135-FZ of July 16, 2006 on Protection of Competition
South Africa	The Competition Act 89 of 1998
South Korea	The Monopoly Regulation and Fair Trade Act
Taiwan	The Fair Trade Law of 1991
Turkey	The Law on Protection of Competition No. 4054 of 1994

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Schedule 25
Delayed Jurisdictions

1Definitions used in this Schedule

1.1In this Schedule:

“Accounting Standards” means the most recent edition of the International Financial Reporting Standards as published by the International Accounting Standards Board at the time that any amount is to be calculated by reference to these standards;

“Audit Team” has the meaning given in paragraph 4.3 of this Schedule;

“Controlled Business Instruction” has the meaning given in paragraph 3.4.1 of this Schedule;

“Controlled Delayed Businesses” means the Delayed Businesses other than the Non-Controlled Delayed Businesses;

“Delay Milestone” means the milestone set out next to the relevant Delayed Business in Appendices 1 and 2 to this Schedule;

“Delayed Business Employees” has the meaning given to it in Schedule 11;

“Delayed Business Representative” has the meaning given in paragraph 3.3 of this Schedule;

“Delayed Businesses” means the Delayed Vaccines Group Companies and the Delayed Vaccines Group Businesses;

“Delayed Closing” means, in respect of a Delayed Business, completion of the transfer of legal ownership of that Delayed Business to the Purchaser in accordance with this Schedule;

“Delayed Closing Date” has the meaning given to it in paragraph 1.4 of this Schedule;

“Delayed Employees” has the meaning given to it in Schedule 11;

“Delayed Liabilities” means the liabilities listed in Appendix 3 to this Schedule;

“Delayed Vaccines Group Business” means a Vaccines Group Business listed in Appendix 2 to this Schedule;

“Delayed Vaccines Group Company” means a Vaccines Group Company listed in Appendix 1 to this Schedule;

“Disputed Items” has the meaning given in paragraph 4.10 of this Schedule;

“Dispute Notice” has the meaning given in paragraph 4.9 of this Schedule;

“Draft Economic Benefit Statement” has the meaning given in paragraph 4.3 of this Schedule;

“Economic Benefit Amount” has the meaning given to it in paragraph 4.12.2 of this Schedule;

“Economic Benefit Expert” has the meaning given in paragraph 4.12.2 of this Schedule;

“Economic Benefit Objective” has the meaning given to it in paragraph 4.4 of this Schedule;

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“Economic Benefit Statement” has the meaning given in paragraph 4.14.2 of this Schedule;

“Economic Benefit Payment” has the meaning given in paragraph 4.15.1 of this Schedule;

[***];

“Half-Yearly Accounting Period” means (i) the period commencing on 1 January in any year and ending on 30 June in the same year and (ii) the period commencing on 1 July in any year and ending on 31 December in the same year;

“Non-Controlled Delayed Business” means:

(i)the Businesses conducted by Novartis (Bangladesh) Limited, Novartis (Thailand) Limited and Novartis Healthcare Private Limited; and

(ii)Chiron Behring Vaccines Private Limited; and

“Protected Information” has the meaning given in paragraph 4.7 of this Schedule; and

“Reverse Payment” the meaning given in paragraph 4.15.2 of this Schedule; and

“Seller Involvement Instruction” has the meaning given in paragraph 3.10 of this Schedule.

1.2The parties agree that legal ownership of the Delayed Businesses shall not be transferred by the Seller to the Purchaser at Closing but that the Delayed Businesses shall be operated by Seller and that the benefit and burden of such Delayed Business shall be for the Purchaser with effect from the Effective Time on the terms set out in this Schedule.

1.3The Seller and the Purchaser shall (and shall procure that their respective Affiliates shall) use all reasonable endeavours to procure the achievement of each Delay Milestone as soon as possible after the Closing Date.

1.4Delayed Closing in respect of a Delayed Business shall occur on the date which is the last Business Day of the month in which the relevant Delay Milestone has been achieved except that:

1.4.1where the last day of such month is not a Business Day, the Delayed Closing shall instead take place on the first Business Day of the following month; and

1.4.2where less than five (5) Business Days remain between achievement of the Delay Milestone and the last Business Day of the month, Delayed Closing shall take place:

(i)on the last Business Day of the following month;

(ii)where the last day of such month is not a Business Day, the Delayed Closing shall instead take place on the first Business Day of the month following the month referred to in paragraph 1.4.2(i); or

(iii)on such other date as may be agreed between the Purchaser and the Seller,

such date (in each case) being the “Delayed Closing Date”.

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2Obligations on Delayed Closing Date

The Sellers’ Obligations

2.1On each Delayed Closing Date, the Seller shall deliver to the Purchaser the Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents) duly executed by the relevant member(s) of the Seller’s Group.

The Purchaser’s Obligations

2.2On each Delayed Closing Date, the Purchaser shall deliver to the Seller the Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents) duly executed by the relevant member(s) of the Purchaser’s Group.

2.3For the purposes of compliance with paragraphs 2.1 and 2.2 of this Schedule, the Seller and the Purchaser shall, between the date of this Agreement and the Delayed Closing Date, negotiate in good faith any and all Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents) such that they are consistent with equivalent Ancillary Agreements executed at Closing, and shall take all such other steps as are required to transfer the Delayed Businesses in accordance with this Agreement and the Ancillary Agreements.

Tax Indemnity

2.4References in paragraphs 2.1 to 2.3 above to Ancillary Agreements shall not include the Tax Indemnity, the execution and delivery of which shall be dealt with under Schedule 15.

2.5This Schedule is without prejudice to the rights and obligations of the parties and their respective Groups under the Tax Indemnity.

2.6The Purchaser shall use reasonable endeavours to procure that any Controlled Business Instructions are consistent with the rights and obligations of the parties and their respective Groups under the Tax Indemnity.

2.7Nothing done or procured (or omitted to be done or procured) by or on behalf of the Seller in accordance with the Seller’s rights under the Tax Indemnity shall constitute a breach by the Seller of its obligations under paragraphs 3.4 and 3.10 of this Schedule.

3Management and Control of Delayed Businesses

Management and control

3.1To the maximum extent permissible by Applicable Law, and the terms of any Product Approvals and Product Applications, the parties intend that, pursuant to this Schedule, all management and control rights and powers that the Seller (or any member of the Seller’s Group) has in relation to a Controlled Delayed Business shall transfer to the Purchaser with effect from Closing and, accordingly, that the Purchaser shall consolidate the Controlled Delayed Businesses into its accounts with effect therefrom in accordance with its accounting policies as applied from the Closing Date.

3.2As soon as reasonably practicable after Closing, the Purchaser shall notify the Seller of the names of its personnel permitted to provide Controlled Business Instructions (“Instructing Personnel”) and the Seller shall be entitled to rely on and act in accordance with Controlled Business Instructions from Instructing Personnel without further verification. Instructions provided by or on behalf of the Purchaser shall not be required to be in writing if they are provided by the Instructing Personnel. The Purchaser shall be free to change its

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Instructing Personnel from time to time by providing 10 Business Days’ written notice to the Seller’s Delayed Business Representative.

3.3In order to cooperate in managing the implementation of the provisions set out in this Schedule, the Seller and the Purchaser shall notify each other of the identity of a senior member of management (the “Delayed Business Representative”) who shall be the primary point of contact in the event that there is any issue in connection with the operation of the provisions in this Schedule. The parties shall notify each other in writing of the contact details for their respective Delayed Business Representatives from time to time.

3.4From Closing until the relevant Delayed Closing Date, in respect of any Controlled Delayed Business, the Seller shall:

3.4.1subject to paragraph 3.11 and to the maximum extent permitted by Applicable Law,  and the terms of any relevant Product Approvals and Product Applications, act in accordance with any instructions provided to it by any of the Instructing Personnel in relation to any aspect of the management and operation of that Controlled Delayed Business or any part of it, whether in relation to sales, marketing, distribution, manufacturing, research and development or any other activities of that Controlled Delayed Business, the making (or otherwise) of expenditure, investments, employee matters (including the hiring or dismissal of any Delayed Employee), determining operating or financial policies of that Controlled Delayed Business, or otherwise, including developing that Controlled Delayed Business into new areas and undertaking activities not previously undertaken in relation to that Controlled Delayed Business, and in each case with the effect that the Purchaser shall have, to the maximum extent permissible by Applicable Law, and the terms of any relevant Product Approvals and Product Applications, the same powers in relation to the relevant Controlled Delayed Business as it would have following the Delayed Closing Date of that Controlled Delayed Business (a “Controlled Business Instruction”);

3.4.2comply with the provisions of Schedule 8 in relation to Product Approvals and Product Applications relating to the Controlled Delayed Business;

3.4.3except to the extent otherwise instructed by the Purchaser’s Instructing Personnel in accordance with this paragraph 3.4 or as required by Schedule 8, ensure that the Controlled Delayed Business is carried on in the ordinary course of business consistent with past practice in relation to that Controlled Delayed Business; and

3.4.4ensure (but in respect of the Tianyuan JV, only to the maximum extent that it is able through the exercise of such interests, rights and powers that the Seller has in the Tianyuan JV), that any Delayed Vaccines Group Company shall, between the Closing Date and the relevant Delayed Closing Date for that Delayed Vaccines Group Company:

(i)make any distribution, dividend or any return of value to any member of the Seller’s Group (whether in cash or in kind) or any return of capital (whether by reduction of capital or redemption or purchase of shares) other than dividends in the ordinary course of the business consistent with past practice; or

(ii)take any action which results in a reduction in its dividend capacity (other than the incurrence of trading losses in the ordinary course of business); or

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(iii)make or incur any Liability to make any payment to, or enter into any transaction with, any member of the Seller’s Group other than with the consent of the Purchaser or in accordance with the provisions of this Agreement or any of the Ancillary Agreements; or

(iv)make or incur any Liability to make any payment to, or enter into any transaction other than (in any case) on arm’s length terms in the ordinary course of business or otherwise in accordance with the provisions of this Agreement or any of the Ancillary Agreements;

(v)permit any waiver, deferral or release by any Delayed Vaccines Group Company of any amount or obligation owed or due to such Delayed Vaccines Group Company; or

(vi)permit any guarantee, indemnity or security to be provided by any Delayed Vaccines Group Company in respect of the obligations or liabilities of the Seller or any of its Affiliates,

and provided that the Seller shall not be required, pursuant to any Controlled Business Instruction, to take any action (or omit to take any action) in relation to any of its business (or the business of the Seller’s Group) that is not a Controlled Delayed Business.

3.5The Seller shall indemnify on demand and hold harmless the Purchaser against and in respect of any and all Liabilities of the Purchaser’s Group and any Delayed Vaccines Group Company arising directly or indirectly as a result of any breach of paragraph 3.4.4 above and, for the avoidance of doubt, any such liability shall not constitute an Assumed Liability for the purposes of this Agreement.

3.6The provisions of Clause 5 and Schedule 20 shall not apply in respect of any Controlled Delayed Business following Closing and the provisions of Clause 13.1 shall not apply in respect of any Delayed Business following Closing.

3.7The Purchaser shall (or shall procure that its Affiliates shall) supply such assistance and access (including the supply of products, the supply of services and access to Transferred Books and Records and Commercial Information, but excluding any access to Intellectual Property Rights except as referred to in paragraph 3.8 below) as shall be reasonably necessary to allow the Seller to operate each Controlled Delayed Business in accordance with this Schedule.

3.8The Purchaser shall (or shall procure that its Affiliates shall) grant the Seller from Closing a non-exclusive, fully paid up, royalty free and sub-licensable licence or sub-licence (as applicable) to use, notwithstanding any other provision of this Agreement or any of the Ancillary Agreements, the Vaccines Group Intellectual Property Rights and Intellectual Property Rights licensed to the Purchaser (and its Affiliates) under any Ancillary Agreement (except the Purchaser Intellectual Property Licence Agreement) for the sole purpose of operating each Delayed Business in accordance with the provisions of this Schedule 25. This licence shall continue on a country by country basis, in relation to each Delayed Business, until the date on which that Delayed Business has been transferred by the Seller to the Purchaser in accordance with this Schedule.

3.9Delayed Employees who are engaged in a Controlled Delayed Business shall report to the management of the Purchaser and shall be treated for such management and reporting purposes in the same way as any employee of the Purchaser’s Group. Controlled

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Business Instructions may, accordingly, be given by the Instructing Personnel directly to any Delayed Employee engaged in a Controlled Delayed Business.

3.10To the extent that the implementation of any Controlled Business Instruction requires an action or actions of a person employed by the Seller but who is not a Delayed Employee (whether because Applicable Law prevents such Controlled Business Instruction from being given directly to a Delayed Employee or for any other reason) (a “Seller Involvement Instruction”), the Seller shall also provide the Controlled Business Instruction, in writing (which may include email), to the Seller’s Delayed Business Representative specifying (i) that it is a Seller Involvement Instruction; (ii) the actions that are required to be taken by such person; and (iii) a reasonable time within which such actions are required to be taken.

3.11The Seller and the Purchaser acknowledge that the Delayed Employees shall continue to be bound by, and shall comply with, the employment policies and procedures (including terms and conditions and disciplinary procedures) of the Seller’s Group that apply to employees of the Seller’s Group.

3.12Subject to paragraph 3.11, the Seller and the Purchaser acknowledge that Delayed Employees shall continue to be bound by and shall comply with the policies of the Seller’s Group provided that:

3.12.1from the date on which the relevant Delayed Employees are given reasonable notice of the relevant restrictions and anti-bribery and corruption policies, Delayed Employees engaged the Delayed Business in China shall be bound by and shall comply with any additional restrictions imposed on commercial practices and anti-bribery and corruption policies that the Purchaser’s Group implements and which apply to employees of the Purchaser’s Group in China including (but not limited to) its policy related to payments to health care providers and such other policies as may be required by Applicable Law from time to time;

3.12.2[***]; and

3.12.3the Seller shall provide the Purchaser with copies of its operational and other policies that apply in relation to Controlled Delayed Businesses. In respect of such policies, the Purchaser may give notice to the Seller that it wishes a particular policy of the Purchaser’s Group to apply in respect of a Controlled Delayed Business and/or the relevant Delayed Employees in place of the equivalent Seller’s policy. The Purchaser’s equivalent policy shall apply to the relevant Delayed Employees from the date on which such Delayed Employees are given reasonable notice of the relevant policy. If the Seller’s and the Purchaser’s policies apply at the same time, if and to the extent that there is any inconsistency or conflict between the two policies, the policy which requires behaviour that is likely to expose the parties to the smallest amount of legal, regulatory and/or compliance risk shall prevail.

3.13The Purchaser hereby undertakes to the Seller (for itself and on behalf of each other member of the Seller’s Group (excluding, for the avoidance of doubt, the Delayed Vaccines Group Companies) and their respective directors, officers, employees and agents (excluding any Delayed Employees) (the “Delayed Indemnity Parties”) that, with effect from the Effective Time, the Purchaser will indemnify on demand and hold harmless each of the Delayed Indemnity Parties against and in respect of any and all Liabilities, other than Liabilities in respect of Tax that are taken into account in calculating any Profit Payment

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resulting directly or indirectly from any Controlled Delayed Business and/or from any Controlled Business Instruction to the extent that (i) such Liabilities are not Assumed Liabilities and (ii) the Controlled Delayed Indemnity Parties concerned would not have incurred such Liabilities if the Controlled Delayed Business in question had been transferred to the relevant member of the Purchaser’s Group at Closing (“Incremental Delay Liabilities”), but in any case excluding any such Liabilities to the extent they arise from a breach by the Seller under paragraph 3.16.

3.14If the Seller is of the opinion that any Controlled Business Instruction may result in any Liability that would fall to be indemnified pursuant to paragraph 3.13 above, the Seller shall use its reasonable endeavours to inform (and procure that the members of the Seller’s Group shall inform) the Purchaser of that opinion and the reasons for it as soon as reasonably practicable after reaching that opinion. The indemnity set out in paragraph 3.13 above shall not be affected or limited in any way by any failure of any member of the Seller’s Group to so inform the Purchaser.

3.15The Purchaser shall not be entitled to make any claim for damages against the Seller in respect of a breach of paragraph 3.4 otherwise than pursuant to a claim brought under paragraph 3.16.

3.16Each Seller shall procure that:

3.16.1in respect of Controlled Business Instructions that are not Seller Involvement Instructions, neither it nor any of its Associated Persons shall act (or fail to act) fraudulently or with Gross Negligence in connection with the implementation of any Controlled Business Instruction. “Gross Negligence” for these purposes means any act or failure to act by the Seller (or any of its Associated Persons that: (i) the Seller (or the relevant Associated Person) knew may create a risk of material harm to the relevant Delayed Business; (ii) was intended to cause such harm, or was done in reckless disregard of, or in wanton indifference to, such risk of harm; and (iii) in all the circumstances (having regard to both the probability and seriousness of such harm) was an unreasonable risk for the Seller (or the relevant Associated Person) to take; and

3.16.2in respect of Seller Involvement Instructions, neither it nor any of its Associated Persons shall act (or fail to act) fraudulently or negligently or in wilful default in connection with the implementation of the Seller Involvement Instruction and shall take no steps which are intended to have the effect of preventing this implementation of a Seller Involvement Instruction,

provided that it shall not be a breach of this paragraph 3.16 (and shall accordingly not be acting with Gross Negligence or wilful default for the purposes of this paragraph) to carry out any act, or fail to act, if to do so is:

3.16.3required to implement a Controlled Business Instruction;

3.16.4required to comply with any Applicable Law;

3.16.5required to implement or comply with the terms of this Agreement or any Ancillary Agreement; or

3.16.6taken to mitigate any other loss or damage to the Controlled Delayed Business which the Seller (or the relevant Associated Person) believes, acting reasonably

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and in good faith, could be material in the context of that Controlled Delayed Business.

In any event, no claim shall be made by the Purchaser (and the Purchaser shall ensure that no member of the Purchaser’s Group shall make any claim) for any breach of any other provisions of this Agreement (or the provisions of any Ancillary Agreement) by the Seller (or any member of the Seller’s Group) that occurs in order to comply with any Controlled Business Instruction.

3.17Prior to the making of any claim under this Schedule 25 in respect of any matter, the parties shall use reasonable endeavours to escalate such matter first for consideration to the Delayed Business Representatives and then to the Purchaser’s and the Seller’s chief financial officers, for the purpose of seeking to resolve such matter within a period of 30 days following such escalation.

3.18Subject in each case to Applicable Law, the Seller shall, in the period between Closing and the relevant Delayed Closing Date, promptly upon request by the Purchaser provide (or procure that any member of its Group shall provide) the Purchaser and its representatives with access to:

3.18.1any books and records of the Seller’s Group to the extent relating to any Controlled Delayed Business of the Seller; and

3.18.2any personnel of the Seller for the purposes of any requests for information from such personnel in relation to the Controlled Delayed Business.

For the avoidance of doubt, the parties shall take all steps necessary to ensure that no information is provided to the Purchaser or any person on behalf of the Purchaser which relates to any business of the Seller or any member of the Seller’s Group other than the Controlled Delayed Business.

3.19For the purposes of the Warranties deemed repeated by the Seller immediately before Closing pursuant to Clause 10.1.5, ownership of the Delayed Businesses shall be deemed to have transferred to the Purchaser at Closing.

3.20During the period between the Closing Date and the Delayed Closing Date, funding for Delayed Businesses shall continue to be provided by the Seller’s Group, save that in the event that any Delayed Business requires funds (for the purposes of working capital, acquisitions, capital expenditure or otherwise) during such period, in excess of US$10 million and the Delayed Business does not have the required funding in place (including through any cash pooling arrangements), then such funds shall promptly be provided by the Purchaser, on such terms as the Seller and the Purchaser shall agree, acting reasonably, having regard to, amongst other things, the Tax effects of such funding.

Non-Controlled Delayed Businesses

3.21From Closing until the relevant Delayed Closing Date:

3.21.1the provisions of paragraph 3 of this Schedule shall not apply in respect of the Non-Controlled Delayed Businesses, with the exception of paragraphs 3.4.4, 3.5, 3.11, 3.18, 3.19 and 3.20 which shall apply if and to the extent permitted by Applicable Law;

3.21.2subject to paragraph 3.22, the provisions of paragraph 4 of this Schedule shall not apply in respect of the Non-Controlled Delayed Businesses; and

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3.21.3if and to the extent permitted by Applicable Law, the provisions of Clause 5 and Schedule 20 will continue to apply to the Non-Controlled Delayed Businesses and each Seller shall exercise such interests, rights and powers that such Seller has in respect of that Non-Controlled Delayed Business to the maximum extent that it is able in order to procure that the Non-Controlled Business is operated in accordance with Clause 5 and Schedule 20.

3.22With effect from the relevant Delayed Closing Date, the provisions of paragraph 4 of this Schedule shall apply in respect of the Non-Controlled Delayed Businesses, save that the first Half Yearly Accounting Period shall be extended so that it commences at the Effective Time and ends on the relevant Delayed Closing Date.

3.23From Closing until 31 March 2015, the Seller shall provide the Purchaser with such assistance and information to which it does not otherwise have access as it reasonably requests in order for it to be able to calculate the necessary receivables to be recorded in respect of any payments that may be made under paragraph 3.23, including, such monthly profit and loss forecast information as already exists and is reasonably available to the Seller or its Affiliates in relation to the Non-Controlled Delayed Businesses for the period up to the estimated relevant Delayed Closing Date.

4Economic Benefit Transfer

Economic benefit

4.1The Seller shall comply with the provisions of this Part 4, in relation to any Delayed Business (other than in relation to a Delayed Vaccines Group Company in respect of which only paragraph 4.2 of this Schedule will apply), for each Half-Yearly Accounting Period in which such Delayed Business remains legally owned by it or any member of the Seller’s Group. The first Half-Yearly Accounting Period for which the provisions of this Part 4 shall be extended so that it commences at the Effective Time and shall end on 31 December 2015.

4.2Within 45 days of the relevant Delayed Closing Date for any Delayed Vaccines Group Company, the Seller shall provide the Purchaser with a cash flow statement (including opening and closing balances for cash and cash equivalents, and payables and receivables that would have fallen within the definitions of Intra-Group Non-Trade Receivables and Intra-Group Non-Trade Payables) for such Delayed Vaccines Group Company for the period commencing at the Effective Time and ending on the Delayed Closing Date prepared using the Accounting Standards.

4.3Within one month following the end of each Half-Yearly Accounting Period, the Seller shall produce and provide to the internal audit team of the Purchaser (or, at the Purchaser’s discretion, the external auditors) (the “Audit Team”) a draft statement setting out, for each Delayed Business that had not transferred to the Purchaser by the start of that Half-Yearly Accounting Period, the Economic Benefit Amount in respect of such Delayed Business for such Half-Yearly Accounting Period (or, if applicable, such part of the Half-Yearly Accounting Period as falls prior to the Delayed Closing Date for such Delayed Business). Each such statement shall be a “Draft Economic Benefit Statement”.

4.4It is intended that the Economic Benefit Amount shown in each Economic Benefit Statement is the amount that is necessary to be paid to the Purchaser by the Seller or by the Seller to the Purchaser, in order to put the Purchaser’s Group and the Seller’s Group in the same economic position as they would have been in, taking into account any

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arrangements that would have been in place in respect of the relevant Delayed Businesses pursuant to any Ancillary Agreement, had such Delayed Businesses been transferred to the Purchaser at Closing before taking account, in each case, of any Tax effect for the Purchaser or the Seller in respect of such payment (the “Economic Benefit Objective”).

4.5In the period prior to 31 December 2015, the Seller and the Purchaser shall meet together to consider in good faith whether there are any adjustments required to the provisions of Part 5 of this Schedule in order for the Economic Benefit Statements to achieve the Economic Benefit Objective and (acting reasonably and in good faith) seek to agree such adjustments.

4.6The portion of the Economic Benefit Amount set out in the Draft Economic Benefit Statement in relation to each Delayed Business shall be calculated in the local currency for that Delayed Business but any Economic Benefit Payment shall be paid pursuant to paragraph 4.15 or 4.16 of this Schedule in pounds sterling, for which purpose each amount in a currency other than pounds sterling shall be converted into pounds sterling at the spot reference rate for those currencies as quoted by the European Central Bank (or if there is no such rate, as quoted by the nearest equivalent institution) on the Business Day immediately prior to the relevant payment date and the sum of such converted sterling amounts shall be the Economic Benefit Payment amount. The calculation of the Economic Benefit Amount set out in an Economic Benefit Statement shall only be converted into pounds sterling in accordance with this paragraph 4.6 and aggregated after the Economic Benefit Statement has been agreed or determined in accordance with this Part 4.

4.7The Seller shall, and shall procure that the members of the Seller’s Group (and, if applicable, its external accountants) shall, provide to the Audit Team, without charge, such access to their personnel, books and records, calculations and working papers as the Audit Team may reasonably request in connection with its review of the Draft Economic Benefit Statement (and the parties acknowledge that local market information that is not contained on central consolidation systems will only be requested where material in the context of the Draft Economic Benefit Statement as a whole), subject (where applicable) to the Purchaser providing such undertakings as the relevant external accountants may reasonably request, and provided that the Seller hereby undertakes to the Purchaser that it shall procure that each member of its Audit Team shall (i) keep any such information which is commercially sensitive (the “Protected Information”) confidential and shall only disclose such information to, and discuss such information with, other members of that Audit Team; (ii) be expressly prohibited from communicating (in any form) any Protected Information to any other employee, agent, adviser or consultant of any member of the Purchaser’s Group; and (iii) be subject to the above requirements whilst employed or engaged by any member of the Purchaser’s Group in any capacity (whether or not as a member of that Audit Team). The provisions of Clause 14 (Confidentiality) of this Agreement shall apply mutatis mutandis to such information including, for the avoidance of doubt, to allow (where permitted by that clause) disclosure of information otherwise prohibited to be communicated to any agent, adviser or consultant of any party’s Group.

4.8No amendments shall be made to any Draft Economic Benefit Statement except in accordance with the provisions of paragraph 4.9 below.

4.9The Audit Team may dispute a Draft Economic Benefit Statement by notice in writing (in this Schedule, a “Dispute Notice”) delivered to the Seller by or on behalf of that Audit Team in accordance with Clause 17.11 (Notices) of this Agreement within 3 weeks following receipt of the Draft Economic Benefit Statement. Any Dispute Notice shall specify

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(i) which items of the Draft Economic Benefit Statement are disputed; (ii) the reasons therefor, making specific reference (where relevant and reasonably possible) to the parts of this Schedule which the Audit Team asserts have not been complied with in preparing the relevant statement; and (iii) to the extent practicable, any adjustments that the Audit Team considers should be made to the Draft Economic Benefit Statement, and provided that a Dispute Notice may only be submitted if the aggregate impact of all disputed items comprised in that Economic Benefit Amount are greater than £500,000.

4.10Any Dispute Notice shall be accompanied by all relevant supporting documentation and working papers on which the Audit Team wishes to rely, it being acknowledged by the Purchaser that it shall procure that its Audit Team shall provide further documentation to support its claims promptly on reasonable request by the Seller or, where relevant, the Economic Benefit Expert. Only those items or amounts specified in a Dispute Notice shall be treated as being in dispute (the “Disputed Items”) and no amendment may be made by any party, or any Economic Benefit Expert, to any items or amounts which are not Disputed Items.

4.11If the Audit Team does not serve a Dispute Notice under and within the time period set out in paragraph 4.9 of this Part 4, the Draft Economic Benefit Statement shall constitute the “Economic Benefit Statement” for the Seller in respect of the relevant Half-Yearly Accounting Period to which that Economic Benefit Statement relates.

4.12If the Audit Team does serve a Dispute Notice under and within the time period set out in paragraph 4.9 of this Part 4, the Seller shall use its reasonable endeavours to resolve the Disputed Items as soon as reasonably practicable (with the Purchaser acting through its Audit Team) and either:

4.12.1if the parties reach agreement on the Disputed Items within 10 Business Days of the service of the relevant Dispute Notice (or such longer period as they may agree in writing), the Draft Economic Benefit Statement shall be amended to reflect such agreement and shall then constitute the “Economic Benefit Statement” in respect of the relevant Half-Yearly Accounting Period to which that Economic Benefit Statement relates; or

4.12.2if the parties do not reach agreement in accordance with paragraph 4.12.1 above, either party may refer the dispute to such individual at an independent firm of chartered accountants of international repute as the parties may agree or, failing such agreement (including such firm and/or individual not accepting such appointment), within 2 Business Days of expiry of the period described in paragraph 4.12.1 above, to such independent firm of chartered accountants of international repute in London as the President of the Institute of Chartered Accountants in England and Wales may, on the application of either party, nominate (the “Economic Benefit Expert”), on the basis that the Economic Benefit Expert is to make a decision on the dispute and notify the parties of its decision within 3 weeks of receiving the reference or such longer reasonable period as the Economic Benefit Expert may determine.

4.13The Purchaser shall bear the costs in relation to the preparation and certification of any Draft Economic Benefit Statement and in relation to the review of (and any dispute in relation to) any Draft Economic Benefit Statement.

4.14In any reference to the Economic Benefit Expert in accordance with paragraph 4.12 above:

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4.14.1the Economic Benefit Expert shall act as expert and not as arbitrator and shall be directed to determine any dispute in accordance with the Accounting Standards and Part 5 of this Schedule and (if necessary) having regard to the Economic Benefit Objective;

4.14.2the decision of the Economic Benefit Expert shall, in the absence of fraud or manifest error, be final and binding on the parties and the Draft Economic Benefit Statement shall be amended as necessary to reflect the decision of the Economic Benefit Expert and, as amended, shall be the “Economic Benefit Statement” in respect of the relevant Half-Yearly Accounting Period to which that Economic Benefit Statement relates;

4.14.3the costs of the Economic Benefit Expert shall be paid by the Purchaser; and

4.14.4the parties shall respectively provide or procure the provision of the Economic Benefit Expert of all such information as the Economic Benefit Expert shall reasonably require including access to their respective advisers and their respective books, records and personnel.

4.15As soon as reasonably practicable and in any event within 5 Business Days following the agreement or determination of the Economic Benefit Statement in respect of any Half-Yearly Accounting Period:

4.15.1the Seller shall, if the Economic Benefit Amount set out in the Economic Benefit Statement is a positive number, pay the Purchaser, or procure the payment to the Purchaser of, an amount in cleared funds equal to that Economic Benefit Amount, such payment being an “Economic Benefit Payment”. Clause 3.5 of this Agreement shall apply to any Economic Benefit Payment as if such payment were made pursuant to an indemnity under this Agreement; and

4.15.2the Purchaser shall, if the Economic Benefit Amount set out in the Economic Benefit Statement is a negative number, pay to the Seller, or procure the payment to the Seller of, an amount in cleared funds equal to that Economic Benefit Amount expressed as a positive number, such payment being a “Reverse Payment”.

4.16If:

4.16.1the amount of an Economic Benefit Payment is, on an after-Tax basis (as defined in Clause 1.9 of this Agreement), less than the relevant Economic Benefit Amount, the amount due shall be increased so that the amount of the payment on an after-Tax basis is equal to the relevant Economic Benefit Amount; or

4.16.2the amount of a Reverse Payment is, on an after-Tax basis (as defined in Clause 1.9 of this Agreement), less than the absolute value of the relevant Economic Benefit Amount, the amount due shall be increased so that the amount of the payment on an after-Tax basis is equal to such absolute value.

4.17If the Purchaser reasonably believes that an Economic Benefit Payment made or procured by the Seller to the Purchaser in accordance with paragraph 4.15.1 will be subject to Tax in the hands of the Purchaser or any member of the Purchaser’s Group:

4.17.1the Purchaser shall as soon as reasonably practicable give the Seller written notice of such belief; and

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4.17.2following the giving of such notice, the Seller and the Purchaser shall, and shall procure that the members of their respective Groups will (at the Seller’s cost) co-operate with each other in good faith and use all commercially reasonable efforts to reduce or mitigate the amount of any additional payment required to be made pursuant to paragraph 4.16 without prejudicing the interests of the Purchaser.

4.18If the Seller reasonably believes that a Reverse Payment made or procured by the Purchaser to the Seller in accordance with paragraph 4.15.2 will be subject to Tax in the hands of the Seller or any member of the Seller’s Group:

4.18.1the Seller shall as soon as reasonably practicable give the Purchaser written notice of such belief; and

4.18.2following the giving of such notice, the Seller and the Purchaser shall, and shall procure that the members of their respective Groups will (at the Purchaser’s cost) co-operate with each other in good faith and use all commercially reasonable efforts to reduce or mitigate the amount of any additional payment required to be made pursuant to paragraph 4.16 without prejudicing the interests of the Seller.

5Preparation of Economic Benefit Statements

5.1For the purposes of this paragraph 5:

“Bad Debt”	has the meaning given in paragraph 5.2.9;
“Customer”	means any person or entity that acquires and/or intends to acquire any of the Products or services provided by the Delayed Business (including any members of the Seller’s Group or the Purchaser’s Group);
“Employee Costs”	means the FTE costs incurred by the Seller’s Group in connection with the employment of the Delayed Employees of the relevant Delayed Business by the Seller’s Group, as provided in paragraph 12.3 of Schedule 11;
“Landed Cost”	means, in respect of each Product, any costs incurred by the relevant Local Seller Entity in relation to that Product in respect of freight, insurance, duty, import and transportation costs;
“Local Seller Entity”	means, in respect of a Delayed Business, the member of the Seller’s Group that owns and operates such Delayed Business;
“Net Sales”	means net sales received from the sale and distribution of Products or the provision of services, in each case, by the relevant Local Seller Entity to any Customer plus any other revenue received in respect of the Delayed Business, but excluding (for the avoidance of doubt) any amounts received by the Seller, any other member of Seller’s Group or any sub-contractor in respect of Sales Tax for which any member of the Seller’s Group is liable to account to any Tax Authority. For these purposes, net sales shall be determined in accordance with Accounting Standards. The deductions booked by the Seller to calculate the recorded net sales from gross sales shall include the following: (a)          normal trade, quantity and cash discounts;
	(b)          Sales Taxes and other taxes levied from

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		Customers in relation to the sale of Products to the extent included in the gross amount invoiced;
	(c)	amounts repaid or credited by reasons of defects, rejections, recalls or returns, excluding amounts in respect of Sales Tax included in the amounts so repaid or credited, unless the Seller or a member of the Seller’s Group is unable (having used reasonable diligent commercial endeavours) to recover such amounts in respect of Sales Tax by way of repayment or credit;
	(d)	rebates and chargebacks to Customers and Third Parties (including, without limitation, Medicare, Medicaid, Managed Healthcare and similar types of rebates), excluding amounts in respect of Sales Tax included in such rebates and chargebacks, unless the Seller or a member of the Seller’s Group is unable (having used reasonable diligent commercial endeavours) to recover such amounts in respect of Sales Tax by way of repayment or credit);
	(e)	any amounts recorded in gross sales associated with goods provided to customers for free, with the exception of samples;
	(f)	amounts provided or credited to customers through coupons, other discount programs and co-pay assistance programs;
	(g)	delayed ship order credits, discounts or payments related to the impact of price increases between purchase and shipping dates; and
	(h)	fees for service payments to customers for any non-separate services (including compensation for maintaining agreed inventory levels and providing information) and any associated Sales Tax to the extent the Seller (or a member of the Seller’s Group) is unable (having used reasonable diligent commercial endeavours) to recover such amounts in respect of Sales Tax by way of repayment or credit,
	and with respect to the calculation of Net Sales:
	(i)	Net Sales shall only include the value charged or invoiced on the first sale to a Customer;
	(j)	if a Product is delivered to the Customer before being invoiced (or is not invoiced), Net Sales will be calculated at the time all the revenue recognition criteria under Accounting Standards are met; and
	(k)	revenue deduction adjustments which relate to any event prior to Closing shall be excluded;
“Product”	means any of the products Commercialised by the relevant Delayed Business, and “Products” shall be construed accordingly;
“Sales Tax”	means any turnover, value-added, sales, use, goods and services or similar Tax (excluding, for the avoidance of doubt, any capital gains or similar Tax);
“Third Party”	means any person other than (i) the Purchaser and

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	members of the Purchaser’s Group and (ii) the Seller and members of the Seller’s Group;
“Third Party Distributor”	means a Third Party distributor of the Seller’s Group;
“Transfer Price”	means:
	(a)	in respect of each Product supplied to the Local Seller Entity by a member of the Purchaser’s Group for distribution, any amount to be paid by the Seller (or its Affiliate) for the Product, as agreed between the Seller (or its Affiliate) and the Purchaser in writing from time to time;
	(b)	in respect of each Product provided to the Local Seller Entity by a Local Purchaser Entity for distribution, any amount paid by the Local Seller Entity for the Product, as agreed between the Seller (or its Affiliate) and the Purchaser in writing from time to time; and
	(c)	in respect of each Product provided to the Local Seller Entity by a Third Party supplier for distribution, any amount paid by the Local Seller Entity for the Product to such Third Party; and
“Working Hours”	means 9 a.m. to 5 p.m. on a Business Day at the relevant working location.

5.2The “Economic Benefit Amount” of a Delayed Business in respect of a given period shall be calculated as:

5.2.1the Net Sales of the relevant Delayed Business in that period;

5.2.2minus the Transfer Price (exclusive of Sales Taxes) paid in respect of the Products covered by those Net Sales;

5.2.3minus the Landed Cost (exclusive of Sales Taxes) of the Products covered by those Net Sales;

5.2.4minus the Employee Costs (exclusive of Sales Taxes);

5.2.5minus any other costs (exclusive of Sales Taxes) incurred by the relevant Local Seller Entity in relation to the relevant Delayed Business other than the Employee Costs, Landed Costs and any costs of acquiring Products for sale (including, but not limited to, the Transfer Price);

5.2.6minus, where the relevant Local Seller Entity carried out any action that would, after Delayed Closing, be provided to the Delayed Business under a Transitional Services Agreement, the amount payable for such services (exclusive of Sales Taxes) at the rates that will apply under such Transitional Services Agreement;

5.2.7plus any foreign exchange gains and minus any foreign exchange losses arising in relation to the accounts receivable and accounts payable of the Delayed Business;

5.2.8minus a sales and distribution charge of 2 per cent (2%) of Net Sales in the period (excluding any Sales Tax thereon);

5.2.9minus any undisputed sum (exclusive of Sales Taxes) payable by any Third Party to the relevant Local Seller Entity in relation to any Products sold on or after the Closing Date which has not been paid by the earlier of sixty (60) days of the due

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date for such payment and the Delayed Closing Date for the relevant Delayed Business (“Bad Debt”); and

5.2.10plus any Bad Debt (exclusive of Sales Taxes) deducted pursuant to paragraph 5.2.9 in any prior period to the extent that such Bad Debt is recovered in the relevant period;

5.2.11minus the amount of:

(i)any expense of the relevant Local Seller Entity or a member of the relevant Local Seller Entity’s Sales Tax group in connection with or as a result of the Delayed Business which consists of an amount in respect of Sales Tax in respect of the period for which neither the relevant Local Seller Entity nor a member of the relevant Local Seller Entity’s Sales Tax group is entitled to credit or repayment; and

(ii)any Sales Tax in respect of the period for which the relevant Local Seller Entity or the relevant Local Seller Entity’s Sales Tax group is liable to account to any Tax Authority in connection with or as a result of the Delayed Business;

save, in each case, to the extent otherwise deducted or excluded in the calculation of the Economic Benefit Amount;

5.2.12minus an amount equal to the product of (i) the amount resulting from the calculation at paragraphs 5.2.1 to 5.2.11 above, and (ii) the statutory local Tax rate applicable in respect of profits of the relevant Delayed Business, expressed as a percentage (the “Headline Tax Rate”), as at the last day of the relevant period,

provided that, if and to the extent that any costs incurred by a Local Seller Entity are subject to reimbursement under any indemnity or equivalent covenant to pay in this Agreement or in an Ancillary Agreement are included in any Economic Benefit Statement, such costs shall not also be recoverable under such indemnity or covenant to pay.

5.3The Economic Benefit Statement for a Delayed Vaccines Group Business will detail the following:

5.3.1Net Sales (which will be reported in accordance with the Seller’s Group’s group reporting system) for the relevant Half-Year by brand, which shall show:

(i)gross sales;

(ii)returns and allowances;

(iii)on-invoice discounts;

(iv)off-invoice discounts;

(v)any other deduction; and

(vi)Net Sales; and

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5.3.2each line item forming part of the calculation of the Economic Benefit Amount in accordance with paragraph 5.2 above (and including, in respect of costs, the itemisation of those costs as between categories of costs),

and the Seller will provide the Draft Economic Benefit Statement together with such supporting information as is reasonably required to enable the Purchaser to review the Economic Benefit Statement, and prior to 31 December 2015, the Seller and the Purchaser shall meet together to agree the scope of such supporting information.

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Appendix 1
Delayed Vaccines Group Companies

Jurisdiction	Delayed Vaccines Group Company	Delay Milestone
China	Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd	The receipt by the parties of all necessary approvals, consents and filings from or with the NDRC and MOFCOM, in each case in respect of the sale and transfer of the Tianyuan Shares and the PRC Transfer Documents.
India	Chiron Behring Vaccines Private Limited	The receipt by the parties of all necessary approvals, consents and filings from or with the Indian Foreign Investment Promotion Board (“FIPB”) in respect of the sale and transfer of 100 per cent. of the shares in Chiron Behring Vaccines Private Limited and the related Commencement Certificate being issued by the FIPB.

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Appendix 2
Delayed Vaccines Group Businesses

Jurisdiction	Delayed Vaccines Group Business	Delay Milestone
Bangladesh	Novartis (Bangladesh) Limited	The passing of a resolution of the shareholders of Novartis (Bangladesh) Limited validly approving the transfer of the Bangladesh Business to the Purchaser and the entry into of the Bangladesh Transfer Documents.
India	Novartis Healthcare Private Limited	The receipt by the parties of all necessary approvals, consents and filings from or with the Indian Foreign Investment Promotion Board in respect of the sale and transfer of the India Business and the India Transfer Documents.
Thailand	Novartis(Thailand) Limited	The receipt by the relevant members of the Seller’s Group of a Foreign Business Licence in respect of transitional services and/or transitional distribution services to be provided to the Purchaser in Thailand.

In this Appendix 2:

“Bangladesh Business” means the assets and liabilities transferring from Novartis (Bangladesh) Limited to the Purchaser in accordance with this Agreement and the relevant Local Transfer Agreement;

“Bangladesh Transfer Documents” means Local Transfer Agreement in respect of the transfer of the Bangladesh Business to the Purchaser;

“Foreign Business Licence” means a foreign business certificate or a foreign business licence from the Thailand Ministry of Commerce to provide transitional services and/or transitional distribution services in Thailand;

“India Business” means the assets and liabilities transferring from Novartis Healthcare Private Limited to the Purchaser in accordance with this Agreement and the relevant Local Transfer Agreement; and

“India Transfer Documents” means Local Transfer Agreement in respect of the transfer of the India Business to the Purchaser.

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Schedule 26
Local Payments

[***]

256

Schedule 27
Vaccines Group Information Technology

[***]

257

Schedule 28
Global TDSA Jurisdictions

[***]

258

Schedule 29
Surviving Affiliate Contracts

[***]

259

Schedule 30

[***]

260

Schedule 31
Anti-bribery and corruption

[***]

261

EX-4.4

Exhibit 4.4

Confidential portions of this exhibit have
been omitted and filed separately with the
Securities and Exchange Commission

EXECUTION VERSION

1 March 2015

GLAXOSMITHKLINE PLC

and

NOVARTIS AG

DEED OF AMENDMENT AND RESTATEMENT

relating to the

SALE AND PURCHASE AGREEMENT
relating to the Seller’s oncology business,
dated 22 April 2014 (as amended)

This Deed (the “Deed”) is made on 1 March 2015 between:

(1)GLAXOSMITHKLINE PLC, a public limited company incorporated in England and Wales whose registered office is at 980 Great West Road, Brentford, Middlesex, TW8 9GS, United Kingdom (the “Seller”); and

(2)NOVARTIS AG, a corporation (Aktiengesellschaft) incorporated in Switzerland whose registered office is at Lichtstrasse 35, 4056 Basel, Switzerland (the “Purchaser”),

each a “party” and together the “parties”.

Whereas:

(A)The Seller and the Purchaser entered into the sale and purchase agreement relating to the Seller’s oncology business on 22 April 2014 (the “SAPA”).

(B)The SAPA was subsequently amended and restated on 29 May 2014 and further amended and restated on 21 November 2014 (the “Original Agreement”).

(B)The Seller and the Purchaser now wish to further amend and restate the Original Agreement, in the form of the Amended Agreement (as defined below).

It is agreed as follows:

1.DEFINITIONS AND INTERPRETATION

In this Deed, unless the context otherwise requires, the provisions of this clause 1 apply.

1.1Incorporation of defined terms

Unless otherwise stated, terms defined in the Original Agreement shall have the same meaning in this Deed.

1.2Definitions

“Amended Agreement” means the Original Agreement, as amended and restated in the form set out in the Schedule to this Deed; and

“Signing Date” means 22 April 2014.

1.3Interpretation clauses

(A)The principles of interpretation set out in Clause 1 of the Original Agreement shall have effect as if set out in this Deed, save that references to “this Agreement” shall be construed as references to “this Deed”.

(B)References to this Deed include the Schedule.

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2.AMENDMENT

2.1In accordance with Clauses 16.4.3 and 16.5.1 of the Original Agreement, the parties agree that the Original Agreement shall be amended and restated as set out in the Schedule to this Deed.

2.2The amendment and restatement of the Original Agreement pursuant to clause 2.1 shall take effect from the Signing Date, as if the Amended Agreement had been entered into on the Signing Date.

2.3Upon this Deed being entered into, the Amended Agreement shall supersede the Original Agreement in its entirety.

3.MISCELLANEOUS

3.1Each party represents and warrants that it has full power and authority to enter into this Deed and to perform its obligations under it.

3.2The provisions of Clauses 13, 16.2 to 16.5 and 16.11 to 16.15 of the Amended Agreement shall apply to this Deed as if set out in full in this Deed and as if references in those Clauses to “this Agreement” are references to this Deed and references to “party” or “parties” are references to parties to this Deed.

3

In witness whereof this Deed has been delivered on the date first stated above.

Executed as a DEED by	)
GLAXOSMITHKLINE PLC acting by	)
its duly appointed attorney	)	/s/ Edgar B. Cale
	)	(Signature of attorney)
	)

In the presence of:
Witness’ signature:	/s/ Maria Ledeneva
Name (print):	Maria Ledeneva
Occupation:	Trainee Solicitor
Address:	65 Fleet Street, London

4

In witness whereof this Deed has been delivered on the date first stated above.

Executed as a DEED by	)
	)
Jonathan Emery As Attorney and	)	/s/ Jonathan Emery
	)
Sunny Jongsaritwang As Attorney	)
	)	/s/ Sunny Jongsaritwang
on behalf of NOVARTIS AG	)

5

SCHEDULE

Amended Agreement

6

Dated 22 April 2014

As amended and restated on 29 May 2014, and as further amended and restated on 21 November 2014 and on 1 March 2015

GLAXOSMITHKLINE PLC

and

NOVARTIS AG

SALE AND PURCHASE AGREEMENT

in relation to the Oncology Business

Sale and Purchase Agreement

This Agreement is made on 22 April 2014, as amended and restated on 29 May 2014, and as further amended and restated on 21 November 2014 and on 1 March 2015.

Between:

(1)GLAXOSMITHKLINE PLC, a public limited company incorporated in England and Wales whose registered office is at 980 Great West Road, Brentford TW8 9GS, United Kingdom (the “Seller”); and

(2)NOVARTIS AG, a corporation (Aktiengesellschaft) incorporated in Switzerland whose registered office is at Lichtstrasse 35, 4056 Basel, Switzerland (the “Purchaser”),

each a “party” and together the “parties”.

Whereas:

(A)As of the date of this Agreement, the Seller and certain of the Seller’s Affiliates own or license certain assets and other rights relating to the Products and are engaged in the Business;

(B)The Seller has agreed, inter alia, to procure the sale of the Share and to sell or license (or cause the sale or licence of) certain assets and other rights relating to the Products together with the Assumed Liabilities comprising the Business, and to assume the obligations imposed on the Seller under this Agreement;

(C)The Purchaser has agreed, inter alia, to purchase or procure the purchase of the Share and to purchase or license certain assets and other rights relating to the Products, together with the Assumed Liabilities comprising the Business, and to assume the obligations imposed on the Purchaser under this Agreement;

(D)In connection with the transactions contemplated by this Agreement, the Purchaser and the Seller, or certain of their respective Affiliates, will enter into the Ancillary Agreements; and

(E)The Seller has notified the Purchaser of its intention to carry out the Pre-Closing Product Reorganisation and accordingly this Agreement has been amended to give effect to it.

It is agreed as follows:

1.Interpretation

In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:

1.1Definitions

“Abandoned Patent(s)” means any Patent Exclusively Related to the Business abandoned by a member of the Seller’s Group before Closing from which a Patent that constitutes a Business Product Intellectual Property Right can claim priority, or from the priority chain of which a right to priority can be claimed in respect of a Patent that constitutes a Business Product Intellectual Property Right;

“Action” means the taking of any steps by any Governmental Entity to seek a Judgment which would have the effect of preventing the consummation of the transactions contemplated by this Agreement by the Purchaser;

“Affiliate” means:

(i)with respect to any person (other than a party to this Agreement), any other person that Controls, is Controlled by or is under common Control with such person; or

(ii)with respect to a party to this Agreement, any other person that is Controlled by such party,

and “Affiliates” shall be interpreted accordingly;

“Agreed Terms” means, in relation to a document, such document in the terms agreed between the Seller and the Purchaser and signed for identification purposes by the Seller’s Lawyers and the Purchaser’s Lawyers, with such alterations as may be agreed in writing between the Seller and the Purchaser from time to time;

“Agreed UK Restructuring Arrangement” means the pension augmentation (or cash in lieu of augmentation) policy applying on redundancy to UK employees of the Seller’s Group who joined service prior to 1 April 2005 as disclosed to the Purchaser prior to the date of this Agreement via a document which was signed on 22 April 2014 by Eleanor Hart of Slaughter and May and Andrew Murphy of Freshfields Bruckhaus Deringer LLP for identification purposes;

“Agreement” means this sale and purchase agreement;

“Allocation Statement” means a statement prepared in accordance with Schedule 10 allocating whole number percentages to each of the Products so that the aggregate of those percentages equals 100 per cent.;

“Allowance” means any amount payable or repayable to customers in respect of a contractual allowance or discount due on the sales of the Products or any other contractually permitted deductions from revenue arising from sales of the Products;

“Ancillary Agreements” means the Implementation Agreement, the Company Tax Indemnity, the Direct Indemnity, the Disclosure Letter, the Manufacturing and Supply Agreement, the Transitional Distribution Services Agreement, the France Offer Letter, the France SPA, the Netherlands Offer Letter, the Netherlands APA, the Purchaser Tax Indemnity, the Transitional Services Agreement, the Ofatumumab Intellectual Property Licence Agreement, the Oncology Intellectual Property Licence Agreement, the Intellectual Property Assignment, the Claims Management Agreement, the Quality Agreement, the Pharmacovigilance Agreement, and the Oncology Development and Clinical Supply Agreement;

“Ancillary Agreement Liabilities” means the Liabilities of any member of the Seller’s Group to any member of the Purchaser’s Group and the Liabilities of any member of the Purchaser’s Group to any member of the Seller’s Group, in each case arising under any Ancillary Agreement;

2

“Anti-Bribery Law” means any Applicable Law that relates to bribery or corruption, including the US Foreign Corrupt Practices Act of 1977 and the UK Bribery Act 2010, in each case as amended, re-enacted or replaced from time to time;

“Applicable Law” means any supra-national, federal, national, state, municipal or local statute, law, ordinance, regulation, rule, code, order (whether executive, legislative, judicial or otherwise), judgment, injunction, notice, decree or other requirement or rule of law or legal process (including common law), or any other order of, or agreement issued, promulgated or entered into by, any Governmental Entity or any rule or requirement of any national securities exchange, including all Healthcare Laws, and GCP, GLP, and GMP, each as may be amended from time to time;

“Aspen Agreements” means: (i) the Amended and Restated Sale and Purchase Agreement dated 14 August 2012 and amended and restated on 30 November 2012, between Glaxo Group Limited and Aspen Global Incorporated; and (ii) the Principal Manufacturing and Supply Agreement dated 14 August 2002, between GlaxoSmithKline Trading Services Limited and Aspen Global Incorporated;

“Assets” means the property, rights and assets referred to in Clause 2.3.1, in each case excluding the Excluded Assets;

“Associated Person” means, in relation to the Seller’s Group, a person (including any director, officer, employee, agent or other intermediary) who performs services for or on behalf of any member of the Seller’s Group or who holds shares of capital stock, partnership interests, limited liability company membership interests and units, shares, interest and other participations in any member of the Seller’s Group (in each case when performing such services or acting in such capacity);

“Assumed Liabilities” means the Liabilities of the Business (including, for the avoidance of doubt, any Delayed Business) other than: (i) the Excluded Liabilities; (ii) any Relevant Pension and Employment Liability; (iii) any Liabilities in respect of Tax; (iv) any Ancillary Agreement Liabilities; (v) Liabilities in respect of the Ofatumumab Autoimmune Business; and (vi) any Liabilities relating to the Abandoned Patents;

“Benefit Plans” means the US Benefit Plans and the Non-US Benefit Plans;

“Business” means the business of the Seller’s Group (including the Company) of research and development (including any studies or trials (whether or not undertaken with third parties)) relating to the Products and the Commercialisation of the Products but excluding (i) the Manufacturing of the Products and (ii) the Seller Pipeline;

“Business Consideration” has the meaning set forth in Clause 3.1.1;

“Business Day” means a day which is not a Saturday, a Sunday or a public holiday in the canton of Basel-Stadt (Switzerland) or London;

“Business Goodwill” means the goodwill of the Business;

“Business Product Intellectual Property Rights” means the Owned Product Intellectual Property Rights and the Transferred Product Intellectual Property Rights and including, for the avoidance of doubt, the OBM Intellectual Property Rights;

3

“Business Sellers” means the members of the Seller’s Group that own assets of or otherwise conduct any of the Business immediately prior to Closing, or for the purposes of the Seller’s Warranties, at the date of this Agreement;

“Cabilly Agreement” means the licence and settlement agreement dated 26 March 2012 between:

(i)Genentech Inc.;

(ii)City of Hope;

(iii)Glaxo Group Limited;

(iv)Lonza Biologics Inc.; and

(v)Lonza Biologics plc;

“Call for New Tender” means any calls for a tender (including any tender for a basket of products), whether a new tender or the renewal of an existing tender, which includes the Products and which is published after Closing of which the Seller and/or any of the Seller’s Affiliates become aware and which relates in whole or in part to the sale of Products;

“Certificate” means a certificate signed by a director, officer or an authorised signatory of the Seller in the form set out in Schedule 16, to be provided to the Purchaser immediately prior to Closing;

“CFIUS” means the Committee on Foreign Investment in the United States;

“CFIUS Approval” means written notice from CFIUS that any review or investigation of the Transaction under Section 721 of the Defense Production Act of 1950, as amended (50 U.S.C. App. Section 2170), has been concluded and there are no unresolved national security concerns with respect to the Transaction or the President of CFIUS shall have determined not to take action with respect to the Transaction;

“CFIUS Filing” has the meaning set forth in Clause 4.2.3;

“China” means the People’s Republic of China excluding Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan;

“China Contracts” means the [***] and all other Contracts exclusively related to the Commercialisation of the China Products in China;

“China Marketing Authorisations” means the Marketing Authorisations held by a Marketing Authorisation Holder in respect of China for the China Products and the Marketing Authorisation Data to the extent exclusively related to such Marketing Authorisations and a “China Marketing Authorisation” means any one of them;

“China Products” means Tykerb, Hycamtin and Zofran, and a “China Product” shall mean any one of them;

“Claims Management Agreement” means the agreement between the Seller and the Purchaser, to be negotiated in good faith between the parties and entered into at

4

Closing, in respect of the management of claims or investigations by or against third parties (including by any Governmental Entity) which constitute or may constitute an Assumed Liability or an Excluded Liability;

“Clinical Employee Transfer Date” means 1 May 2015 or such later date as the parties may agree;

“Clinical Employees” means the Relevant Employees (other than those Relevant Employees who are employed in France or Italy) who immediately prior to the Closing Date work wholly or substantially in clinical development activities in relation to the Products or the Business, provided that such Relevant Employees shall only constitute Clinical Employees for so long as they are assigned to provide services within the Transitional Services Agreement;

“Clinical Trial Agreement” has the meaning given to it in paragraph 4.6.2 of Schedule 7;

“Clinical Trials/Data Liability” means any Liability arising out of, relating to or resulting from any breach of Applicable Law in connection with the conduct of, or reporting or data in relation to, clinical studies or trials (including post-approval studies) in relation to the Products or the Business;

“Closing” means the completion of the sale of the Share and the Business pursuant to this Agreement, and Closing shall be deemed to have taken place notwithstanding that some of the Business has not transferred to the Purchaser pursuant to Schedule 25 in which case the provisions of Schedule 25 shall then apply in respect thereof;

“Closing Date” means the date on which Closing takes place;

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985 of the United States, as amended, section 4980B of the Code, Title I Part 6 of ERISA, and any similar US state group health plan continuation law, together with its implementing regulations;

“Code” means the U.S. Internal Revenue Code of 1986, as amended, together with its implementing regulations;

“Commercial Information” means information that is, as of the Closing Date, or, in respect of any Delayed Business, the Delayed Closing Date, as applicable, owned by the Seller and/or its Affiliates and relates exclusively to the Commercialisation of any Product;

“Commercial Practices Liability” means any Liability arising out of, relating to or resulting from any breach of Applicable Law in connection with the Commercialisation of any products;

“Commercialise” means to promote, market, distribute and/or sell a Product and “Commercialising” and “Commercialisation” shall be construed accordingly;

“Commercially Reasonable Litigation Efforts” mean, with respect to the efforts to be expended by the Purchaser in relation to undertaking litigation in accordance with Schedule 26, those reasonable, diligent commercial efforts in respect to such

5

litigation that a person with operations of a similar scale and standing in the pharmaceutical industry would normally use when conducting litigation for its own benefit under similar circumstances;

“Company” has the meaning given to it in Schedule 18;

“Company Intra-Group Debt” means all sums owed by the Company to GlaxoSmithKline Finance plc at the Closing Date (immediately prior to Closing) as shall be notified by the Seller to the Purchaser in accordance with Clause 6.3.2;

“Company Tax Indemnity” has the meaning given to it in Schedule 18;

“Competing Product” has the meaning given to it in Clause 12.1;

“Contract” means any binding contract, agreement, instrument, lease, licence or commitment, excluding any contract with any Employee;

“Contracts Liabilities” means Liabilities relating to the: (i) Transferred Contracts; (ii) Transferred Intellectual Property Contracts (but excluding until the OBM Transfer Date, any OBM Intellectual Property Contracts); and (iii) all other contracts or parts thereof transferred, assigned, novated or assumed by the Purchaser pursuant to this Agreement, and a “Contracts Liability” shall mean any one of them;

“Control” means the power to direct the management and policies of a person (directly or indirectly), whether through ownership of voting securities, by Contract or otherwise (and the term “Controlled” shall be interpreted accordingly);

“Controlled Business Instruction” has the meaning given to it in sub-paragraph 3.4.1 of Schedule 25;

“Co-Owned Business Product Intellectual Property Right” means any Business Product Intellectual Property Right that is owned in part by a third party;

“Co-Owned Transferred Product Intellectual Property Right” means any Transferred Product Intellectual Property Right that is owned in part by a third party;

“Copyright” means any works of authorship, copyrights, database rights, mask work rights and registrations and applications therefor;

“Cork FDA Matter” means the deficiencies in GMP noted in the observations made by the FDA in a Form FDA 483 following an inspection of the Cork Site between 18 and 23 October 2013 which are the subject of the Warning Letter dated 18 March 2014 issued by the FDA to a member of the Seller’s Group;

“Data Room” means the electronic data room containing documents and information relating to the Business made available by Intralinks on behalf of the Seller, the contents of which are listed in the Disclosure Letter;

“Decision” means the issuing of any decision by a competition, antitrust, foreign investment, national, local, supranational or supervisory or other government, governmental, quasi-governmental, trade, or regulatory body, agency, branch, subdivision, department, commission, official or authority, including any Tax Authority

6

and any governmental department and any court or other tribunal, that would have the effect of prohibiting the acquisition of the Business by the Purchaser;

“Deferred Employee” means any person to whom the Seller or any other member of the Seller’s Group has made an offer of employment for a role within the Business in compliance with Clause 5 and whose employment in the Business will take effect on a date following the Closing Date, save that no person shall become a Deferred Employee unless and until the Seller has provided to the Purchaser a copy of the offer letter setting out the agreed principal terms of employment and/or employment agreement (if executed) applicable to such person;

“Delayed Business” means the Bangladesh Business, the India Business, the Saudi Business, the Thailand Business and the Ukraine Business, each as defined in Schedule 25;

“Delayed Closing” means, in respect of a Delayed Business, completion of the transfer of legal ownership of that Delayed Business to the relevant Designated Purchaser in accordance with Schedule 25;

“Delayed Closing Date” has the meaning given to it in paragraph 1.4 of Schedule 25;

“Delayed Contract” has the meaning given to it in Schedule 7;

“Delayed Contract Transfer Date” has the meaning given to it in Schedule 7;

“Delayed Employee Costs” has the meaning given to it in Schedule 25;

“Delayed Employees” means (i) the Relevant Employees who immediately prior to the Closing Date work in any of the Delayed Businesses, and (ii) any employees of any member of the Seller’s Group who are appointed to their position (whether by internal or external hire) on or after the Closing Date to work wholly or substantially in the Business in accordance with a Controlled Business Instruction or Seller Involvement Instruction, and in each case for so long as they are not assigned to work other than wholly or substantially in the Business;

“Delayed Local Payment Amount” has the meaning given to it in Clause 6.5;

“Designated Purchaser” means any entity within the Purchaser’s Group acquiring part of the Business;

“Development Plan” means the development plans and study protocols, including the target product profile, development designs, timelines and costs of the studies and trials being undertaken by the Seller’s Group (whether or not approved by any Governmental Entity) in respect of each Product Expansion as at the date of this Agreement, including the Key Study Plans;

“Direct Indemnity” has the meaning given to it in Schedule 18;

“Disclosure Letter” means the letter dated on the same date as this Agreement from the Seller to the Purchaser disclosing information constituting exceptions to the Seller’s Warranties;

“Distribution Contract” has the meaning given to it in Schedule 7;

7

“Distribution Transfer Date” has the meaning given to it in the Transitional Distribution Services Agreement;

“Divested Zofran Product” means Zofran (Ondansetron) in Australia, following the divestment by the Seller or its Affiliates of its rights to Commercialise it in Australia only to Aspen Global Incorporated;

[***];

“Effective Time” means 11.59 p.m. (local time in the relevant location) on the Closing Date or, if the Closing Date is not the last day of a month but the first Business Day of a month, 11.59 p.m. on the last day of the immediately preceding month;

“Election Date” has the meaning set forth in Clause 4.2.3;

“Employee Benefit Indemnification Amount” has the meaning given to it in Schedule 9;

“Employee Benefits” has the meaning given to it in Schedule 9;

“Employees” means, other than Excluded Employees, the employees of any member of the Seller’s Group who work wholly or substantially in the Business from time to time including the International Assignees and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at the date of this Agreement”, and “Employee” means any one of them;

“Encumbrance” means any claim, charge, mortgage, lien, option, equitable right, power of sale, pledge, hypothecation, usufruct, retention of title, right of pre-emption, right of first refusal or other security interest of any kind or an agreement, arrangement or obligation to create any of the foregoing, and for the avoidance of doubt, shall exclude any licences of, or claims of infringement relating to, Intellectual Property Rights;

“ERISA” means the Employee Retirement Income Security Act of 1974 of the United States, as amended, together with its implementing regulations;

“Estimated Employee Benefit Adjustment” means the Seller’s reasonable estimate (in so far as practicable), made in good faith after consulting with the Purchaser, of 95 per cent. of the anticipated aggregate of the Employee Benefit Indemnification Amounts, to be notified by the Seller to the Purchaser pursuant to Clause 6.3.9. However, the Seller and the Purchaser may agree in writing to apply a different mechanism to determine and calculate the Estimated Employee Benefit Adjustment;

“Estimated Business Consideration” means the Seller’s reasonable estimate of the Business Consideration, to be notified by the Seller to the Purchaser pursuant to Clause 6.3.9;

“Estimated Company Intra-Group Debt” means the Seller’s reasonable estimate of the Company Intra-Group Debt, to be notified by the Seller to the Purchaser pursuant to Clause 6.3.9;

“Estimated Share Consideration” means an amount equal to the product of:

8

(x) the Headline Amount less the aggregate of the Estimated Business Consideration, the amount of the Estimated Company Intra-Group Debt and any Estimated Employee Benefit Adjustment; and

(y) 100 divided by 100.5,

to be notified by the Seller to the Purchaser pursuant to Clause 6.3.9;

“Estimated Stamp Duty Amount” means an amount equal to 0.5% of the Estimated Share Consideration, to be notified by the Seller to the Purchaser pursuant to Clause 6.3.9;

“Excluded Assets” means the property, rights and assets referred to in Clause 2.3.2 or Part 1 of Schedule 3;

“Excluded Contracts” means, collectively, each Contract: (i) which is not Exclusively Related to the Business; or (ii) which is listed in Part 2 of Schedule 3, and including, for the avoidance of doubt, until the OBM Transfer Date, any OBM Intellectual Property Contract;

“Excluded Employees” means: (i) the employees of any member of the Seller’s Group who work in the Discovery organisation as operated by the Seller’s Group and (ii) the employees of any member of the Seller’s Group who are referred to in Schedule 29;

“Excluded Liabilities” means all Liabilities, other than Ancillary Agreement Liabilities and any Liabilities relating to the Abandoned Patents, relating to:

(i)the Business to the extent they have arisen or arise (whether before or after the applicable Liability Cut-off Time for that Liability) as a result of, or otherwise relate to, an act, omission, fact, matter, circumstance or event undertaken, occurring, in existence or arising before the applicable Liability Cut-off Time for that Liability, other than any Relevant Pension and Employment Liability;

(ii)the Seller Group Retained Business; and

(iii)any Seller Allowance, Rebate and Royalty Amount;

“Exclusively Related to the Business” means exclusively related to, or exclusively used or held for use exclusively in connection with, the Business;

“Exploitation Arrangements” has the meaning given to it in Schedule 18;

“FCA” means the Financial Conduct Authority;

“FDA” means the United States Food and Drug Administration (or its successor);

“France Assumed Liabilities” means the Assumed Liabilities to the extent they relate to the France Business;

“France Business” means that part of the Business, comprising the activities of the France Employees;

9

“France Closing” has the meaning given to it in the France SPA;

“France Employees” means those of the Employees who are employed in France;

“France Offer Letter” means the letter from the Purchaser to the Seller in respect of the binding offer from the Purchaser to acquire the France Business dated on or around the date hereof;

“France Put Option Exercise” has the meaning given to it in the France Offer Letter;

“France SPA” OR “France APA” has the meaning given to it in the France Offer Letter;

“FSMA” means the Financial Services and Markets Act 2000;

“Full Disclosure” means disclosure by the Seller to the Purchaser of the material terms, including financial terms, of a Relevant Part of a Shared Business Contract;

“Full Title Guarantee” means on the basis that the covenants implied under Part 1 of the Law of Property (Miscellaneous Provisions) Act 1994 where a disposition is expressed to be made with full title guarantee are deemed to be given by the Seller (on behalf of the relevant Share Seller or Business Seller) on Closing;

“Genmab” means Genmab A/S, a Danish corporation having its principal office at Toldbodgade 33, DK-1253 Copenhagen K, Denmark;

“Genmab Agreement” means the co-development and collaboration agreement between Genmab and Glaxo Group Limited dated 19 December 2006 (as amended from time to time) relating to the development, manufacturing and commercialisation of pharmaceutical products containing Ofatumumab;

“Good Clinical Practices” or “GCP” means the then-current standards, practices and procedures promulgated or endorsed by (i) the ICH Harmonised Tripartite Guidelines for Good Clinical Practice (CPMP/ICH/135/95) and any other guidelines for good clinical practices for trials on medicinal products in the European Union; (ii) the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” including related regulatory requirements imposed by the FDA; and (iii) the equivalent Applicable Law in any relevant country;

“Good Laboratory Practices” or “GLP” means the then-current standards, practices and procedures promulgated or endorsed by: (i) the European Commission Directive 2004/10/EC relating to the application of the principles of good laboratory practices as well as “The rules governing medicinal products in the European Union,” Volume 3, Scientific guidelines for medicinal products for human use (ex-OECD principles of GLP); (ii) the then-current standards, practices and procedures promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58; and (iii) the equivalent Applicable Law in any relevant country;

“Good Manufacturing Practices” or “GMP” means the then-current standards, practices and procedures promulgated or endorsed by: (i) the European Commission Directive 91/356/EEC, as amended by Directive 2003/94/EC and 91/412/EEC respectively, as well as “The rules governing medicinal products in the European

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Union,” Volume 4, Guidelines for good manufacturing practices for medicinal products for human and veterinary use; (ii) the FDA and the provisions of 21 C.F.R. Parts 210 and 211; (iii) the principles detailed in the ICH Q7A guidelines; and (iv) all Applicable Law with respect to each of (i) through (iii);

“Governmental Entity” means any supra-national, federal, national, state, county, local, municipal or other governmental, regulatory or administrative authority, agency, commission or other instrumentality, any court, tribunal or arbitral body with competent jurisdiction, or any national securities exchange or automated quotation service including, any governmental regulatory authority or agency responsible for the grant approval, clearance, qualification, licensing or permitting of any aspect of the research, development, manufacture, marketing, distribution or sale of the Products including the FDA, the European Medicines Agency, or any successor agency thereto;

“Governmental Liability” means any Liability arising out of, relating to or resulting from any claim, demand, action, suit, proceedings or investigation by a Governmental Entity (other than a Tax Authority) brought or undertaken in connection with products sold or developed by, or operations or practices of, the Seller’s Group prior to Closing;

“Gross Negligence” has the meaning given to it in Schedule 25;

“GSK Break Fee” has the meaning given to it in the Implementation Agreement;

“Headline Amount” has the meaning given to it in Clause 3.1.1;

“Healthcare Laws” means the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)); the Anti-Inducement Law (42 U.S.C. § 1320a-7a (a)(5)); the civil False Claims Act (31 U.S.C. §§ 3729 et seq.); the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)); the Exclusion Laws (42 U.S.C. § 1320a-7); the Medicare statute (Title XVIII of the Social Security Act), including Social Security Act §§ 1860D-1 to 1860D-43 (relating to Medicare Part D and the Medicare Part D Coverage Gap Program); the Medicaid statute (Title XIX of the Social Security Act); the Physician Payment Sunshine Act (42 U.S.C. § 1320a-7h) and any analogous state laws; the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and any other similar Law, including the price reporting requirements and the requirements relating to the processing of any applicable rebate, chargeback or adjustment, under applicable rules and regulations relating to the Medicaid Drug Rebate Program (42 U.S.C. § 1396r-8), any state supplemental rebate program, Medicare average sales price reporting (42 U.S.C. § 1395w-3a), the Public Health Service Act (42 U.S.C. § 256b), the Veterans Health Care Act (38 U.S.C. § 8126), regulatory requirements applicable to sales on the Federal Supply Schedule or under any state pharmaceutical assistance program or United States Department of Veterans Affairs agreement, all legal requirements relating to the billing or submission of claims, collection of accounts receivable, underwriting the cost of, or provision of management or administrative services in connection with, any and all of the foregoing, by the Seller’s Group and any successor government programs, and all foreign equivalents of the foregoing;

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“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, together with its implementing regulations;

“Implementation Agreement” means the implementation agreement dated the date of this Agreement between the Seller, and the Purchaser relating to, amongst other things, the implementation of the Transaction;

“Import Drug Licence” means any import drug licence held by a member of the Seller’s Group in respect of the importation of the China Products in China;

“In-Market Inventory” means all inventory of Products for Commercialisation that, at any particular time: (i) is beneficially owned by a member of the Seller’s Group; and (ii) is in finished packed form and released for Commercialisation; and (iii) is located: (a) in (or in transit to) the relevant Market; or (b) in (or in transit to) a multi-market warehouse owned or operated by a member of the Seller’s Group or by a third party; or (c) at a primary or secondary manufacturing site pending despatch following release by the relevant qualified person to the relevant market or multi-market warehouse;

“Information Technology” means computer, hardware, software and network;

“Intellectual Property Assignment” means, collectively, (i) the intellectual property assignment agreements that may be entered into between the Seller, the Purchaser or their respective Affiliates at Closing; and (ii) the intellectual property assignment agreement that may be entered into between the Seller (and/or its Affiliates) and the Company at Closing, in each case on terms consistent with the Agreed Terms;

“Intellectual Property Rights” means all: (i) Patents; (ii) Know-How; (iii) Trademarks; (iv) internet domain names; (v) Copyrights; (vi) rights in designs; (vii) database rights; and (viii) all rights or forms of protection, anywhere in the world, having equivalent or similar effect to the rights referred to in paragraphs (i) to (vii) above, in each case whether registered or unregistered and including applications for registration of any such thing;

“International Assignees” means the employees of any member of the Seller’s Group as may be identified as International Assignees in the International Assignee list provided to the Purchaser on 27 February 2015, subject to such further changes as the parties may agree;

“IP Liability” means any Liability arising out of, relating to or resulting from any actual or alleged infringement, misappropriation or other violation of Intellectual Property Rights of third parties;

“JTI” means Japan Tobacco Inc., a Japanese corporation having its principal office at 2-1Toranomon, 2-chome, Minato-ku, Tokyo 105-8422, Japan;

“JTI Agreement” means the licence agreement between JTI and SmithKline Beecham Corporation (doing business as GSK) dated 18 April 2006 (as amended from time to time);

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“Judgment” means any order, writ, judgment, injunction, decree, stipulation, determination, decision or award entered by or with any Governmental Entity of competent jurisdiction;

“Key Financial Information” means: (i) the gross profit (being net sales less standard costs, less third party royalties) for each of the Key Products in respect of the financial year ended 31 December 2013; and (ii) the net sales for the Key Products in respect of the financial years ended 31 December 2012 and 31 December 2011, as set out in an annex to the Disclosure Letter;

“Key Personnel” means the Employees listed in Schedule 20;

“Key Products” means Tykerb, Promacta, Votrient, Arzerra, Tafinlar and Mekinist;

“Key Study Plans” means the plans relating to certain combination studies involving the Products appended to this Agreement at Schedule 17;

“Know-How” means all existing and available technical information, know-how and data, including inventions (whether patentable or not), discoveries, trade secrets, specifications, instructions, processes and formulae, including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data;

“Liabilities” means all liabilities, claims, damages, proceedings, demands, orders, suits, costs, losses and expenses of every description, whether deriving from contract, common law, statute or otherwise, whether present or future, actual or contingent, ascertained or unascertained or disputed and whether owed or incurred severally or jointly or as principal or surety;

“Liability Cut-off Time” means (i) Closing in respect of any Liability that is a Clinical Trials/Data Liability, Commercial Practices Liability, Governmental Liability, IP Liability, or Product Liability; (ii) Delayed Closing in respect of any Liability that relates to a Non-Controlled Delayed Business and is a Clinical Trials/Data Liability, Commercial Practices Liabilities, Governmental Liability, IP Liability, or Product Liability (but, in respect of any such IP Liability or Product Liability that arises as a result of or otherwise relates to, any act, omission, fact, matter or circumstance or event undertaken, occurring, in existence, or arising between Closing and Delayed Closing, only to the extent that such Liability arises due to the wilful default or Gross Negligence of the relevant Seller or any of its Associated Persons); or (iii) the Effective Time in respect of any other Liability;

[***];

“LIBOR” means the London interbank offered rate, being the interest rate offered in the London inter-bank market for three month US dollar deposits as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen at 11 a.m. (London) on the second Business Day prior to the Closing Date;

“Licensed Intellectual Property Contract” means any Contract under which Product Intellectual Property Rights have been licensed by a third party to the Seller or any Affiliate thereof or to a third party by the Seller or any Affiliate thereof, including any OBM Intellectual Property Contract;

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“Licensed Product Intellectual Property Rights” means all Intellectual Property Rights licensed to the Seller or its Affiliates under any Transferred Intellectual Property Contract;

“Listing Rules” means the listing rules made by the FCA under section 73A of FSMA;

“Local Payment Amount” has the meaning given to it in Clause 6.4;

“Local Transfer Document” has the meaning given to it in Clause 2.5;

“Long Stop Date” has the meaning given to it in Clause 4.3;

“Losses” means all losses, liabilities, costs (including legal costs and experts’ and consultants’ fees), charges, expenses, actions, proceedings, claims and demands;

“MA Costs” has the meaning given to it in paragraph 4.1 of Part 2 of Schedule 6;

“MA Documentation” has the meaning given to it in paragraph 1.6 of Part 2 of Schedule 6;

“Manufacture” or “Manufacturing” or “Manufactured” means planning, purchasing of materials for, production, processing, compounding, storage, filling, packaging, labelling, leafleting, warehousing, quality control testing, waste disposal, quality release, sample retention and stability testing of products;

“Manufacturing and Supply Agreement” means the manufacturing and supply agreement to be entered into between an Affiliate of the Seller and an Affiliate of the Purchaser at Closing on terms consistent with the heads of terms in the Agreed Terms;

“Manufacturing Licences” means any certificates, permits, licences, consents and approvals issued by any Governmental Entity, used in the operation or conduct of Manufacturing any Product, and “Manufacturing Licence” shall be construed accordingly;

“Marketing Authorisation Data” means the existing and available dossiers containing the relevant Know-How used by the Seller and/or its Affiliates to obtain and maintain the Marketing Authorisations including with respect to any Product Expansion Application;

“Marketing Authorisation Holder” means the holder of the relevant Marketing Authorisation;

“Marketing Authorisation Re-registration” has the meaning given to it in paragraph 1.1.2 of Part 2 of Schedule 6;

“Marketing Authorisation Re-Registration Date” means the date on which the relevant Governmental Entity approves, or is deemed to approve, the relevant Marketing Authorisation Re-registration;

“Marketing Authorisation Transfer” has the meaning given to it in paragraph 1.1.1 of Part 2 of Schedule 6;

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“Marketing Authorisation Transfer Date” means the date on which the relevant Governmental Entity approves, or is deemed to approve, the relevant Marketing Authorisation Transfer;

“Marketing Authorisation Transferee” means the member of the Purchaser’s Group or, where no member of the Purchaser’s Group satisfies the requirements under Applicable Law to be transferred the relevant Marketing Authorisation, such Third Party as is nominated by the Purchaser, in either case to whom the relevant Marketing Authorisation is to be transferred;

“Marketing Authorisations” means the marketing authorisations issued or applications for marketing authorisations with respect to the Products and all supplements, amendments and revisions thereto including any pending Product Expansion Application;

“Markets” means the markets in which the Products are marketed and sold under the relevant Marketing Authorisation, and “Market” shall be construed accordingly;

“Material Adverse Effect” means any matter, change, event or circumstance arising or discovered on or after the date of this Agreement and prior to Closing (including a breach of the Seller’s obligations under Clause 5 or Clause 9.1) (a “Relevant Matter”) that, individually or in the aggregate with other Relevant Matters, if known to the Purchaser prior to the date of this Agreement, could reasonably have expected to have resulted in the Purchaser offering to acquire the Business on the terms of this Agreement at a discount to the Headline Amount of 30 per cent. or more, and, in determining such reduction, regard shall be had to the actual basis on which the Purchaser determined the Headline Amount.  A Relevant Matter shall not constitute or count towards a “Material Adverse Effect” to the extent resulting or arising from:

(i)any change that is generally applicable to, or generally affects, the industries or markets in which the Business operates (including changes arising as a result of usual seasonal variations) or arises from or relates to changes in Applicable Law or accounting rules or changes in any authoritative interpretation of any Applicable Law by any Governmental Entity;

(ii)any change in financial, securities or currency markets or general economic or political conditions or changes in prevailing interest rates or exchange rates;

(iii)the execution of this Agreement, the public announcement thereof or the pendency or consummation of the transactions contemplated hereby (including any cancellations of or delays in customer orders or other decreases in customer demand, any reduction in revenues and any disruption in supplier, distributor, customer or similar relationships); or

(iv)the taking of any action expressly required by this Agreement or by any Ancillary Agreement or otherwise taken with the advance written consent of the Purchaser,

except, in relation to either paragraph (i) or paragraph (ii) above, if that change adversely affects the Business in a disproportionate manner relative to other

15

comparable businesses operating in the same industry and geographic markets as the Business (in which case it may constitute or count towards a “Material Adverse Effect”);

“Material Employee Jurisdictions” means France, Germany, Japan, the United Kingdom and the United States of America;

“Medical Information” means information relating to clinical and technical matters, such as therapeutic uses for the approved indications, drug-disease information, and other product characteristics Exclusively Related to the Business which is available to or used by the Seller and/or its Affiliates;

[***];

[***];

[***];

[***];

“Moratorium Date” has the meaning given to it in Schedule 7;

“Multi-Basket Tender” means any Tender other than a Products-Only Tender;

“Netherlands APA” has the meaning given to it in the Netherlands Offer Letter;

“Netherlands Assumed Liabilities” means the Assumed Liabilities to the extent they relate to the Netherlands Business;

“Netherlands Business” means that part of the Business, comprising the activities of Netherlands Employees;

“Netherlands Closing” has the meaning given to it in the Netherlands APA;

“Netherlands Employees” means those of the Employees who are employed in the Netherlands;

“Netherlands Offer Letter” means the letter from the Purchaser to the Seller in respect of the binding offer from the Purchaser to acquire the Netherlands Business dated on or around the date hereof;

“Netherlands Put Option Exercise” has the meaning given to it in the Netherlands Offer Letter;

“New Marketing Authorisation” has the meaning given to it in paragraph 3.1 of Part 2 of Schedule 6;

“Non-Controlled Delayed Business” has the meaning given to it in Schedule 25;

“Non-Transferring Tender” means:

(i)any Products-Only Tender which is subject to public procurement law and regulation in the relevant Market and cannot be transferred under Applicable Law; and

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(ii)any Multi-Basket Tender;

“Non-US Benefit Plans” has the meaning given to it in paragraph 13.3.1 of Schedule 14;

“Notice” has the meaning given to it in Clause 16.11.1;

“Novartis Break Fee” has the meaning given in the Implementation Agreement;

“OBM Transferred Rights” mean the OBM Intellectual Property Contracts, OBM Intellectual Property Rights, and the Seller OBM Rights;

“OBM Transfer Date” means the date at which possession of the Ofatumumab Biological Materials is divided between the Seller (or any member of its Group) and the Purchaser (or any member of its Group) in accordance with Annex 1 of the Manufacturing and Supply Agreement;

“OBM Intellectual Property Contracts” mean any Contract pursuant to which Intellectual Property Rights exclusively related to, exclusively used in, or exclusively held for use in connection with Ofatumumab Biological Materials are licensed to the Seller (or any member of the Seller’s Group) from a Third Party as at the Closing Date;

“OBM Intellectual Property Rights” mean any Intellectual Property Rights (i) owned by the Seller (or any member of the Seller’s Group); and (ii) exclusively related to, exclusively used in, or exclusively held for use in connection with the Ofatumumab Biological Materials as at the Closing Date;

“Ofatumumab Autoimmune Business” means the business of the Seller’s Group of research, development, Manufacture and Commercialisation of the Ofatumumab Compound, as carried out by or on behalf of the Seller’s Group pursuant to the Ofatumumab Intellectual Property Licence Agreement;

“Ofatumumab Agreements” means the Transferred Contracts and the Transferred Intellectual Property Contracts (excluding the OBM Intellectual Property Contracts) that relate to the Ofatumumab Compound, including but not limited to (i) the Genmab Agreement, (ii) the side letter to the Genmab Agreement dated 8 June 2012, and (iii) the Cabilly Agreement;

“Ofatumumab Biological Materials” mean all tangible biological materials, cells, reference standards, assays and media that (i) are exclusively related to, exclusively used in, or exclusively held for use in connection with, the Arzerra Product or the Ofatumumab Compound; and (ii) are not commercially available to the Purchaser on commercially standard terms, including (without limitation) the Ofatumumab Cell Line, Ofatumumab MCB, Ofatumumab WCB and the cell line provided by American Type Culture Collection;

“Ofatumumab Cell Line” means the cell line(s) that express the Ofatumumab Compound, including any derivatives, progeny or modifications thereof;

“Ofatumumab Compound” means the compound Ofatumumab;

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“Ofatumumab Indications” means: (i) multiple sclerosis; (ii) rheumatoid arthritis; (iii) pemphigus; and (iv) neuromyelitis optica;

“Ofatumumab Indications Data” means any data or other information owned by any member of the Seller’s Group as at the Closing Date relating exclusively to the use of the Ofatumumab Compound for the Ofatumumab Indications;

“Ofatumumab Intellectual Property Licence Agreement” means the intellectual property licence agreement to be entered into between members of the Seller’s Group and the Purchaser’s Affiliate at Closing in respect of the grant of a licence from the Purchaser’s Affiliate to the Seller’s Affiliate of certain Intellectual Property Rights related to the Ofatumumab Compound;

“Ofatumumab MCB” means the reference deposit or collection of vials of the Ofatumumab Cell Line, from which the Ofatumumab WCB is derived;

“Ofatumumab WCB” means a vialed collection of serially subcultivated cells that is derived from the Ofatumumab MCB, and used to establish seed cultures of the Ofatumumab Cell Line;”

“OIG” has the meaning given to it in Clause 4.1.12;

“Oncology Development and Clinical Supply Agreement” means the development and clinical supply agreement dated the date of this Agreement between the Seller and Novartis Pharma AG, pursuant to which the Seller will manufacture and supply certain development materials to Novartis Pharma AG;

“Oncology Intellectual Property Licence Agreement” means the intellectual property licence agreement to be entered into between Affiliates of the Seller and an Affiliate of the Purchaser at Closing in respect of the grant of licences from the Seller’s Affiliate to the Purchaser’s Affiliate of certain Intellectual Property Rights;

“Ongoing Clinical Trials” means the ongoing clinical studies sponsored or supported by the Seller Group (including post-approval studies) or otherwise recommended by a Governmental Entity, and regulatory commitments in respect of the Products, and “Ongoing Clinical Trial” shall mean any one of them;

“Out of Scope Patent” means any Patent of the Seller’s Group at the Closing Date, but excluding: (i) the Business Product Intellectual Property Rights; and (ii) any Patents licensed under the Oncology Intellectual Property Licence Agreement;

“Owned Product Intellectual Property Rights” means the Intellectual Property Rights listed at Part 1 of Schedule 2 and all other Intellectual Property Rights Exclusively Related to the Business that, in each case, are owned by the Company, including the Registered Owned Product Intellectual Property Rights and, for the avoidance of doubt, excluding any Intellectual Property Rights in Seller Combination Compounds;

“PA Transfer Date” means, in relation to a Product, the date upon which the relevant Governmental Entity approves and notifies the Product Approval (as applicable) naming the Purchaser or the relevant Affiliate of the Purchaser (or designee thereof) as the holder of such Product Approval in the relevant country or territory covered by that Product Approval;

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“Patents” means, patents, design patents, patent applications, and any reissues, re-examinations, divisionals, continuations, continuations-in-part, provisionals, and extensions thereof or any counterparts to any of the foregoing (including rights resulting from any post-grant proceedings relating to any of the foregoing);

“Patent Term Extensions” means any and all extension of the term of a Patent granted under the Patent laws or regulations of any country, the European Union (including any supplementary protection certificate), or any other Governmental Entity;

“Pending Marketing Authorisation” has the meaning given to it in paragraph 3.2 of Part 2 of Schedule 6;

“Permitted Cash Receivable” means a debt owed to the Company by a member of the Seller’s Group other than GlaxoSmithKline Finance plc, payable on demand to the Company or as the Company directs, not exceeding £5 million multiplied by the number of months from and including 29 September 2014 to Closing;

“Permitted Encumbrance” means:

(i)Encumbrances imposed by Applicable Law otherwise than in respect of Tax;

(ii)Encumbrances imposed in the ordinary course of business which are not yet due and payable or which are being contested in good faith;

(iii)Encumbrances which are listed in Schedule 5; and

(iv)liens, title retention arrangements or deposits to secure the performance of bids, trade contracts (other than for borrowed money), conditional sales contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of the Business;

“Pharmacovigilance Agreement” means the agreement between the Seller and the Purchaser, to be entered into at Closing, in respect of pharmacovigilance and regulatory matters relating to the Products;

“Pre-Closing Product Reorganisation” means the steps described in Part 1 of Schedule 18 as may be amended from time to time in accordance with Part 3 of Schedule 18;

“Pre-Closing Receivables” means all outstanding payments due to the Seller or any of its Affiliates related to the period prior to the Effective Time (whether such payments have arisen or arise before or after the Effective Time) for goods or services supplied or rights licensed by it or on its behalf in the ordinary and usual course of carrying on the Business other than the Permitted Cash Receivable;

“Proceedings” means any legal actions, proceedings, suits, litigations, prosecutions, investigations, enquiries, mediations or arbitrations;

“Product Approvals” means all permits, licences, certificates, clearances, registrations or other authorisations or consents issued by any Governmental Entity to the Seller or one of its Affiliates with respect to the Products or the Product

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Expansions, or the manufacture, use, research, development, marketing, distribution or sale thereof, including the Marketing Authorisations;

“Product Expansion Applications” means all of the applications or planned applications for Product Expansions set out in Schedule 1 including those listed in the column “Product Expansion Applications” in Part 1 of Schedule 1, with each individual application being a “Product Expansion Application”;

“Product Expansion” means in relation to any Product:

(i)the expansion of the indications or formulations for such Product for use as monotherapy; and

(ii)the expansion of the indications or formulations for such Product for use in combination with any other compound including without limitation those set out in Part 2 of Schedule 1 but excluding any Seller Combination Compounds;

“Product Filings” means all filings, written representations, declarations, listings, registrations, reports or submissions with or to any Governmental Entity, including adverse event reports and all submitted data relating to each Product;

“Product Intellectual Property Rights” means all Intellectual Property Rights related to, or used, or held for use in connection with the Products or the manufacture, use, research, development, marketing, distribution or sale thereof, including for the avoidance of doubt, the OBM Intellectual Property Rights;

“Product Liabilities” means any Liability arising out of, relating to or resulting from actual or alleged harm, injury, damage or death to persons in connection with the use of any product (including in any clinical trial or study);

“Product Partners” means any third parties which pursuant to a Contract with the Seller or any Affiliate of the Seller co-develop, co-promote, co-market, or otherwise have a licence or other right to research, develop, manufacture, promote, distribute, market, or sell any Product, including all manufacturers and suppliers of any such Product;

“Products” means the products set out under the heading “Products” in Part 1 of Schedule 1 (but excluding the Divested Zofran Product);

“Products-Only Tender” means any Tender that relates solely to the Products;

“Proprietary Information” means all confidential and proprietary information of the Seller or its Affiliates that is Exclusively Related to the Business, including confidential Medical Information confidential Know-How and confidential Commercial Information;

“Purchaser’s Group” means the Purchaser and its Affiliates from time to time, and includes the Company with effect from Closing;

“Purchaser’s Lawyers” means Freshfields Bruckhaus Deringer LLP of 65 Fleet Street, London EC4Y 1HS, United Kingdom;

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“Purchaser Tax Indemnity” has the meaning given to it in Schedule 18;

“Quality Agreement” means the agreement between the Seller and the Purchaser, to be entered into at Closing, in respect of regulatory compliance and product safety and quality with respect to the manufacture of the Products;

“Rebate” means any amount payable or repayable to customers or Governmental Entities in respect of a contractual rebate or other rebate including under applicable Healthcare Laws (or under similar laws or regulations) due on sales of the Products;

“Reduction Amount” has the meaning given to it in Clause 6.3;

“Registered Business Product Intellectual Property Rights” means all Business Product Intellectual Property Rights that are Registered Intellectual Property Rights, including those set out at Part 1 of Schedule 2;

“Registered Intellectual Property Product Rights” means all Registered Business Product Intellectual Property Rights, Registered Licensed Product Intellectual Property Rights and Registered Shared Product Intellectual Property Rights;

“Registered Intellectual Property Rights” means Intellectual Property Rights that are registered, issued, filed, or applied for under the authority of any Governmental Entity;

“Registered Licensed Product Intellectual Property Rights” means all Licensed Product Intellectual Property Rights that are Registered Intellectual Property Rights;

“Registered Owned Product Intellectual Property Rights” means all Owned Product Intellectual Property Rights that are Registered Intellectual Property Rights, including those set out at Part 1 of Schedule 2;

“Registered Shared Product Intellectual Property Rights” means all Shared Product Intellectual Property Rights that are Registered Intellectual Property Rights;

“Registered Transferred Product Intellectual Property Rights” means all Transferred Product Intellectual Property Rights that are Registered Intellectual Property Rights, including those set out at Part 1 of Schedule 2;

“Regulation” has the meaning given to it in Clause 4.1.1;

“Relevant Development Product” has the meaning given to it in Clause 8.12;

“Relevant Employees” means the Employees immediately prior to the Closing Date and “Relevant Employee” means any one of them;

“Relevant Employers” means the Sellers and such other members of the Seller’s Group who employ the Relevant Employees;

“Relevant Part” means the relevant part of the Shared Business Contracts which relates exclusively to the Business (or the relevant part of the Business that is transferred to the Purchaser at Closing);

“Relevant Pension and Employment Liability” means (i) any Liabilities assumed by the Purchaser or a member of the Purchaser’s Group as contemplated by Schedule

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8; and (ii) any Transferred Employee Benefit Liabilities (as defined in Schedule 9) which the Purchaser agrees to assume in accordance with Schedule 9;

“Relevant Period” means the period of two years prior to the date of this Agreement;

“Relevant Purchaser Business” has the meaning given to it in Clause 4.1.12;

“Relevant Working Day” means a normal working day in the relevant jurisdiction and excludes a Saturday or Sunday or a public holiday in the relevant jurisdiction;

“Reporting Accountants” means the London office of Ernst & Young or, if that firm is unable or unwilling to act in any matter referred to them under this Agreement, the London office of Deloitte or, if that firm is also unable or unwilling to act in any matter referred to them under this Agreement, an internationally recognised and independent firm of accountants who does not act as auditor to the Seller or the Purchaser, to be agreed by the Seller and the Purchaser within seven days of a notice by one to the other requiring such agreement or, failing such agreement, to be nominated on the application of either of them by or on behalf of the Institute of Chartered Accountants of England and Wales;

“Representatives” means, in relation to any party, any of its and/or any other member of the Purchaser’s Group’s or Seller’s Group’s directors, officers, employees, agents, representatives, bankers, auditors, accountants, financial advisers, legal advisers and any other professional advisers;

“Required Notifications” has the meaning given to it in Clause 4.2.1;

“Restricted Group Employee” means any Transferred Employee who is at or above grade GG5 or GJFA3 (or in either case the Purchaser’s equivalent from time to time);

“Royalty” means any royalty payable in respect of sales of the Products;

[***];

“Sanctions Law” has the meaning given to it in paragraph 7 of Schedule 14;

“Seller Allowance, Rebate and Royalty Amount” means any Allowance, Rebate or Royalty payable after the Effective Time by the Purchaser or any member of the Purchaser’s Group, to the extent it relates to the sales of any Products made prior to the Effective Time;

“Seller Articles of Association” means the articles of association of the Seller in force and effect from time to time;

“Seller Combination Compounds” means any compounds owned by the Seller or a member of the Seller’s Group (other than a Product) which are used in combination with the Products;

“Seller Marks” means any Trademark of the Seller containing the marks listed in Schedule 23;

“Seller OBM Rights” has the meaning given to it in Clause 2.3.1(x);

“Seller Pipeline” means:

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(i)any research and development activities relating to any compound (other than the Products) at any stage of development by or on behalf of the Seller that is not yet approved for marketing for use in humans and all assets, rights and contracts relating to those activities (except where those assets, rights and contracts relate to the Products, save in relation to (ii) below); and

(ii)subject to Clause 8.5.3, assets, rights and contracts relating to pre-clinical research which do not relate exclusively to the Products;

“Seller Partner” shall mean any counterparty to a development, contract research, commercialisation, manufacturing, distribution, sales, marketing, supply, consulting or other collaboration Contract with the Seller or any Affiliate of the Seller;

“Seller Shareholder Meeting” has the meaning given to it in Clause 4.1.8;

“Seller Shareholder Resolution” has the meaning given to it in Clause 4.1.8;

“Seller Shareholders” means the holders of ordinary shares in the capital of the Seller from time to time;

“Seller’s Group” means the Seller and its Affiliates from time to time but excluding from Closing, the Company;

“Seller’s Group Insurance Policies” means all insurance policies (whether under policies maintained with third party insurers or any member of the Seller’s Group) maintained by the Seller or any member of the Seller’s Group in relation to the Business or under which, immediately prior to Closing, the Seller or any member of the Seller’s Group in relation to the Business is entitled to any benefit, and “Seller’s Group Insurance Policy” means any one of them;

“Seller’s Group Retained Business” means all businesses of the Seller’s Group, including the manufacture and/or supply of the Divested Zofran Product pursuant to the Aspen Agreements, but excluding the Business;

“Seller’s Indian Business” means that part of the Business conducted by any member of the Seller’s Group in the Republic of India;

“Seller’s Intra-Group Licence Agreement” means the:

(i)licence agreement, effective from 31 December 2012, between GlaxoSmithKline LLC and GlaxoSmithKline Intellectual Property (No. 2) Limited relating to the Group 4 Sold ROW Entrepreneurial Rights (as defined in such Seller’s Intra-Group Licence Agreement);

(ii)licence agreement, effective from 31 December 2012, between GlaxoSmithKline LLC, GlaxoSmithKline Intellectual Property Holdings Limited and GlaxoSmithKline Intellectual Property (No. 2) Limited relating to the Group 4 Contributed Entrepreneurial Rights (as defined in such Seller’s Intra-Group Licence Agreement);

(iii)licence agreement, effective from 31 December 2012, between GlaxoSmithKline LLC, GlaxoSmithKline Intellectual Property Holdings Limited and GlaxoSmithKline Intellectual Property (No. 2) Limited relating to the

23

Group 4 Licensed ROW Entrepreneurial Rights (as defined in such Seller’s Intra-Group Licence Agreement);

(iv)licence agreement, effective from 31 December 2012, between Glaxo Group Limited and GlaxoSmithKline Intellectual Property Management Limited relating to the Group 2 Entrepreneurial Rights (as defined in such Seller’s Intra-Group Licence Agreement);

(v)licence agreement between SmithKline Beecham Corporation (now known as GlaxoSmithKline LLC) and SmithKline Beecham (Cork) Limited (which assigned its rights to GlaxoSmithKline Consumer Healthcare Ireland IP Limited, effective from 26 January 2015) with an effective date of 1 January 1997 relating to Hycamtin; and

(vi)licence agreement, effective from 31 December 2012, between Glaxo Group Limited and GlaxoSmithKline Intellectual Property Limited relating to the Non-Partnership Asset Entrepreneurial Rights (as defined in such Seller’s Intra-Group Licence Agreement)

and “Seller’s Intra-Group Licence Agreements” in the plural;

“Seller’s Knowledge” has the meaning given to it in Clause 9.1.4;

“Seller’s Lawyers” means Slaughter and May of One Bunhill Row, London EC1Y 8YY;

“Seller’s Warranties” means the warranties given by the Seller pursuant to Clause 9.1 and Schedule 14, and “Seller’s Warranty” means any one of them;

“Separation” has the meaning given to it in paragraph 3.4 of Schedule 7;

“Service Provider” means an Associated Person who is a legal person;

“Share” means the entire issued share capital of the Company;

“Share Consideration” means an amount equal to the product of:

(x) the Headline Amount less the aggregate of the Business Consideration, the amount of the Company Intra-Group Debt and any Employee Benefit Indemnification Amount; and

(y) 100 divided by 100.5;

“Share Seller” means Glaxo Group Limited, a company incorporated in England and Wales with registered number 00305979;

“Shared Business Contracts” means any Contract which relates both:

(i)to the Business or any part of the Business to be transferred to the Purchaser at Closing; and

(ii)to any part of the Seller’s Group Retained Business, any product other than the Products, or any Excluded Asset,

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and to which a member of the Seller’s Group is a party or in respect of which a member of the Seller’s Group has any right, liability or obligation at Closing (including, for the avoidance of doubt, the Zofran Trade Mark and Domain Name Licence and the Multi Basket Tenders) and “Shared Business Contract” shall mean any of them;

“Shared Product Intellectual Property Rights” means all Intellectual Property Rights which shall be licensed to the Purchaser pursuant to the Oncology Intellectual Property Licence Agreement;

“Six-Month LIBOR” means the London interbank offered rate, being the interest rate offered in the London inter-bank market for six month US dollar deposits as displayed on page LIBOR01 of the Reuters screen at 11 a.m. (London) on the second Business Day prior to the date on which the Reduction Amount becomes payable;

[***];

“Stamp Duty Amount” means an amount equal to 0.5% of the Share Consideration;

“Target Asset Agreements” has the meaning given to it in the Implementation Agreement;

“Taxation” or “Tax” has the meaning given to it in the Company Tax Indemnity;

“Tax Authority” means any taxing or other authority competent to impose any liability in respect of Taxation or responsible for the administration and/or collection of Taxation or enforcement of any law in relation to Taxation;

“Tax Group” has the meaning given to it in the Company Tax Indemnity;

“Tax Return” has the meaning given to it in the Company Tax Indemnity;

“Tax Warranties” means the Seller’s Warranties set out in paragraph 11 of Schedule 14;

“Tenders” means any Contracts or arrangements to which a member of the Seller’s Group is a party (itself or through an agent) with a third party, entered into following a call for a tender by the relevant third party, for the supply by the Seller’s Group of products, including the Products in a Market pursuant to which Products may be sold after Closing;

“Third Party Claim” has the meaning given to it in Clause 11.4;

“Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from third parties:

(i)in connection with any step of the Pre-Closing Products Reorganisation; and

(ii)for the assignment or transfer to the Purchaser or any member of the Purchaser’s Group of any of the Transferred Contracts, Transferred Intellectual Property Contracts (but excluding until the OBM Transfer Date, the OBM Intellectual Property Contracts), Co-Owned Transferred Product Intellectual Property Rights, or Shared Business Contracts,

and “Third Party Consent” means any one of them;

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“Time-Limited Excluded Liability” means an Excluded Liability which is:

(i)a Contracts Liability; or

(ii)a Commercial Practices Liability;

“Trademarks” means trademarks, service marks, trade names, certification marks, service names, industrial designs, brand names, brand marks, trade dress rights, identifying symbols, logos, emblems, and signs or insignia;

“Transaction” has the meaning given to it in Clause 4.1.1;

“Transfer Regulations” means the relevant national measure by which the employment of a Relevant Employee automatically transfers to the Purchaser or a relevant member of the Purchaser’s Group;

“Transferred Books and Records” means all books, ledgers, files, reports, plans, records, manuals and other materials (in any form or medium) to the extent of, or maintained predominantly for, the Business by the Seller’s Group (other than emails), including (without limitation) all books, records and other materials relating to the research, development and pre-clinical trials for each of the Products and the Product Expansions but excluding:

(i)any such items to the extent that: (A) they are related to any Excluded Assets or Excluded Liabilities, (B) they are related to any corporate, Tax, human resources or stockholder matters of the Seller or its Affiliates, (C) any Applicable Law prohibits their transfer, (D) any transfer thereof otherwise would subject the Seller or any of its Affiliates to any material liability or (E) they are retained by the Seller in accordance with Clause 8.8.2;

(ii)any laboratory notebooks to the extent containing research and development information unrelated to the Business;

(iii)in relation to Products other than the Key Products, any books and records that are more than 5 years old containing, in whole or in part, research and development information (other than any laboratory notebooks, books or records described in this paragraph (iii) that are maintained for the Business by the Seller’s Group); and

(iv)any books and records (including but not limited to the content of any personnel files) kept by the Seller’s Group relating to the employment of the Transferred Employees with the Seller’s Group;

“Transferred Contracts” means Contracts (other than the Transferred Intellectual Property Contracts) that (i) are listed in Part 2 of Schedule 2 or (ii) are between the Seller or a member of the Seller’s Group on the one hand and any third party on the other hand and are Exclusively Related to the Business (including, without limitation, Products-Only Tenders), but excluding the Excluded Contracts, this Agreement and any Ancillary Agreement;

“Transferred Employees” means (i) the Relevant Employees to whom the Purchaser (or a member of the Purchaser’s Group) offers employment and who accept such

26

employment and become employed by the Purchaser (or a member of the Purchaser’s Group) in accordance with Schedule 8; and (ii) any Relevant Employees who transfer to the Purchaser (or a member of the Purchaser’s Group) by operation of the Transfer Regulations and do not object to such transfer (to the extent permitted by the Transfer Regulations) in accordance with Schedule 8; and “Transferred Employee” means any one of them;

“Transferred Intellectual Property Contracts” means Contracts relating to Intellectual Property Rights Exclusively Related to the Business that are between the Seller or a member of the Seller’s Group on the one hand and any third party on the other hand including any such Contracts set out in Part 2 of Schedule 2 and including, for the avoidance of doubt, the OBM Intellectual Property Contracts;

“Transferred Product Intellectual Property Rights” means the Intellectual Property Rights listed at Part 1A of Schedule 2 (except where such Intellectual Property Rights are Owned Product Intellectual Property Rights) and all other Intellectual Property Rights Exclusively Related to the Business and owned by any member of the Seller’s Group (other than the Company), including the Registered Transferred Product Intellectual Property Rights, the OBM Intellectual Property Rights, and, for the avoidance of doubt, excluding any Intellectual Property Rights in Seller Combination Compounds;

“Transitional Services Agreement” means the transitional services agreement to be entered into between the Seller or its Affiliate and the Purchaser or its Affiliate at Closing (and each local agreement entered into pursuant to such transitional services agreement) on terms consistent with the heads of terms in the Agreed Terms;

“Transitional Distribution Services Agreement” means the transitional distribution services agreement to be entered into between the Seller or its Affiliate and the Purchaser or its Affiliate at Closing (and each local agreement entered into pursuant to such transitional distribution services agreement) on terms consistent with the heads of terms in the Agreed Terms;

“Ukraine Business” has the meaning given to it in Schedule 25;

“US Benefit Plans” means all United States “employee benefit plans” (within the meaning of section 3(3) of ERISA), severance, change in control or employment, vacation, incentive, bonus, stock option, stock purchase, or restricted stock plans, programmes, agreements or policies benefiting the Employees;

“Vaccines Sale and Purchase Agreement” means the sale and purchase agreement dated the date of this Agreement (as amended) between the Purchaser and the Seller relating to the sale and purchase of the Purchaser’s vaccines business;

“VAT” means within the European Union such Taxation as may be levied in accordance with (but subject to derogations from) Council Directive 2006/112/EC and outside the European Union any Taxation levied by reference to added value or sales;

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“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988 of the United States; and

“Zofran Trade Mark and Domain Name Licence” means the trade mark and domain name licence agreement dated 30 November 2012 (as amended from time to time) between (i) Glaxo Group Limited; (ii) SmithKline Beecham (Australia) Pty Limited; (iii) GlaxoSmithKline Australia Pty Limited (together, as licensors); (iv) GlaxoSmithKline Intellectual Property Management Limited and (v) Aspen Global Incorporated (as licensee), relating to the licensing of certain Intellectual Property Rights in Australia.

1.2Singular, plural, gender

References to one gender include all genders and references to the singular include the plural and vice versa.

1.3References to persons and companies

References to:

1.3.1a person include any individual, company, partnership or unincorporated association (whether or not having separate legal personality); and

1.3.2a company include any company, corporation or any body corporate, wherever incorporated.

1.4Schedules etc.

References to this Agreement shall include any Recitals and Schedules to it and references to Clauses and Schedules are to Clauses of, and Schedules to, this Agreement.  References to paragraphs and Parts are to paragraphs and Parts of the Schedules.

1.5Reference to documents

References to any document (including this Agreement), or to a provision in a document, shall be construed as a reference to such document or provision as amended, supplemented, modified, restated or novated from time to time.

1.6References to enactments

Except as otherwise expressly provided in this Agreement, any express reference to an enactment (which includes any legislation in any jurisdiction) includes references (i) to that enactment as amended, consolidated or re-enacted by or under any other enactment before or after the date of this Agreement; (ii) any enactment which that enactment re-enacts (with or without modification); and (iii) any subordinate legislation (including regulations) made before or after the date of this Agreement under that enactment as amended, consolidated or re-enacted as described in paragraph (i) or (ii) above, except to the extent that any of the matters referred to in paragraphs (i) to (iii) occurs after the date of this Agreement and increases or alters the liability of the Seller or Purchaser under this Agreement.

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1.7Information

References to books, records or other information mean books, records or other information in any form including paper, electronically stored data, magnetic media, film and microfilm.

1.8References to “indemnify”

Unless specified to the contrary, references to “indemnify” and “indemnifying” any person against any circumstance include indemnifying and holding that person harmless on an after-Tax basis and:

1.8.1references to the Purchaser indemnifying each member of the Seller’s Group shall constitute undertakings by the Purchaser to the Seller for itself and on behalf of each other member of the Seller’s Group;

1.8.2references to the Seller indemnifying each member of the Purchaser’s Group shall constitute undertakings by the Seller to the Purchaser for itself and on behalf of each other member of the Purchaser’s Group;

1.8.3to the extent that the obligation to indemnify relates to the Share, the Company or any assets or liabilities transferred by a Business Seller or the Share Seller (as the case may be) to a member of the Purchaser’s Group pursuant to this Agreement, references to the Seller indemnifying the Purchaser and references to the Seller indemnifying the Purchaser or any member of the Purchaser’s Group shall constitute undertakings by the Seller to indemnify or procure indemnification of the relevant purchaser of the assets or liabilities or the Share transferred or to be transferred by that Business Seller or the Share Seller or the Company, and references to the Purchaser indemnifying the Seller and references to the Purchaser indemnifying the Seller and each member of the Seller’s Group shall constitute undertakings by the Purchaser to indemnify or procure the indemnification of the relevant member of the Seller’s Group; and

1.8.4where under the terms of this Agreement one party is liable to indemnify or reimburse another party in respect of any costs, charges or expenses, the payment shall include an amount equal to any VAT thereon not otherwise recoverable by the other party or any member of any group or consolidation of which it forms part for VAT purposes, subject to that party using reasonable endeavours to recover or procure recovery of such amount of VAT as may be practicable.

For the purposes of this Clause, indemnifying and holding harmless a person on an “after-Tax basis” means that the amount payable pursuant to the indemnity (the “Payment”) shall be calculated in such a manner as will ensure that, after taking into account:

(i)any Tax required to be deducted or withheld from the Payment and any additional amounts required to be paid by the payer of the Payment in consequence of such withholding;

29

(ii)the amount and timing of any additional Tax which becomes (or would, but for the use of any credit or other relief which would otherwise have been available to reduce the Tax liabilities of any member of the Seller’s Group (or a member of the Purchaser’s Group, as the case may be), have become) payable by the recipient of the Payment (or a member of the Seller’s Group or the Purchaser’s Group, as the case may be) as a result of the Payments being subject to Tax in the hands of that person; and

(iii)the amount and timing of any Tax benefit which is obtained by the recipient of the Payment (or a member of the Seller’s Group or the Purchaser’s Group, as the case may be) to the extent that such Tax benefit is attributable to the matter giving rise to the indemnity payment or to the receipt of the Payment,

which amount and timing is to be determined by the auditors of the recipient at the shared expense of both relevant parties and is to be certified as such to the party making the Payment, the recipient of the Payment is in no better and no worse after Tax position as that in which it would have been if the matter giving rise to the indemnity payment had not occurred, provided that if either party to this Agreement shall have assigned or novated the benefit of this Agreement in whole or in part or shall, after the date of this Agreement, have changed its Tax residence or the permanent establishment to which the rights under this Agreement are allocated then no Payment to that party shall be increased by reason of the operation of paragraphs (i) to (iii) above to any greater extent than would have been the case had no such assignment, novation or change taken place.

1.9References to wholly or substantially in the Business

References to “wholly or substantially in the Business” in relation to any employee employed by a member of the Seller’s Group means that such employee spends more than 70 per cent. of their time working in the Business at the relevant time.

1.10Legal terms

References to any English legal term shall, in respect of any jurisdiction other than England and Wales, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction.

1.11Non-limiting effect of words

The words “including”, “include”, “in particular” and words of similar effect shall not be deemed to limit the general effect of the words that precede them.

1.12Currency conversion

Other than in relation to conversion of the Company Intra-Group Debt, where the provisions of Clause 1.13 shall apply, any amount to be converted from one currency into another currency for the purposes of this Agreement shall be converted into an equivalent amount at the Conversion Rate prevailing at the Relevant Date.  For the purposes of this Clause:

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“Conversion Rate” means the spot reference rate for a transaction between the two currencies in question as quoted by the European Central Bank on the Business Day immediately preceding the Relevant Date or, if no such rate is quoted on that date, on the preceding date on which such rates are quoted;

“Relevant Date” means, save as otherwise provided in this Agreement, the date on which a payment or an assessment is to be made, save that, for the following purposes, the date shall mean:

(i)for the purposes of Clause 5, the date of this Agreement;

(ii)for the purposes of Clause 10, the date of this Agreement; and

(iii)for the purposes of the monetary amounts set out in Schedule 14, the date of this Agreement.

1.13US$ Spot Rate

1.13.1For the purposes of Clause 6.3.2, the amount of the Company Intra-Group Debt shall be converted from sterling to US$ at the spot rate of exchange for sterling into US$ available as soon as possible after 04:00 am GMT on the Closing Date on the Bloomberg screen (the Intraday Chart) or where no such US$ rate is available for such date, at the rate quoted by Barclays Bank on such date.

1.13.2For the purposes of Clause 6.3.9, the estimate of the amount of the Company Intra-Group Debt shall be converted from sterling to US$ at the spot rate of exchange for sterling into US$ available as soon as possible after 04:00 am GMT on the date on which such estimate is to be given on the Bloomberg screen (the Intraday Chart) or where no such US$ rate is available for such date, at the rate quoted by Barclays Bank on such date.

2.Sale and Purchase of the Business

2.1Sale and Purchase of the Business

On and subject to the terms of this Agreement:

2.1.1the Seller shall procure that the Business Sellers shall sell and assign that part of the Business which is not carried on by the Company immediately before Closing; and

2.1.2the Seller shall procure that the Share Seller shall sell the Share in accordance with Clause 2.2;

2.1.3the Purchaser shall purchase and accept, or procure the purchase and acceptance by one or more other members of the Purchaser’s Group of that part of the Business which is not carried on by the Company immediately before Closing; and

2.1.4the Purchaser shall purchase and accept, or procure the purchase and acceptance by another member of the Purchaser’s Group of, the Share,

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such that the Seller shall directly or indirectly relinquish and the Purchaser shall directly or indirectly acquire the Business as a going concern.

2.2Sale of the Share

2.2.1The Seller shall procure that:

(i)the Share Seller shall sell the Share with Full Title Guarantee free from Encumbrances and together with all rights and advantages attaching to it as at Closing (including the right to receive all dividends or distributions declared, made or paid on or after Closing); and

(ii)on or prior to Closing, any and all rights of pre-emption over the Share and the equity interests in any subsidiaries are waived irrevocably by the person entitled thereto.

2.2.2If the Seller notifies the Purchaser under paragraph 4, Part 1 of Schedule 18 that it no longer wishes to proceed with the Pre-Closing Product Reorganisation, then:

(i)the provisions of sub-Clauses 2.1.2, 2.1.4 and 2.2.1 shall cease to have effect; and

(ii)the parties acknowledge that amendments to this Agreement will be required to give effect to that notice such that, subject to any other amendments that may be agreed by the parties that are not required to implement the Pre-Closing Product Reorganisation, the provisions of this Agreement will be the same as they were after it was amended and restated on 29 May 2014.

2.3The Business, the Excluded Assets, the Assumed Liabilities and the Excluded Liabilities

2.3.1The Assets to be sold under this Agreement, which shall be sold with Full Title Guarantee (save in respect of the Abandoned Patents and the Transferred Product Intellectual Property Rights) and free from Encumbrances other than Permitted Encumbrances shall be:

(i)the Transferred Books and Records;

(ii)the Transferred Product Intellectual Property Rights (but excluding, until the OBM Transfer Date, the OBM Intellectual Property Rights);

(iii)subject to and in accordance with Schedule 7, the Transferred Contracts, the Transferred Intellectual Property Contracts (but excluding, until the OBM Transfer Date, the OBM Intellectual Property Contracts Rights), Co-Owned Transferred Product Intellectual Property Rights and if elected by the Purchaser in accordance with paragraph 3 of Schedule 7, the Relevant Parts of any Shared Business Contracts;

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(iv)subject to and in accordance with Schedule 6, all Product Approvals (other than those relating to manufacturing), Product Expansions and all other permits, licences, certificates, registrations, marketing or other authorisations or consents issued by a Governmental Entity Exclusively Related to the Business;

(v)subject to and in accordance with Schedule 6, all Marketing Authorisation Data;

(vi)all Commercial Information;

(vii)all Medical Information;

(viii)all rights of the Purchaser or a member of the Purchaser’s Group as contemplated by Schedule 8 and Schedule 9;

(ix)the Business Goodwill;

(x)with effect from the OBM Transfer Date, the rights of the Seller (or any member of the Seller’s Group) in the Ofatumumab Biological Materials (the “Seller OBM Rights”); and

(xi)all other property, rights and assets owned or held by any member of the Seller’s Group and Exclusively Related to the Business at Closing (other than any property, rights and assets of the Business Sellers or the Company expressly excluded from the sale under this Agreement).

2.3.2There shall be excluded from the sale of the Business under this Agreement the following:

(i)the Seller’s Group Retained Business, including the Seller Pipeline, any Manufacturing, and any equipment, machinery, spare parts, tools and other tangible property used by the Seller’s Group for Manufacturing products or in connection with the research and development of the Products or the Product Expansions and any rights or property related to the Seller Combination Compounds (save for, until the OBM Transfer Date, the Ofatumumab Biological Materials);

(ii)any Intellectual Property Right that is not a Business Product Intellectual Property Right, and any Contract relating to Intellectual Property Rights that is not a Transferred Intellectual Property Contract or the Relevant Part of a Shared Business Contract;

(iii)the Seller Marks;

(iv)any product and any permits, licences, certificates, registrations, marketing or other authorisations or consents issued by any Governmental Entity in respect of any products, or any applications therefor, other than the Products, Product Approvals and Product Expansion Applications;

33

(v)the In-Market Inventory;

(vi)any Information Technology;

(vii)all cash, marketable securities and negotiable instruments, and all other cash equivalents, of the Seller and its Affiliates, other than the Share and the Permitted Cash Receivable;

(viii)all real property and any leases therefor and interests therein, together with all buildings, fixtures, and improvements erected thereon;

(ix)the company seal, minute books, charter documents, stock or equity record books and such other books and records pertaining to the Seller or its Affiliates other than the Company, as well as any other records or material relating to the Seller or its Affiliates generally and not involving or related to the Business;

(x)any right of the Seller or its Affiliates to be indemnified in respect of Assumed Liabilities;

(xi)all Tax assets (including Tax refunds and prepayments) other than those of the Company;

(xii)all Tax Returns of the Seller’s Group other than the Company and all books and records (including working papers) related thereto;

(xiii)any rights in respect of any insurance policies of the Seller’s Group as provided in Clause 14;

(xiv)any rights in respect of Pre-Closing Receivables;

(xv)any equity interest in any person other than the Company;

(xvi)the Excluded Contracts;

(xvii)the China Marketing Authorisations; and

(xviii)all rights of the Seller’s Group under this Agreement and the Ancillary Agreements.

2.3.3The Seller agrees to procure the transfer (to the extent it is able so to do) and the Purchaser agrees to accept (or procure the acceptance by another member of the Purchaser’s Group of) the transfer of, and to assume, duly and punctually pay, satisfy, discharge, perform or fulfil (or procure that another member of the Purchaser’s Group will assume, duly and punctually pay, satisfy, discharge, perform or fulfil) the Assumed Liabilities with effect from Closing.

2.3.4Clause 2.3.3 shall not apply to, and the Purchaser shall not be obliged to accept or procure the acceptance by another member of the Purchaser’s Group of the transfer of or to assume, pay, satisfy, discharge, perform or

34

fulfil, or procure that another member of the Purchaser’s Group will assume, duly and punctually pay, satisfy, discharge, perform or fulfil:

(i)any Excluded Liability; or

(ii)any Liability to the extent it relates to an Excluded Asset.

2.3.5The parties acknowledge that the Seller has notified the Purchaser of its intention to carry out the Pre-Closing Product Reorganisation and that the Seller may, at its discretion, carry out the Pre-Closing Product Reorganisation provided that:

(i)the Seller shall, in good faith, consult with, and take into account the reasonable views of, and any reasonable requests made by the Purchaser in relation to the Pre-Closing Product Reorganisation steps and documents, including any proposals to reduce or avoid Liability or cost being suffered or incurred by any member of the Purchaser’s Group;

(ii)all fees, costs and expenses of implementing the Pre-Closing Product Reorganisation (or any part thereof) shall be borne by the Seller’s Group (other than the Company); and

(iii)any modification or amendment of the steps set out in Part 1 of Schedule 18 shall require the prior written consent of the Purchaser, not to be unreasonably withheld or delayed.  Without prejudice to any other exercise of a discretion whether or not to give consent, the Purchaser shall not be acting unreasonably if it withholds or delays its consent because it believes in good faith that the modification or amendment would result in exposure of any member of the Purchaser’s Group to any additional cost, loss of benefit or Liability; and

(iv)for the avoidance of doubt, nothing done or agreed to by the Purchaser to comply with the provisions of this Clause 2.3.5, Clause 2.3.6 and Schedule 18 shall in any respect reduce or restrict any rights the Purchaser or any member of the Purchaser’s Group may have to make a claim against the Seller under Clause 2.3.6, the Company Tax Indemnity or the Purchaser Tax Indemnity.

2.3.6The Seller undertakes to the Purchaser (for itself and as trustee for each other member of the Purchaser’s Group) that, with effect from Closing, the Seller will indemnify on demand and hold harmless each member of the Purchaser’s Group against and in respect of the loss of any benefit (other than benefits in respect of Tax) and any and all Liabilities (other than Liabilities in respect of Tax), including any and all Liabilities (other than Liabilities in respect of Tax) of any company whose shares are transferred to the Purchaser or a member of the Purchaser’s Group in connection with the Pre-Closing Product Reorganisation, arising in connection with any Pre-Closing Product Reorganisation (or part thereof) including any such loss or

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Liability that would not have been suffered or incurred had such Pre-Closing Product Reorganisation (or part thereof) not been undertaken.

2.4Employees and Employee Benefits

2.4.1The provisions of Schedule 8 shall apply in respect of the Employees.

2.4.2The provisions of Schedule 9 shall apply in respect of Employee Benefits.

2.5Local Transfer Documents

2.5.1On Closing or at such other time as agreed between the parties, the Seller shall procure that the Business Sellers or the Share Seller execute, and the Purchaser shall execute (or procure the execution by one or more other members of the Purchaser’s Group of), such agreements, transfers, conveyances and other documents, as may be required pursuant to the relevant local law and otherwise as may be agreed between the Seller and the Purchaser to implement the transfer of the Business or the Share on Closing subject to the provisions of Schedule 25 (the “Local Transfer Documents” and each, a “Local Transfer Document”).  Title shall be transferred by the applicable Local Transfer Document.

2.5.2To the extent that the provisions of a Local Transfer Document are inconsistent with or (except to the extent they implement a transfer in accordance with this Agreement) additional to the provisions of this Agreement:

(i)the provisions of this Agreement shall prevail; and

(ii)so far as permissible under the laws of the relevant jurisdiction, the Seller and the Purchaser shall procure that the provisions of the relevant Local Transfer Document are adjusted, to the extent necessary to give effect to the provisions of this Agreement or, to the extent this is not permissible, the Seller shall indemnify the Purchaser against all Liabilities suffered by the Purchaser or its Affiliates or, as the case may be, the Purchaser shall indemnify the Seller against all Liabilities suffered by the Seller or its Affiliates, in either case through or arising from the inconsistency between the Local Transfer Document and this Agreement or the additional provisions (except to the extent they implement a transfer in accordance with this Agreement).

2.5.3The Seller shall not, and shall procure that none of its Affiliates shall bring any claim against the Purchaser or any member of the Purchaser’s Group in respect of or based upon the Local Transfer Documents save to the extent necessary to implement any transfer of the Business as contemplated by this Agreement.  To the extent that the Seller or a member of the Seller’s Group does bring a claim in breach of this Clause, the Seller shall indemnify the Purchaser and each member of the Purchaser’s Group against all Liabilities which the Purchaser or that member of the Purchaser’s Group may suffer through or arising from the bringing of such a claim.

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2.5.4The Purchaser shall not, and shall procure that none of its Affiliates shall, bring any claim against the Seller or any member of the Seller’s Group in respect of or based upon the Local Transfer Documents save to the extent necessary to implement any transfer of the Business as contemplated by this Agreement.  To the extent that the Purchaser or a member of the Purchaser’s Group does bring a claim in breach of this Clause, the Purchaser shall indemnify the Seller and each member of the Seller’s Group against all Liabilities which the Seller or any member of the Seller’s Group may suffer through or arising from the bringing of such a claim.

3.Amounts Payable

3.1Consideration

3.1.1Subject to Clause 3.4.1, the consideration for the purchase of the Business (including the Share) under this Agreement shall be an amount equal to US$16,000,000,000 (the “Headline Amount”) less the Stamp Duty Amount and, if applicable, any Employee Benefit Indemnification Amount paid in accordance with Schedule 9 and any Reduction Amount, and shall include:

(i)the consideration for the purchase of the Share under this Agreement, being the Share Consideration;

(ii)the “Business Consideration”, being the consideration for the purchase of that part of the Business not owned directly by the Company as at Closing, as notified by the Seller to the Purchaser 5 Business Days prior to the Closing Date, and for the undertaking given by the Seller in Clause 12.1, and which is subject to Clause 6.3.3; and

(iii)the amount of the Company Intra-Group Debt.

3.1.2For the avoidance of doubt, the consideration provided for under Clause 3.1.1 includes the consideration payable in respect of the Delayed Businesses.

3.2Allocation

The provisions of Schedule 10 shall apply.

3.3VAT

3.3.1The provisions of Schedule 11 shall apply.

3.3.2The Seller and the Purchaser agree that the amount payable in respect of the sales and purchases described in Clause 2.1 above is exclusive of any VAT.

3.3.3To the extent that VAT is chargeable in respect of those sales and purchases or any part thereof, the Purchaser shall, against delivery of a valid VAT invoice (or equivalent, if any), in addition to any other amount expressed in the Agreement to be payable by the Purchaser, pay or procure the payment to the Seller (on behalf of the relevant Business Seller or the Share Seller as

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applicable) any amount of any VAT so chargeable for which the Seller (or the relevant member of the Seller’s Group, as the case may be) is liable to account, in accordance with Schedule 11.

3.3.4The Seller shall indemnify each member of the Purchaser’s Group against any VAT chargeable in connection with the transfer of the Share under this Agreement.

3.4Treatment of Payments

3.4.1If any payment is made by a member of the Seller’s Group to a member of the Purchaser’s Group or by a member of the Purchaser’s Group to a member of the Seller’s Group, in either case in respect of any claim under, or for any breach of this Agreement or pursuant to an indemnity (or equivalent covenant to pay) under this Agreement, the payment shall be treated, so far as possible, as an adjustment of the consideration paid by the Purchaser for the Share, the Owned Product Intellectual Property Rights or the Assets to which the payment and/or claim relates under this Agreement and the consideration shall be deemed to be increased or reduced (as applicable) by the amount of such payment.

PROVIDED THAT this Clause 3.4.1 shall not require any amount to be treated as an amount in respect of the Share Consideration or the Business Consideration for the purposes of Clause 16.10 if it would not otherwise have been so treated.

3.4.2If:

(i)the payment and/or claim relates to: (A) more than one of the Assets, the Owned Product Intellectual Property Rights and the Share; and/or (B) to more than one Asset or to more than one Owned Product Intellectual Property Right, it shall be allocated in a manner which reflects the impact of the matter to which the payment and/or claim relates, failing which it shall be allocated rateably to the Products concerned by reference to the percentages in which amounts are to be allocated between the Products in accordance with Schedule 10; or

(ii)the payment and/or claim relates to neither the Share nor any particular Assets or Owned Product Intellectual Property Rights, it shall be allocated rateably to the Products by reference to the percentages in which amounts are to be allocated between the Products in accordance with Schedule 10,

and in each case the consideration shall be deemed to have been reduced by the amount of such payment.

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4.Conditions

4.1Conditions Precedent

The sale and purchase of the Business, including the sale and purchase of the Share, is conditional upon satisfaction or, where applicable, waiver of the following conditions, or their satisfaction subject only to Closing:

4.1.1to the extent that the proposed acquisition of all or any of the Business (the “Transaction”) either constitutes (or is deemed to constitute under Article 4(5) or Article 5(2))) a concentration with a Community dimension within the meaning of Council Regulation (EC) 139/2004 (as amended) (the “Regulation”) or is to be examined by the European Commission as a result of a decision under Article 22(3) of the Regulation:

(i)the European Commission taking a decision (or being deemed to have taken a decision) under Article 6(1)(b) or, if the Commission has initiated proceedings pursuant to Article 6(1)(c), under Article 8(1) or 8(2) of the Regulation declaring the Transaction compatible with the common market; or

(ii)the European Commission taking a decision (or being deemed to have taken a decision) to refer the whole or part of the Transaction to the competent authorities of one or more Member States under Articles 4(4) or 9(3) of the Regulation; and

(a)each such authority taking a decision with equivalent effect to Clause 4.1.1(i) with respect to those parts of the Transaction referred to it; and

(b)the European Commission taking any of the decisions under Clause 4.1.1(i) with respect to any part of the Transaction retained by it;

4.1.2any waiting period (and any extension thereof) under the HSR Act applicable to the Transaction having expired;

4.1.3to the extent required or otherwise agreed between the parties as appropriate to permit the parties to consummate the Transaction in the jurisdictions listed in Schedule 21, any additional clearances, approvals, waivers, no-action letters and consents having been obtained and any additional waiting periods having expired under applicable antitrust, merger control or foreign investment rules set forth in Schedule 21;

4.1.4receipt of CFIUS Approval if CFIUS has initiated a review of the transactions contemplated by this Agreement, whether pursuant to Clause 4.2.3 or otherwise;

4.1.5the unconditional consent of JTI to the assignment to the Purchaser of the rights and obligations of the relevant member of the Seller’s Group under the JTI Agreement having been obtained;

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4.1.6the unconditional consent of Genmab to:

(i)the assignment to the Purchaser of the rights and obligations of the relevant member of the Seller’s Group under the Genmab Agreement having been obtained; and

(ii)a waiver of all non-compete provisions in the Genmab Agreement that would otherwise prevent the Purchaser and any member of the Purchaser’s Group from [***] having been obtained;

4.1.7no Governmental Entity having enacted, issued, promulgated, enforced or entered any Applicable Law or Judgment (whether temporary, preliminary or permanent) that is in effect at the Closing Date and that has the effect of making the transactions contemplated by this Agreement illegal or otherwise restraining or prohibiting the consummation of such transactions;

4.1.8the passing at a duly convened and held general meeting of the Seller Shareholders of an ordinary resolution validly approving the Target Asset Agreements (as defined in the Implementation Agreement) and any sale and purchase under the Put Option Agreement (as defined in the Implementation Agreement) in accordance with the Seller Articles of Association, the Listing Rules and all other Applicable Law (such resolution being the “Seller Shareholder Resolution” and such meeting being the “Seller Shareholder Meeting”);

4.1.9the Purchaser not delivering a Novartis AG Board Certificate (as defined in the Implementation Agreement), in accordance with clause 3 of the Implementation Agreement, prior to the conclusion of the vote on the Seller Shareholder Resolution at the Seller Shareholder Meeting;

4.1.10there having been no disruption in the Seller Group’s supply chain, for any reason, which has caused a stock out at any of the Seller Group’s relevant distribution centres in a manner which had, or would be reasonably likely to have, a Material Adverse Effect;

4.1.11each of the other Target Asset Agreements having become unconditional in accordance with its terms (save for any condition in those agreements relating to this Agreement or the other of those agreements having become unconditional); and

4.1.12the Office of Inspector General of the U.S. Department of Health and Human Services (“OIG”) not requiring that:

(i)the full terms and conditions of the Corporate Integrity Agreement between OIG and GlaxoSmithKline LLC dated on or around 28 June 2012 (the “GSK CIA”); or

(ii)significant provisions of the GSK CIA which (a) are terms that are not currently applicable to the Relevant Purchaser Business under Novartis Pharmaceutical Corporation’s own Corporate Integrity Agreement with the OIG, and (b) when applied to the Relevant

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Purchaser Business, would, in the aggregate, reasonably be expected to have an adverse effect on it,

shall, by reason of the sale under this Agreement, bind or apply in respect of the Relevant Purchaser Business.

In this Clause 4.1.12, the “Relevant Purchaser Business” means the entire (NPC) business and operations in the United States of the pharmaceuticals division of the Purchaser.

4.2Responsibility for Satisfaction

4.2.1The Purchaser and the Seller shall prepare and file the notifications necessary for the fulfilment of the conditions in Clauses 4.1.1 to 4.1.3 (the “Required Notifications”) as soon as reasonably practicable (with notifications under the HSR Act to be filed by 29 May 2014).  Notwithstanding anything to the contrary contained in this Agreement, the Purchaser shall have primary responsibility for obtaining all consents, approvals or actions of any Governmental Entity which are required in connection with the Required Notifications.

4.2.2The Purchaser shall be responsible for payment of all filing and other fees and expenses in connection with the Required Notifications and the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3.

4.2.3CFIUS

(i)The Seller and the Purchaser shall consult, cooperate and keep each other reasonably informed regarding communications with, and requests for additional information from, CFIUS with respect to the Transaction.  The Seller and the Purchaser shall use their respective reasonable best efforts to provide promptly all information that is pursuant to a request by CFIUS.

(ii)Within 30 calendar days after the execution of this Agreement, any party wishing to submit a formal joint voluntary notice to CFIUS pursuant to 31 C.F.R. Section 800.401, et. seq. (“CFIUS Filing”) shall provide the other party with written notice of its intent to make a CFIUS Filing (“Election Date”).  Prior to making its election to submit a CFIUS Filing, the party wishing to make a CFIUS Filing shall consult in good faith with senior executives of the other party.  If neither the Seller nor the Purchaser provides notice to submit a formal joint voluntary notice to CFIUS, a CFIUS Filing will not be made unless requested by CFIUS.

(iii)If either the Seller or the Purchaser elects to make a CFIUS Filing following the procedures and consultations in Clause 4.2.3(ii) or if CFIUS requires a filing, then:

(a)the Seller and the Purchaser shall use their respective reasonable best efforts to submit a draft CFIUS Filing no later than 15 Business Days following the Election Date, and

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a final CFIUS Filing the earlier of (1) five business days after submitting the draft CFIUS filing or (2) five calendar days after the receipt of any comments from CFIUS staff regarding the draft CFIUS Filing.

(b)the Seller and the Purchaser will provide each other with the reasonable opportunity to review and comment on any information provided to CFIUS to the extent permitted by Applicable Law, with the exception of personal identifier information required under Section 800.402(c)(6)(vi)(B) of the CFIUS regulations, 31 C.F.R..  Competitively sensitive information, or information not related to the transactions contemplated by this Agreement, may be restricted to each party’s external counsel to the extent reasonably considered necessary or advisable by the providing party;

(c)the Seller and the Purchaser shall each have an opportunity to approve and mutually agree on the joint contents of the CFIUS Filing and shall be jointly responsible for the accuracy of such contents.  The Seller and the Purchaser respectively, shall each be responsible for the accuracy of contents of the CFIUS Filing that exclusively relate to itself, its business, and any subsidiaries, parents or other related parties; and

(d)the Seller and the Purchaser shall use their respective reasonable best efforts to obtain CFIUS Approval as promptly as practicable and shall consult with each other on strategic matters related to obtaining such CFIUS Approval, provided that the Purchaser shall have no obligation to agree to any mitigation or other restrictive provision that could reasonably be considered to have a substantial impact on either the Business or the Purchaser.

4.2.4The party responsible for satisfaction of each condition pursuant to this Clause 4.2 shall give notice to the other party of the satisfaction of the relevant condition within one Business Day of becoming aware of the same.

4.2.5The parties shall cooperate with each other in connection with the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3.  The parties will consult and cooperate reasonably with one another, consider in good faith the views of one another, and provide to the other party in advance any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals they or their agents make or submit to a Governmental Entity.  Without limiting the foregoing, the parties agree to (a) give each other reasonable advance notice of all meetings with any Governmental Entity, (b) give each other an opportunity to participate in each of such meetings, (c) to the extent practicable, give each other reasonable advance notice of all substantive oral communications with any Governmental Entity, (d) if any Governmental Entity initiates a substantive oral communication promptly notify the other party of the substance of such communication, (e) provide

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each other with a reasonable advance opportunity to review and comment upon all written communications (including any analyses, presentations, memoranda, briefs, arguments, opinions and proposals) with a Governmental Entity, (f) provide each other with copies of all written communications to or from any Governmental Entity, and (g) not advance arguments in connection with any regulatory review or litigation proceeding related to this Agreement (other than litigation between the parties) over the objection of the other party that would reasonably be likely to have a significant adverse impact on that other party, provided however, that neither party shall be required to comply with subsection (b) to the extent that the Governmental Entity objects to the participation of a party, or with subsections (e) or (f) to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis).

4.2.6Subject to sub-Clause 4.2.7 and Applicable Law:

(i)the parties shall cooperate with each other in connection with the satisfaction of the condition in Clause 4.1.12;

(ii)the parties will consult and cooperate reasonably with one another, consider in good faith the views of one another, and provide to the other party in advance any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals they or their agents make or submit to the OIG; and

(iii)without limiting paragraphs (i) and (ii) of this Clause 4.2.6, the parties agree to (a) give each other reasonable advance notice of all meetings with the OIG, (b) consult to determine if it is in the parties’ mutual interest for both parties give each other an opportunity to participate in each of such meetings, (c) to the extent practicable, give each other reasonable advance notice of all substantive oral communications with the OIG, (d) if the OIG initiates a substantive oral communication promptly notify the other party of the substance of such communication, (e) provide each other with a reasonable advance opportunity to review and comment upon all written communications (including any analyses, presentations, memoranda, briefs, arguments, opinions and proposals) with the OIG, (f) provide each other with copies of all written communications to or from the OIG, (g) not advance arguments in connection with any regulatory review or litigation proceeding related to this Agreement (other than litigation between the parties) over the objection of the other party that would reasonably be likely to have a significant adverse impact on that other party, and (h) provide each other with such information, documents and data as may be reasonably requested in preparation for any communications (including any analyses, presentations, memoranda, briefs, arguments, opinions and proposals) with the OIG, provided however, that neither party shall be required to permit the participation of the other party in a meeting with the OIG following the consultation required to comply with subsection (b) to the extent

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that the parties fail to agree to such mutual participation or the OIG objects to the participation of a party, to comply with subsections (e), (f) or (g) to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis), or permit the disclosure or use of information, documents and data provided under subsection (h) in any communications with the OIG if the providing party reasonably determines that the information is confidential or proprietary and disclosure or use would be reasonably likely to have a significant adverse impact on that party.

4.2.7The Seller shall not, and shall procure that no member of the Seller’s Group (including but not limited to GlaxoSmithKline LLC) or their directors, officers, employees, agents or advisors shall, make any material or substantive communication or notification to the OIG regarding the Transaction without consulting and taking into account the views of the Purchaser.

4.2.8The Purchaser shall and, shall cause its Affiliates to, use its reasonable endeavours to procure the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3 as soon as reasonably possible (and, in any event, not later than the Long Stop Date).  Notwithstanding any other provision of this Agreement to the contrary, the Purchaser shall and, shall cause its Affiliates to use best endeavours to propose, negotiate, offer to commit and effect (and if such offer is accepted, commit to and effect), by consent decree, undertaking, hold separate order, or otherwise, the sale, divestiture, licence or disposition of its LGX818 and MEK162 products in development on a global basis (excluding existing manufacturing capabilities) as may be required or desirable in order to procure the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3 as soon as reasonably possible (and, in any event, not later than the Long Stop Date) and to avoid the commencement of any Action or the issuing of any Decision to prohibit the acquisition or any other transaction contemplated by this Agreement or, if such Action is already commenced, to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any Action so as to enable the Closing to occur as soon as reasonably possible (and, in any event, not later than the Long Stop Date).  Nothing in this Clause shall require the Purchaser to divest any currently marketed product indicated for use in renal cell carcinoma or any currently marketed Product indicated for use in melanoma, including but not limited to Mekinist, Tafinlar, Votrient and/or Afinitor.

4.2.9The Seller shall, and shall cause the Seller’s Group, to use its reasonable endeavours to cooperate with the Purchaser in connection with procuring the satisfaction of the conditions in Clauses 4.1.1 to 4.1.3 as soon as reasonably possible (and, in any event, not later than the Long Stop Date), including providing to the Purchaser such information with respect to the Business and the Products as the Purchaser may reasonably require in connection with satisfaction of its obligations under this Clause.

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4.2.10The Purchaser and Seller shall cooperate to confirm, within 21 Business Days from signing of this Agreement, any additional merger notification requirements reasonably required or advisable in respect of the Transaction in jurisdictions beyond those listed in Schedule 21, and shall cooperate with each other, within the meaning of Clause 4.2.5, in achieving any additional clearances, approvals, consents, waivers, no- action letters or waiting period expirations in such jurisdictions.  For the avoidance of doubt, Closing shall not be conditional upon such additional clearances, approvals and consents or waiting period expirations.

4.2.11The Purchaser and Seller shall cooperate, within the meaning of Clause 4.2.5, and use reasonable endeavours to ensure that no Governmental Entity shall enact, issue, promulgate, enforce or enter any Applicable Law or Judgment as contemplated under Clause 4.1.7. In the event that any Governmental Entity enacts, issues, promulgates, enforces or enters any Applicable Law or Judgment as contemplated under Clause 4.1.7, the Seller and the Purchaser shall cooperate and use reasonable endeavours to put in place arrangements that would allow the Transaction to complete to the greatest possible extent in compliance with the relevant Applicable Law or Judgment.

4.2.12The Seller shall use best efforts to obtain the consents referred to in Clauses 4.1.5 and 4.1.6 prior to the Closing Date.  The cost of obtaining such consents shall be borne by the Seller, including any payment or other incentive that may (whether required to be offered or not) be offered to JTI and/or Genmab or any of their respective Affiliates in order to obtain such consents.  The Purchaser shall, and shall cause its Affiliates to cooperate with the Seller in connection with obtaining the consents, referred to in Clauses 4.1.5 and 4.1.6 and use its reasonable endeavours to ensure that such conditions are satisfied at Closing, including providing to the Seller such information as the Seller may reasonably require in connection with the satisfaction of its obligations under this Clause 4.2.12.

4.2.13The Purchaser may at any time waive in whole or in part (and conditionally or unconditionally) the conditions set out in Clauses 4.1.5, 4.1.6, 4.1.10 and 4.1.12 by notice in writing to the Seller.

4.3Non-Satisfaction by the Long Stop Date

If the conditions in Clause 4.1 are not satisfied (or waived in accordance with Clause 4.2.13) as of 22 October 2015 (the “Long Stop Date”), the Purchaser or the Seller may, in its sole discretion, terminate this Agreement (other than Clauses 1, 13 and 16.2 to 16.15) and no party shall have any claim against the other under it, save for any claim arising from breach of any obligation contained in such Clauses or Clause 4.2.  Neither the Seller nor the Purchaser may terminate this Agreement after satisfaction or waiver of the conditions in Clause 4.1, except in accordance with this Agreement.

4.4Termination

4.4.1This Agreement may be terminated at any time prior to Closing:

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(i)by written consent of the Seller and the Purchaser;

(ii)by either the Seller or the Purchaser by notice to the other party in the event that any Judgment restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement shall have become final and non-appealable, provided that the party seeking to terminate this Agreement pursuant to this Clause 4.4 has complied with the terms of the Implementation Agreement and this Agreement in connection with having such Judgment vacated or denied; or

(iii)by the Purchaser by notice to the Seller if:

(a)a Material Adverse Effect occurs prior to Closing (which shall include any breach or breaches of Clause 9.1 which alone or together constitute a Material Adverse Effect); or

(b)the Seller fails to provide a Certificate immediately prior to Closing; or

(iv)in accordance with the terms of the Implementation Agreement.

4.4.2This Agreement shall terminate automatically at any time prior to Closing in the event that:

(i)any other Target Asset Agreement terminates or is terminated in accordance with its terms; or

(ii)the Novartis Break Fee and/or the GSK Break Fee becomes payable under clause 5.1 or clause 5.8 of the Implementation Agreement, respectively.

4.4.3Save as provided in this Clause 4, neither party shall be entitled to terminate or rescind this Agreement (whether before or after Closing).  If this Agreement is terminated pursuant to this Clause 4.4, this Agreement shall be of no further force and effect and there shall be no further liability under this Agreement or any of the Ancillary Agreements on the part of any party, except that Clauses 1, 13, and 16.2 to 16.15, in each case, to the extent applicable, shall survive any termination.

4.4.4Nothing in this Clause 4.4 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement prior to termination of this Agreement.

5.Pre-Closing

5.1The Seller’s Obligations in Relation to the Business

5.1.1The Seller undertakes to procure that between the date of this Agreement and Closing, the relevant members of the Seller’s Group shall, so far as permitted by Applicable Law, carry on the Business as carried on by the Seller Group as a going concern in the ordinary course as carried on

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immediately prior to the date of this Agreement save in so far as agreed in writing by the Purchaser (such consent not to be unreasonably withheld or delayed).

5.1.2Without prejudice to the generality of Clause 5.1.1 and subject to Clause 5.2, the Seller shall not, in each case with respect to the Business only, between the date of this Agreement and Closing, and shall procure that each member of the Seller’s Group shall not, except as may be required to comply with this Agreement, without the prior written consent of the Purchaser (such consent not to be unreasonably withheld or delayed), take any of the actions listed in Part 1 of Schedule 19.

5.1.3Without prejudice to the generality of Clause 5.1.1, the Seller shall, in each case with respect to the Business only: (i) undertake to procure the satisfaction of its obligations listed in paragraph 1, Part 2 of Schedule 19; and (ii) shall, and shall procure that each member of the Seller’s Group shall, between the date of this Agreement and Closing, comply with the requirements of paragraph 2, Part 2 of Schedule 19.

5.2Exceptions to Seller’s Obligations in Relation to the Conduct of Business

Clause 5.1 shall not operate so as to prevent or restrict:

5.2.1any matter undertaken by any member of the Seller’s Group to implement any Pre-Closing Product Reorganisation in accordance with Clauses 2.3.5 and 2.3.6;

5.2.2any action to the extent it is required to be undertaken to comply with Applicable Law; or

5.2.3any matter reasonably undertaken by any member of the Seller’s Group in an emergency or disaster situation with the intention of minimising any adverse effect of such situation in relation to the Business and where any delay arising by virtue of having to give notice to the Purchaser and await consent would materially prejudice the Business,

provided that the Seller shall notify the Purchaser as soon as reasonably practicable of any action taken or proposed to be taken as described in Clause 5.2.3, shall provide to the Purchaser all such information as the Purchaser may reasonably request and shall use reasonable endeavours to consult with the Purchaser in respect of any such action.

5.3Seller and Purchaser’s Rights and Obligations

5.3.1Subject to Clause 5.3.2, the parties shall negotiate in good faith to agree definitive and legally binding documentation in respect of each of the Ancillary Agreements for which the heads of terms are in the Agreed Terms, including the Manufacturing and Supply Agreement, on the date of this Agreement, and shall duly execute and deliver such definitive and legally binding documentation in respect of the Ancillary Agreements at Closing.

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5.3.2In the event that the parties are unable to agree definitive and legally binding documentation in respect of an Ancillary Agreement referred to in Clause 5.3.1 by Closing, the parties shall be subject to and shall adhere to the heads of terms in the Agreed Terms for that Ancillary Agreement, which terms shall be legally binding on the parties.

5.3.3If required by the Seller, the Purchaser shall co-operate with the Seller and the relevant counterparty to procure the grant of a sub-licence or partial assignment of certain rights under the Ofatumumab Agreements to the Seller for use in relation to the Ofatumumab Compound in the Ofatumumab Indications and in the field of autoimmune diseases under the Ofatumumab Intellectual Property Licence or another agreement between the parties, effective from Closing.

5.3.4If, at any time prior to Closing, the [***] determines that the terms and conditions of the [***] shall not bind or apply (in full or with respect to significant provisions thereof) to the Relevant Purchaser Business, but does determine that they shall bind or apply in any respect to either all or part of the Business or the Employees, then, at any time prior to the date falling 5 Business Days prior to the Closing Date, notwithstanding any provision in this Agreement to the contrary, the Purchaser shall be entitled not to make an offer of employment to any Employee who:

(i)is not expected to transfer by operation of law to the Purchaser or any member of the Purchaser’s Group on Closing; and

(ii)is or would reasonably be expected to be a “Covered Person” (as defined in the [***]) or is otherwise subject to or bound by any material obligation or term of the [***] as applied to the Purchaser or any member of the Purchaser’s Group following Closing,

and, where no offer of employment with the Purchaser or any member of the Purchaser’s Group is made in accordance with this Clause 5.3.4, such Employee shall remain employed by the Seller or the relevant member of the Seller’s Group on and following Closing.

5.3.5At any time prior to the date falling 18 months after the Closing Date, each relevant member of the Purchaser’s Group shall be entitled to terminate the employment of any Employee:

(i)whose employment has transferred to the Purchaser or any member of the Purchaser’s Group either by operation of law or by way of offer and acceptance; and

(ii)who is or would reasonably be expected to be a “Covered Person” (as defined in the [***], as applied to the Purchaser’s Group) or is otherwise subject to or bound by any material obligation or term of the [***] as applied to the Purchaser or any member of the Purchaser’s Group following Closing,

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if the [***] has determined or determines that the terms and conditions of the [***] shall apply or be binding (in whole or in part) to the Relevant Purchaser Business.  The relevant member of the Purchaser’s Group may effect such termination either by giving notice or transferring the Employee to a member of the Seller’s Group by agreement to be concluded between the relevant member of the Purchaser’s Group, the Employee concerned and the relevant member of the Seller’s Group.  The Seller shall be responsible for and shall indemnify and keep indemnified the Purchaser (for itself and as trustee for any relevant member of the Purchaser’s Group) against all Liabilities from time to time made, suffered or incurred by the Purchaser (or any other member of the Purchaser’s Group) as a result of:

(iii)the transfer of employment of such Employee to the Purchaser or any member of the Purchaser’s Group and the employment of such Employee from the Closing Date until the termination of employment of such Employee as referred to in this Clause 5.3.5(iii) (or any other employment liabilities relating to such person); and

(iv)the termination of such Employee’s employment.

5.3.6Prior to Closing, the Seller shall be entitled to take and retain a full set of copies of the Ofatumumab Indications Data for use in accordance with the Ofatumumab Intellectual Property Licence Agreement.  For the avoidance of doubt, the Ofatumumab Indications Data constitutes part of the Ofatumumab Licensed IP Rights for the purposes of the Ofatumumab Intellectual Property Licence Agreement (as such term is defined in the Ofatumumab Intellectual Property Licence Agreement).

6.Closing

6.1Date and Place

Save as otherwise provided in this Agreement (including Schedule 25), Closing shall take place simultaneously with closing under the other Target Asset Agreements at the offices of Freshfields Bruckhaus Deringer, 65 Fleet Street, London EC4Y 1HS (other than in respect of any Local Transfer Documents agreed between the parties to be executed in another jurisdiction) on the last Business Day of the month in which fulfilment or waiver of the last of the condition(s) set out in Clause 4.1 to be fulfilled or waived takes place, except that:

6.1.1where the last day of such month is not a Business Day, Closing shall instead take place on the first Business Day of the following month; and

6.1.2where less than five Business Days remain between such fulfilment or waiver and the last Business Day of the month, Closing shall take place:

(i)on the last Business Day of the following month;

(ii)where the last day of such month is not a Business Day, Closing shall instead take place on the first Business Day of the month following the month referred to in Clause 6.1.2(i); or

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(iii)at such other location, time or date as may be agreed between the Purchaser and the Seller in writing,

provided that:

(a)Closing shall not take place and shall not be effective in any circumstances unless closing also takes place under and in accordance with the terms of the other Target Asset Agreements at the same time; and

(b)in determining the date on which the last of the conditions set out in Clause 4.1 is fulfilled or waived, the date shall be the date on which the last of the conditions set out in Clauses 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.5, 4.1.6, 4.1.8, 4.1.9 and 4.1.11 is fulfilled or waived unless any of the conditions set out in Clauses 4.1.7, 4.1.10 and 4.1.12 is not fulfilled or waived on that date, in which case the date shall then be the first following date on which all of the conditions set out in Clauses 4.1.7, 4.1.10 and 4.1.12 are fulfilled or waived.

6.2Closing Events

6.2.1On Closing, but subject to the provisions of Schedule 25, the parties shall comply with their respective obligations specified in Schedule 12.  The Seller may waive some or all of the obligations of the Purchaser as set out in Schedule 12 and the Purchaser may waive some or all of the obligations of the Seller as set out in Schedule 12.

6.2.2The parties acknowledge that the transfer of Product Approvals to the Purchaser or other members of the Purchaser’s Group may be subject to the approval of applicable Governmental Entities, and that, notwithstanding anything in this Agreement to the contrary, each Product Approval shall continue to be held by the relevant member of the Seller’s Group from the Closing Date until the relevant PA Transfer Date.

6.2.3The parties shall perform their respective obligations with respect to:

(i)the transfer of the Product Approvals as set out in Schedule 6;

(ii)the transfer of Contracts (other than Product Approvals) and the Transferred Intellectual Property Contracts as set out in Schedule 7;

(iii)to the extent the Purchaser has elected to have the Relevant Part of a Shared Business Contract transferred to it, the separation of each Shared Business Contract as set out in Schedule 7; and

(iv)the Delayed Businesses as set out in Schedule 25.

6.3Payment on Closing and the Reduction Amount

6.3.1Subject to the remainder of this Clause 6.3, on Closing the Purchaser shall pay (for itself and on behalf of each relevant member of the Purchaser’s Group, and in accordance with Clause 16.6):

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(i)an amount in cleared funds to the Seller which is equal to the Headline Amount less the sum of:

(a)the amount of the Company Intra-Group Debt; and

(b)any Estimated Employee Benefit Adjustment; and

(c)any amount to be deducted pursuant to Clause 6.3.6; and

(d)the Estimated Stamp Duty Amount; and

(ii)a further amount in cleared funds to the Seller which is equal to the amount of the Company Intra-Group Debt and which shall be applied as provided in paragraph 1.4 of Schedule 12,

such that the total amount to be paid to the Seller and other members of the Seller’s Group on Closing shall be the Headline Amount less the sum of the Estimated Stamp Duty Amount  and, if applicable, any Estimated Employee Benefit Adjustment and, if applicable, any amount to be deducted under Clause 6.3.6.

6.3.2On the Closing Date, as soon as possible after 04:00 a.m. (GMT) on the Closing Date when the US$ Spot Rate becomes available, the Seller shall deliver a written statement to the Purchaser in the form of Schedule 24 setting out the amount of the Company Intra-Group Debt determined using the US$ Spot Rate, provided that such amount shall be no greater than the Headline Amount less the aggregate of the Business Consideration, the Stamp Duty Amount and, if applicable, any Employee Benefit Indemnification Amount (the “Maximum Company Intra-Group Debt Amount”). If, after Closing, it is determined that the amount paid by the Purchaser pursuant to Clause 6.3.1(ii) exceeded the Maximum Company Intra-Group Debt Amount, the Seller shall pay the Purchaser an amount equal to the difference on demand.

6.3.3The amount of the Business Consideration shall be subject to the following:

(i)in the event that, by the CombiD Outcome Longstop Date, neither the Category A Outcome nor the Category B Outcome is achieved, the Business Consideration shall be reduced by $1.5 billion; and

(ii)in the event that, by the CombiD Outcome Longstop Date, the Category A Outcome is not achieved but the Category B Outcome is achieved, the Business Consideration shall be reduced by $1.0 billion,

the amount of any such applicable reduction being the “Reduction Amount”.  Clauses 6.3.5 and 6.3.6 below shall apply in respect of any Reduction Amount.

6.3.4For the avoidance of doubt, in the event that, by the CombiD Outcome Longstop Date, the Category A Outcome is achieved, then (whether or not

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the Category B Outcome is also achieved) no reduction or adjustment shall be made to the Business Consideration.

6.3.5In the event that a reduction to the Business Consideration applies under Clause 6.3.3 above and the cause of such reduction occurs at or following 5 Business Days prior to Closing, the Seller shall (against the Purchaser having paid the full amount of the Business Consideration at Closing) repay to the Purchaser:

(i)an amount equal to the applicable Reduction Amount; and

(ii)interest on the Reduction Amount at the rate of Six-Month LIBOR, such interest accruing on a daily basis from the Closing Date to (and including) the date of payment of the Reduction Amount by the Seller to the Purchaser.

Any repayment to be made pursuant to this Clause 6.3.5 shall be made within 5 Business Days of the CombiD Outcome Longstop Date, provided that, in circumstances where Conclusion of the CombiD Study has occurred and either or both of (a) the condition in Clause 6.3.7(i)(a) of the Category A Outcome, and (b) the condition in Clause 6.3.7(ii)(a)(A) of the Category B Outcome are no longer capable of satisfaction, any resulting applicable reduction to the Business Consideration shall apply and take effect at (and any payment in respect thereof made within the 5 Business Days following) the time at which the relevant condition or conditions are no longer capable of satisfaction.

6.3.6In the event that a reduction applies under Clause 6.3.3 above and the cause of such reduction occurs prior to 5 Business Days prior to Closing, the Purchaser shall be entitled to deduct an amount equal to the applicable Reduction Amount from the Business Consideration otherwise payable to the Seller at Closing.

6.3.7The following terms used in this Clause 6.3 shall have the meaning ascribed below:

(i)“Category A Outcome” means, in relation to the CombiD Study, all of the following:

(a)that Statistical Significance is achieved for the Overall Survival Endpoint;

(b)that the FDA accepts or agrees that Statistical Significance has been achieved for the Overall Survival Endpoint; and

(c)the absence of a New Material Safety Signal;

(ii)“Category B Outcome” means both of the following:

(a)in relation to the CombiD Study, both:

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(A)achievement of a point estimate for the Hazard Ratio (HR) on the Overall Survival Endpoint that is [***] or better (that is, lower than [***]); and

(B)the absence of a New Material Safety Signal; and

(b)the FDA not disallowing, within 12 months of Conclusion of the CombiD Study, continued use in the product insert of the claim that the Combination is more efficacious than the constituent mono-therapies;

(iii)“CombiD Outcome Longstop Date” means the later of (i) the date that is 12 months after Conclusion of the CombiD Study, and (ii) 31 December 2015;

(iv)“CombiD Study” means the Phase III, randomized, double-blinded study comparing the combination of the BRAF inhibitor, dabrafenib and the MEK inhibitor, trametinib to dabrafenib and placebo as first-line therapy in subjects with unresectable (Stage IIIC) or metastatic (Stage IV) BRAF V600E/K mutation-positive cutaneous melanoma (the “Combination”);

(v)“Conclusion” means when the Overall Survival Endpoint is analysed and the CombiD Study is closed;

(vi)“New Material Safety Signal” means a Safety Signal:

(a)which is identified in the results of the CombiD Study;

(b)which was not described in the approval of the Combination by the FDA or the respective approvals of the BRAF and MEK components of the Combination; and

(c)in respect of which, within 12 months of the Conclusion of the CombiD Study, the FDA requires inclusion of a “black box” on the product insert for the Combination, the BRAF inhibitor and the MEK inhibitor;

(vii)“Overall Survival Endpoint” means, as defined in the study protocol for the CombiD Study and the statistical analysis plan agreed with the FDA in respect thereof, the time from randomization until death due to any cause, where:

(a)all-cause mortality is used and censoring is performed using the date of the last known contact for those who were alive at the time of analysis; and

(b)overall survival is summarized using the Kaplan-Meier method and treatment comparisons are made using a stratified log rank test (stratified by LDH status and mutation status);

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(viii)“Safety Signal” means information that arises from one or multiple sources that suggests a new, potentially causal association, or a new aspect of a known association, between an intervention and event or set of related events, which is adverse; and

(ix)“Statistical Significance” means a one-sided p-value less than [***].

6.3.8Notwithstanding any other provision in this Agreement or any Ancillary Agreement, the parties agree that the CombiD Study shall remain under the control of the Seller until its Conclusion.

6.3.9By no later than 5 Business Days prior to Closing, the Seller shall notify the Purchaser of:

(i)any Estimated Employee Benefit Adjustment;

(ii)the Estimated Business Consideration;

(iii)the Estimated Company Intra-Group Debt;

(iv)the Estimated Share Consideration; and

(v)the Estimated Stamp Duty Amount,

and at the same time provide to the Purchaser reasonable supporting calculations and information to enable the Purchaser to review the basis on which each such amount has been determined.

The Estimated Stamp Duty Amount and the Estimated Employee Benefit Adjustment shall be used for the purposes of calculating the payment to be made pursuant to Clause 6.3.1 such that the total amount to be paid to the Seller and other members of the Seller’s Group on Closing shall be the Headline Amount less the sum of the Estimated Stamp Duty Amount and, if applicable, any Estimated Employee Benefit Adjustment and, if applicable, any amount to be deducted under Clause 6.3.6.

6.3.10If the Estimated Stamp Duty Amount exceeds the Stamp Duty Amount, the Purchaser shall, as soon as reasonable practicable (and in any event within 5 Business Days) after the date on which the Stamp Duty Amount can be determined, pay to the Seller (by way of payment of consideration due under Clause 3.1.1) an amount equal to the excess. If the Estimated Stamp Duty Amount is less than the Stamp Duty Amount, the provisions of Clause 16.8 shall apply.

6.3.11The amounts payable in accordance with Clause 6.3.1 shall, in each case, include all amounts payable in respect of the Delayed Businesses.

6.4Local Payments

The Purchaser shall procure that each relevant Designated Purchaser set out in column 2 of the table in Part 1 of Schedule 28 shall, subject to the terms of the relevant Local Transfer Document (and, for the avoidance of doubt, in partial satisfaction of the amounts payable under Clause 3.1.1), pay to the relevant Business

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Seller the amount set out against its name in column 4 (each a “Local Payment Amount”) converted into the relevant currency set out in the relevant Local Transfer Document as at the Closing Date, on:

(i)the date falling 7 days after the Closing Date; or

(ii)if this is not possible, the date falling 14 days after the Closing Date; or

(iii)if this is not possible, the date falling 21 days after the Closing Date, or

(iv)if this is not possible, the date falling 28 days after the Closing Date, or

provided that, in any event, all such payments shall be made by no later than the date falling 28 days after the Closing Date.

6.5Delayed Local Payments

In respect of each Delayed Business, the Purchaser shall procure that each relevant Designated Purchaser set out in column 2 of the table in Part 2 of Schedule 28 shall, subject to the terms of the relevant Local Transfer Document (and, for the avoidance of doubt, in partial satisfaction of the amounts payable under Clause 3.1.1), pay to the relevant Business Seller set out in column 3 the amount set out against its name in column 4 in respect of that Delayed Business (each a “Delayed Local Payment Amount”) converted into the relevant currency set out in the relevant Local Transfer Document as at the relevant Delayed Closing Date, as soon as reasonably practicable following the relevant Delayed Closing Date and, in any event, within 10 Business Days following the relevant Delayed Closing Date, in accordance with the terms of the relevant Local Transfer Document.

6.6Repayment of Local Payments and Delayed Local Payments

Where a Local Payment Amount or Delayed Local Payment Amount is received by a member of the Seller’s Group pursuant to Clause 6.4 or Clause 6.5, the Seller shall (on behalf of the relevant Business Seller, in accordance with Clause 16.6) pay to the Purchaser in US Dollars an amount equal to such Local Payment Amount or Delayed Local Payment Amount by way of repayment of all or part (as the case may be) of the amount paid by the Purchaser on behalf of the Designated Purchaser that paid the relevant Local Payment Amount or Delayed Local Payment Amount, so as to ensure that the total amount received by members of the Seller’s Group under Clauses 6.3, 6.4 and 6.5 does not exceed the amount payable under Clause 3.1.1.

6.7Breach of Closing Obligations

If any party fails to comply with any material obligation in Clause 6.2 or 6.3 or Schedule 12 in relation to Closing, the Purchaser, in the case of non-compliance by the Seller, or the Seller, in the case of non-compliance by the Purchaser, shall be entitled (in addition to and without prejudice to all other rights or remedies available) by written notice to the Seller or the Purchaser to fix a new date for Closing which, except as agreed by the parties, shall be the last day of the month next ending or, if

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that day is not a Business Day, the first Business Day falling after that day, in which case the provisions of Schedule 12 shall apply to Closing as so deferred, but provided such deferral may only occur once.  In all circumstances Closing shall only occur simultaneously with closing under the other Target Asset Agreements.

7.Development Plans

7.1As at the date of this Agreement, the Seller or the relevant member of the Seller’s Group intends to implement the studies of the Products set out in the Key Study Plans in accordance with the Key Study Plans. Prior to Closing, the Seller (or the relevant member(s) of the Seller Group) shall continue to implement the Development Plans in the same manner and to the same standards as it has done so prior to the date of this Agreement.

7.2The Seller shall (and shall ensure that the relevant member(s) of the Seller Group), maintain and preserve the laboratory notebooks and other records detailing the experiments and studies (including of any clinical trials) conducted pursuant to the Development Plans (the “Development Plan Records”) and shall require any sub-contractors to similarly maintain and preserve Development Plan Records of their respective activities.

7.3So far as permitted by Applicable Law and at the Purchaser’s risk:

7.3.1the Seller shall provide the Purchaser with such information about the progress of the Development Plans as the Purchaser may reasonably request and shall provide the Purchaser with copies of substantive correspondence with any Governmental Entity with respect to any Product Expansion Application.

7.3.2the Seller shall provide to the Purchaser monthly an update in relation to each Product Expansion with sufficient detail for the Purchaser to be able to assess the progress of each Product Expansion against the relevant Development Plan and highlighting any areas, whether scientific, clinical or regulatory, which may have a material impact on the future development of the Product Expansion.  The form of update shall be agreed by the Seller and the Purchaser acting reasonably and in good faith.  The Seller shall discuss matters relevant to the Product Expansion with representatives of the Purchaser and consult the Purchaser on the progress of the Product Expansion and any material proposed amendments to the relevant Development Plan with respect to the particular Product Expansion; and

7.3.3the Seller shall promptly inform the Purchaser of any material unforeseen results, problems or difficulties with regards to any Product Expansion including with respect to any communication from any Governmental Entity which indicates that the Development Plan in relation to such Product Expansion requires material amendment in order for the Product Expansion to be approved.  The Seller shall consult with the Purchaser with respect to any such matters and shall take account of the views of the Purchaser for resolving any such unforeseen results, problems or difficulties.

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8.Post-Closing Obligations

8.1Indemnities

8.1.1Indemnity by the Purchaser against Assumed Liabilities

The Purchaser hereby undertakes to the Seller (for itself and on behalf of each other member of the Seller’s Group, and their respective directors, officers, employees and agents) that with effect from Closing, the Purchaser will indemnify on demand and hold harmless each member of the Seller’s Group and their respective directors, officers, employees and agents against and in respect of any and all Assumed Liabilities.

8.1.2Indemnities by the Seller

(i)Subject to Clause 8.1.3, the Seller hereby undertakes to the Purchaser (for itself and on behalf of each other member of the Purchaser’s Group and their respective directors, officers, employees and agents) that, with effect from Closing, the Seller will indemnify on demand and hold harmless each member of the Purchaser’s Group and their respective directors, officers, employees and agents against and in respect of any and all:

(a)Excluded Liabilities; and

(b)Liabilities, including legal fees, to the extent they have arisen or arise (whether before or after Closing) as a result of or otherwise relate to any act, omission, fact, matter, circumstance or event undertaken, occurring or in existence or arising before Closing so far as related to: (A) any anti-bribery warranty, including without limitation those set forth in paragraphs 7.1 through 7.6 of Schedule 14, not being true and correct when made; (B) any government inquiries or investigations involving the Seller, its Affiliates or their respective Associated Persons; (C) save to the extent in existence as at the date of this Agreement, any limitation, restriction or other reduction in drug registrations, licences, listings or marketing approvals, government pricing or reimbursement rates relating to the Products including specifically the value of lost future profits as a result of any such limitation, restriction or reduction; or (D) any other claim, litigation, investigation or proceeding to the extent related to any of the foregoing (A) to (C), including but not limited to costs of investigation and defence and legal fees.

(ii)The Seller hereby undertakes to the Purchaser (for itself and on behalf of each other member of the Purchaser’s Group and their respective directors, officers, employees and agents) that, with effect from Closing, the Seller will indemnify on demand and hold harmless each member of the Purchaser’s Group and their respective directors, officers, employees and agents against and in respect of

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any and all Liabilities, including lost profits, arising from or in connection with any failure by the Seller or its Affiliates to Manufacture and supply Products in accordance with the terms of the Manufacturing and Supply Agreement or Transitional Distribution Services Agreement, as applicable, to the extent such failure results from the Cork FDA Matter.

8.1.3Limitations on Indemnities

Subject to Clause 8.1.4, the Seller shall not be liable under Clause 8.1.2(i) in respect of:

(i)any Time-Limited Excluded Liability unless a notice of claim in respect of the matter giving rise to such Liability is given by the Purchaser to the Seller within ten years of Closing, provided that this sub-Clause (i) shall not apply in respect of any claim by the Purchaser which relates to:

(a)a Product Liability;

(b)a Governmental Liability;

(c)a Clinical Trials/Data Liability;

(d)an Excluded Asset; or

(e)an IP Liability; and

(ii)any individual claim (or a series of claims arising from similar or identical facts or circumstances) where the Liability (disregarding the provisions of this Clause 8.1.3(ii))) in respect of any such claim or series of claims does not exceed US$10 million, provided that, for the avoidance of doubt, where the Liability in respect of any such claim or series of claims exceeds US$10 million, the Liability of the Seller shall be for the whole amount of such claim(s) and not just the excess.

8.1.4Disapplication of limitations

None of the limitations contained in Clause 8.1.3 shall apply to any claim to the extent that such claim which arises or is increased, or to the extent to which it arises or is increased, as the consequence of, or which is delayed as a result of, fraud by any member of the Seller’s Group or any director, officer or employee of any member of the Seller’s Group.

8.2Conduct of Claims

8.2.1Assumed Liabilities

(i)If the Seller becomes aware after Closing of any claim by a third party which constitutes or may constitute an Assumed Liability, the Seller shall as soon as reasonably practicable:

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(a)give written notice thereof to the Purchaser setting out such information as is available to the Seller as is reasonably necessary to enable the Purchaser to assess the merits of the potential claim;

(b)take all appropriate actions to preserve evidence; and

(c)provide the Purchaser with periodic updates on the status of the claim upon request and shall not admit, compromise, settle, discharge or otherwise deal with such claim without the prior written agreement of the Purchaser (such agreement not to be unreasonably withheld or delayed).

(ii)The Seller shall, and shall procure that each Business Seller and the Share Seller shall, take such action as the Purchaser may reasonably request to avoid, dispute, resist, appeal, compromise, defend or mitigate any claim which constitutes or may constitute an Assumed Liability subject to the Seller, the Share Seller and each Business Seller being indemnified and secured to their reasonable satisfaction by the Purchaser against all Liabilities which may thereby be incurred.  In connection therewith, the Seller shall make or procure to be made available to the Purchaser or their duly authorised agents on reasonable notice during normal business hours all relevant books of account, records and correspondence relating to the Business which have been retained by the Seller’s Group (and shall permit the Purchaser to take copies thereof at its expense) for the purposes of enabling the Purchaser to ascertain or extract any information relevant to the claim.

8.2.2Liabilities Indemnified by the Seller

(i)If the Purchaser becomes aware after Closing of any claim by a third party which constitutes or may constitute a Liability covered by Clause 8.1.2 or relates to a Liability or any investigations related thereto, regardless of whether the Purchaser believes that such claim would be made against a member of the Purchaser’s Group or a member of the Seller’s Group, the Purchaser shall as soon as reasonably practicable:

(a)give written notice thereof to the Seller, setting out such information as is available to the Purchaser as is reasonably necessary to enable the Seller to assess the merits of the potential claim;

(b)take all appropriate actions to preserve evidence; and

(c)provide the Seller with periodic updates on the status upon request and shall not admit, compromise, settle, discharge or otherwise deal with such claim without the prior written agreement of the Seller (such agreement not to be unreasonably withheld or delayed).

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(ii)The Purchaser shall take such action as the Seller may reasonably request to avoid, dispute, resist, appeal, compromise, defend or mitigate any claim which constitutes or may constitute a Liability covered by Clause 8.1.2 subject to the Purchaser being indemnified and secured to its reasonable satisfaction by the Seller against all Liabilities which may thereby be incurred.

(iii)In addition, where any such claim or investigation involves a Governmental Entity, the Purchaser shall, subject to Applicable Law, the requirements of the relevant Governmental Entity and the Seller providing an appropriate confidentiality undertaking in favour of the Purchaser’s Group, provide to the Seller, at least five Business Days in advance (or, where not possible, as soon as reasonably possible), any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals they or their agents make or submit to a Governmental Entity.  Without limiting the foregoing, the parties agree, subject to the Applicable Law and the requirements of the relevant Governmental Entity and the Seller providing an appropriate confidentiality undertaking in favour of the Purchaser’s Group to:

(a)give the Seller reasonable advance notice of all meetings with any Governmental Entity;

(b)give the Seller an opportunity to participate in each of such meetings;

(c)to the extent practicable, give the Seller reasonable advance notice of all substantive oral communications with any Governmental Entity;

(d)if any Governmental Entity initiates a substantive oral communication, promptly notify the Seller of the substance of such communication;

(e)provide the Seller with a reasonable advance opportunity to review and comment upon all substantive written communications (including any substantive correspondence, analyses, presentations, memoranda, briefs, arguments, opinions and proposals) that the Purchaser or its agents intend to make or submit to a Governmental Entity in connection with such claim;

(f)provide the Seller with copies of all substantive written communications to or from any Governmental Entity; and

(g)not advance arguments with the Governmental Entity without prior agreement of the Seller that would reasonably be likely to have a significant adverse impact on the Seller, provided however, that the Purchaser shall not be required to comply with paragraph (b) above to the extent that the Governmental

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Entity objects to the participation of a party, or with paragraph (e) or (f) above to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis).

(iv)Other than in respect of any claim to the extent it relates to an IP Liability, a Commercial Practices Liability or a Governmental Liability (other than in respect of any Liability arising solely by virtue of a breach of any Contract with any Governmental Entity which breach does not also constitute a breach of Applicable Law), the Seller shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Purchaser, to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest any such claim (including making counterclaims or other claims against third parties) in the name of and on behalf of the Purchaser or other member of the Purchaser’s Group concerned and to have the conduct of any related proceedings, negotiations or appeals.  In taking action on behalf of any member of the Purchaser’s Group as permitted by this Clause 8.2, the Seller shall, in good faith, take into account and have due regard to any reputational matter or issue arising out of the claim for any member of the Purchaser’s Group or any of their respective directors, officers, employees or agents which are brought to its attention by the Purchaser or a member of the Purchaser’s Group.

(v)Without limitation to the Seller’s rights pursuant to Clause 8.7.2, the Purchaser shall make or procure to be made available to the Seller or its duly authorised agents on reasonable notice during normal business hours full and free access to all relevant books of account, records and correspondence relating to the Business which are in the possession or control of the Purchaser or any member of the Purchaser’s Group (and shall permit the Seller to take copies thereof) for the purposes of enabling the Seller to ascertain or extract any information relevant to the claim.

(vi)The Purchaser shall, and shall procure that each other member of the Purchaser’s Group shall, on reasonable notice from the Seller, give such assistance to the Seller as it may reasonably require in relation to the claim including providing the Seller or any member of the Seller’s Group and its representative and advisers with access to and assistance from directors, officers, managers, employees, advisers, agents or consultants of the Purchaser and/or of each other member of the Purchaser’s Group (collectively, the “Relevant Persons”) and the Purchaser will use its reasonable endeavours to procure that such Relevant Persons comply with any reasonable requests from the Seller and generally co-operates with and assists the Seller and other members of the Seller’s Group.

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(vii)When seeking assistance under Clauses 8.2.2(v) and (vi), the Seller, or any other relevant member of the Seller’s Group, shall use reasonable endeavours to minimise interference with the Purchaser and the Purchaser’s Group’s conduct of the relevant business or the performance by the Relevant Persons of their employment duties.

8.3Release of Guarantees

8.3.1The Purchaser shall use reasonable endeavours to procure as soon as reasonably practicable after Closing, the release of the Sellers or any member of the Seller’s Group from any securities, guarantees or indemnities given by or binding upon the Seller or any member of the Seller’s Group in respect of the Assumed Liabilities.  Pending such release the Purchaser shall indemnify the Seller and any member of the Seller’s Group against all amounts paid by any of them (acting reasonably) pursuant to any such securities, guarantees or indemnities in respect of such Assumed Liabilities.

8.3.2The Seller shall use reasonable endeavours to procure by Closing or, to the extent not done by Closing, as soon as reasonably practicable after Closing, the release of the Assets, the Owned Product Intellectual Property Rights and the Company from any securities, guaranties or indemnities given by or binding upon the Assets, the Owned Product Intellectual Property Rights and the Company in respect of any liability of the Seller or any member of the Seller’s Group.  Pending such release, the Seller shall indemnify the Purchaser and any member of the Purchaser’s Group against all amounts paid by any of them (acting reasonably) pursuant to any such securities, guarantees and indemnities in respect of such liability of the Seller which arises after Closing.

8.4Pre-Closing Receivables

8.4.1The Purchaser shall not acquire the Pre-Closing Receivables, and accordingly the Seller or, as the case may be, the other relevant members of the Seller’s Group (as applicable) shall remain entitled to the Pre-Closing Receivables in accordance with the terms of Clauses 8.4.2 and 8.4.3.

8.4.2The Purchaser agrees that the Seller (or such other member(s) of the Seller’s Group as the Seller may nominate) (each, a “Collecting Seller”) shall be responsible for the collection of any of the Pre-Closing Receivables and that:

(i)each Collecting Seller shall be entitled to take such steps as it may think fit (having regard for maintaining good relationships with third parties from whom Pre-Closing Receivables are being collected) to recover any Pre-Closing Receivables;

(ii)the Purchaser shall not take, and shall procure that no other member of the Purchaser’s Group takes, any step to collect any of the Pre-Closing Receivables (unless agreed in writing with the Seller or relevant Collecting Seller), and shall not do anything to hinder their collection by any Collecting Seller; and

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(iii)if the Purchaser or any other member of the Purchaser’s Group should receive any written communication or payment in respect of any Pre-Closing Receivable, the Purchaser shall use reasonable efforts to give, or procure that there are given, written details of any such written communication or payment to the Seller as soon as reasonably practicable following receipt thereof.

8.4.3In the event that, notwithstanding Clauses 8.4.1 and 8.4.2 above, a member of the Purchaser’s Group receives any monies in respect of any Pre-Closing Receivables, then the Purchaser shall procure that those monies are paid by the recipient to the Seller or, as directed, its Affiliate, as soon as reasonably practicable after the amount is received.

8.5Wrong Pockets Obligations and Pre-Clinical Research Licence

8.5.1Except as provided in Schedule 6, Schedule 7, Schedule 8, Schedule 9 and Schedule 25, if any property, right or asset forming part of the Business (other than any property, right or asset expressly excluded from the sale under this Agreement) has not been transferred to the Purchaser, or to another member of the Purchaser’s Group and should have transferred pursuant to the terms of this Agreement, the Seller shall procure that such property, right or asset (and any related liability which is an Assumed Liability) is transferred to the Purchaser, or to such other member of the Purchaser’s Group as the Purchaser may nominate reasonably acceptable to the Seller, as soon as practicable and at no cost to the Purchaser.  For the avoidance of doubt, this Clause 8.5.1 shall not take effect in respect of the OBM Transferred Rights until the OBM Transfer Date.

8.5.2If, following Closing or, in respect of a Delayed Business, the relevant Delayed Closing, any property, right or asset not forming part of the Business (other than any property, right or asset expressly included in the sale under this Agreement and the Permitted Cash Receivable) is found to have been transferred to the Purchaser or to another member of the Purchaser’s Group and should not have transferred pursuant to the terms of this Agreement, the Purchaser shall procure that such property, right or asset is transferred to the transferor or another member of the Seller’s Group nominated by the Seller reasonably acceptable to the Purchaser as soon as practicable and at no cost to the Seller (save that if such property, right or asset is or has been owned by the Company, the cost of transferring such property, right or asset to a member of the Seller’s Group shall be borne by the Seller, provided that the consideration paid for any such transfer shall, unless otherwise required by Applicable Law, be of a nominal amount).

8.5.3The Seller shall, with effect from Closing, grant (and shall procure the grant by members of the Seller’s Group) to the extent it has the right to grant or procure the grant to the Purchaser of a non-exclusive, irrevocable, royalty-free licence for use solely in relation to the Products of all Intellectual Property Rights (excluding for the avoidance of doubt any Intellectual Property Rights to the extent relating to new chemical entities owned by or licensed to the Seller which are not Products) owned by or licensed to the

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Seller’s Group as at Closing relating to pre-clinical research which relate to (but do not exclusively relate to) the Products and which are necessary or reasonably useful to research, develop, manufacture or Commercialise the Products, which licence shall be (a) sub-licensable by the Purchaser (i) to members of its Group and (ii) to third parties working with it on the development of the Products; and (b) sub-licensable and assignable to other third parties solely in connection with the license, sub-license or assignment of all of the rights of the Purchaser in the relevant Product.

8.6Covenant not to sue

8.6.1The Seller hereby undertakes not to enforce, at any time after Closing, any Out of Scope Patent against the Purchaser’s Group in relation to the Purchaser’s Group carrying on the Business as at the date of Closing.

8.6.2The Purchaser hereby undertakes not to enforce, at any time after Closing, any Patents constituting Business Product Intellectual Property Rights against the Seller’s Group in relation to the Seller’s Group carrying on the Seller’s Group Retained Business as at the date of Closing.

8.7The Purchaser’s Continuing Obligations

8.7.1Except as provided in the Ancillary Agreements and Schedule 27, the Purchaser shall not, and shall procure that no member of the Purchaser’s Group shall, after Closing, use any of the Seller Marks or any confusingly similar name or mark, any extensions thereof or developments thereto in any business which competes with the Seller’s business or any other business of the Seller or any member of the Seller’s Group in which the Seller Marks are used for (i) a minimum period of five years following Closing; and (ii) thereafter for so long as any member of the Seller’s Group continues to retain an interest in the relevant Seller Marks.

8.7.2The Purchaser shall, and shall procure that any relevant member of the Purchaser’s Group shall, retain for a period of 10 years from Closing (and, upon notice from the Seller between 9 and 10 years from Closing, for a further period of 5 years), and not dispose of or destroy during that period, the books, records and documents of the Business to the extent they relate to the period prior to Closing and shall, and shall procure that any relevant member of the Purchaser’s Group shall, if reasonably requested by the Seller, allow the Seller reasonable access during that period to such books, records and documents (including the right to take copies at the Seller’s expense) and to the employees of the Business.

8.8The Seller’s Continuing Obligations

8.8.1The Seller shall retain and not dispose of or destroy and make or procure to be made available to the Purchaser or their duly authorised agents and/or professional advisers on reasonable notice during normal business hours:

(i)in each case for a period of one year from Closing (or from the relevant Delayed Closing Date in respect of emails relating to a

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Delayed Business), all emails relating to the Business (and shall permit the Purchaser to take copies thereof);

(ii)in each case for a period of 10 years from Closing (and, upon notice from the Purchaser between 9 and 10 years from Closing, for a further period of 5 years), all relevant books, accounts, other records and correspondence (except, in each case, emails) Exclusively Relating to the Business which have not been, or to the extent they have not been, transferred to the Purchaser’s Group under this Agreement (and shall permit the Purchaser to take copies thereof), save as otherwise agreed by the parties in relation to any books and records (including but not limited to the content of any personnel files) relating to the employment of the Transferred Employees;

(iii)in each case for a period of 10 years from Closing (and, upon notice from the Purchaser between 9 and 10 years from Closing, for a further period of 5 years), reasonable access to employees of the Seller’s Group who have knowledge relating to any of the Products (including any inventor of the Products) for the purposes of the defence, prosecution or enforcement of any Business Product Intellectual Property Rights or Licensed Product Intellectual Property Rights, any actual or potential regulatory or safety investigation involving any of the Products, or as required by Applicable Law or a Governmental Entity, provided that the Purchaser shall promptly reimburse the Seller in relation to the provision of such access for (i) out of pocket expenses reasonably incurred by the Seller; and (ii) for the time of that employee of the Seller’s Group if it exceeds 25 man hours in aggregate per annum; and

(iv)in each case for a period of 3 years from Closing, the Seller shall make or procure to be made available to the Purchaser or their duly authorised agents on reasonable notice during normal business hours reasonable access to any employees of the Seller’s Group who have knowledge relating to the Business (including, for the avoidance of doubt and without limitation, any background information relating to the legal position of the Products), to the extent that such employees are retained by the Seller after Closing, to answer any questions other than those covered by Clause (iii) that the Purchaser may reasonably ask in relation to the Business, provided that:

(a)the Purchaser shall promptly reimburse the Seller in relation to the provision of such access for the time of that employee of the Seller’s Group to the extent it exceeds 25 man hours in aggregate per annum;

(b)the Seller shall have no obligations under this Clause 8.8.1(iv) where such access to employees of the Seller’s Group is prohibited under Applicable Law;

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(c)the Purchaser shall have no access rights under this Clause 8.8.1(iv) to employees of the Seller’s Group to the extent that such access is prohibited by applicable antitrust rules or any undertakings, contractual arrangements or guidelines entered into or provided with the aim of reasonably ensuring compliance with applicable antitrust rules; and

(d)without prejudice to any indemnity provided by the Seller to the Purchaser under this Agreement, no member of the Seller’s Group shall have any Liability to any member of the Purchaser’s Group in connection with the provision of any information by employees of the Seller’s Group pursuant to this Clause 8.8.1(iv).

8.8.2to the extent and for so long as required by, or to the extent and for so long as required in order to perform any obligations under, any Ancillary Agreement or Applicable Law, or where otherwise agreed between the parties, the Seller shall be entitled to retain the original or a copy of any book, ledger, file, report, plan record, manual or other material (in any form or medium) which would otherwise transfer to the Purchaser under this Agreement, provided that:

(i)any copy or original retained is treated as strictly confidential in accordance with Clause 13.2;

(ii)in the case of retained originals, a copy of such book, ledger, file, report, plan, record, manual or other material is provided to the Purchaser;

(iii)upon reasonable notice by the Purchaser, the Seller shall provide access to such retained book, ledger, file, report, plan, record, manual or other material in accordance with Clause 8.8.1(ii); and

(iv)upon expiry of the relevant obligation under the applicable Ancillary Agreement the Seller is entitled to retain a copy of any such book, ledger, file, report, plan, record, manual or other material to comply with Applicable Law but shall transfer the original to the Purchaser.

8.9Transfer of Marketing Authorisations and Tenders

8.9.1The transfer of the Marketing Authorisations following Closing shall take place in accordance with Part 2 of Schedule 6 and the terms of the Transitional Distribution Services Agreement.

8.9.2Between the Closing Date and the Marketing Authorisation Transfer Date, the Seller agrees to assist the Purchaser in accordance with Part 3 of Schedule 6 in respect of any tenders relating to the Products.

8.10Joint tax election

If, following Closing, the Seller so requests in writing to the Purchaser, the Purchaser and the Seller shall, each acting reasonably and in good faith, discuss the making of

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a joint election under subsection 56.4(7) of the Income Tax Act (Canada) and the corresponding provisions of any applicable Canadian provincial statute.  Any such election shall be made using the applicable prescribed form, if any, or otherwise filed in a manner acceptable to the Canada Revenue Agency or the applicable Canadian provincial Tax Authorities, as the case may be.

8.11Clinical Trials and Safety Database

Arrangements in relation to the Ongoing Clinical Trials and the safety database shall take place in accordance with the terms of the Transitional Services Agreement.

8.12Ongoing collaboration

8.12.1The Seller hereby grants to the Purchaser, as its preferred partner, with effect from Closing, the rights set out in Schedule 22 in relation to the co-development and commercialisation of Relevant Development Products.  “Relevant Development Products” means products in development for the treatment, palliation, diagnosis or prevention of any and all cancers, including without limitation immunology, epigenetics and treatment of solid or hematologic tumours (but excluding in all cases vaccines).

8.12.2In the event that the Seller elects to assign or sub-license the Ofatumumab Intellectual Property Licence Agreement in a transaction of the type described in paragraph 1.1.1 of Schedule 22, then the provisions of Schedule 22 will apply to such assignment or sub-license (except where such assignment or sub-license is to a member of the Seller’s Group). For the avoidance of doubt, the Seller shall be free at all times to pursue the co-development and commercialisation of the Ofatumumab Compound for use in relation to autoimmune diseases (including the Ofatumumab Indications), on its own or with third parties provided that if such co-development or commercialisation falls within the activities described in paragraph 1.1.1 of Schedule 22, that schedule shall apply.

8.13IP recordals

8.13.1For the purposes of this Clause 8.13, the terms “Assignor” and “Assignee” shall have the meanings given to them in the relevant Intellectual Property Assignment.

8.13.2The Purchaser and its Affiliates shall be responsible for preparing and filing any documentation necessary for the recordal with any relevant intellectual property office of the transfer of ownership of all of the Registered Transferred Intellectual Property Rights from the Assignor to the Assignee under each Intellectual Property Assignment.  The Purchaser (or such of its Affiliates as it nominates) shall be responsible for all out-of-pocket filing fees and other costs and expenses associated with those recordals.

8.13.3Subject to Clauses 8.13.5 and 8.17, the Seller shall procure that each relevant member of the Seller’s Group shall, at the request and cost of any member of the Purchaser’s Group, execute and deliver any further documents that may be reasonably necessary to secure the vesting in the

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Assignee under each Intellectual Property Assignment of all the Registered Transferred Intellectual Property Rights.

8.13.4Subject to Clause 8.17, the Seller shall procure that each relevant member of the Seller’s Group shall, at the request and cost of any member of the Purchaser’s Group, (i) request that the applicable registrar for each of the Assigned Domain Names (as defined in the Intellectual Property Assignment), and any other domain name registration authorities that exercise authority over the Assigned Domain Names, facilitate the transfer of the Assigned Domain Names from the relevant Assignor to the Assignee; and (ii) execute all such documentation and take all such further acts as are reasonably necessary to effect such transfer. Within ten (10) Business Days of a date to be agreed by the parties, the Seller shall procure that each relevant member of the Seller’s Group shall (a) unlock the Assigned Domain Names; and (b) provide the Assignee with authorisation codes for any Assigned Domain Names that have authorisation codes.

8.13.5To the extent that any transfers of Registered Business Product Intellectual Property Rights to an Assignor or the Company have not been recorded prior to the date of Closing (including any transfers of such Registered Business Product Intellectual Property Rights prior to the transfer of the same to the Assignor or the Company), and to the extent that such separate recordal is necessary to effect:

(i)the recordal referred to in Clause 8.13.2; or

(ii)the recordal of any transfer of Owned Product Intellectual Property Rights that constitute Registered Intellectual Property Rights to the Company (or its predecessor in title),

the Purchaser and its Affiliates shall be responsible for preparing and filing any documentation necessary for the recordal with any relevant intellectual property office of the transfer of ownership to such Assignor or the Company (as applicable).

Subject to Clause 8.17, the Seller shall or shall procure that such Assignor shall provide to the Purchaser or a relevant Affiliate of the Purchaser any documentation or information that is reasonably necessary to record such transfer in the name of the Assignor or the Company (as applicable) as soon as reasonably possible after receipt of a request for the same from the Purchaser or one of its Affiliates for the purposes of such recordal. The Seller (or such of its Affiliates as it nominates) shall be responsible for all out-of-pocket filing fees and other costs and expenses associated with the recordal of any such transfer to the Assignor or to the Company (as applicable).

8.14China Products

The parties shall perform their respective obligations with respect to the China Products and the China Contracts as set out in Schedule 26.

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8.15Transitional Trademark Licence

The provisions of Schedule 27 shall apply to any use of the Seller Marks for a transitional period from Closing.

8.16Abandoned Patent Applications

8.16.1For the purposes of this Clause 8.16, the terms “Assignor” and “Assignee” shall have the meanings given to them in the relevant Intellectual Property Assignment.

8.16.2Subject to Clause 8.17, in respect of any Abandoned Patents, the Seller shall, on reasonable request from the Purchaser’s Group for assistance from any member of the Seller’s Group, use reasonable endeavours to execute a document confirming the transfer of such rights as any member of the Seller’s Group has (if any) in such Abandoned Patent, to the extent not prohibited under Applicable Law in the relevant country of any such Abandoned Patent, to the Assignee under each Intellectual Property Assignment, provided that:

(i)if the Seller provides such assistance the Purchaser shall promptly reimburse the Seller for its reasonable costs; and

(iii)a request from the Purchaser’s Group for assistance will be deemed to be not reasonable if:

(a)the Assignee or any other member of the Purchaser’s Group is able to prove common ownership of (i) the Abandoned Patent and (ii) the relevant Patent(s) that constitute Business Product Intellectual Property Rights(s) to the satisfaction of any relevant intellectual property office, court or tribunal without such assistance from any member of the Seller’s Group (provided further that in no event shall the Purchaser’s Group be required to narrow the scope of protection of the claims of a Patent that constitutes a Business Product Intellectual Property Right in order to avoid its request being unreasonable);

(b)any member of the Seller’s Group is asked to take any steps to achieve an outcome that is the same or equivalent to an outcome the Assignee or any other member of the Purchaser’s Group could achieve without such assistance from any member of the Seller’s Group (provided that the Seller’s Group shall not be required to narrow a Patent that constitutes a Transferred Product Intellectual Property Right in order to avoid its request being unreasonable); or

(c)it requires any member of the Seller’s Group to state that an Abandoned Patent was abandoned inadvertently or unavoidably when this was not the case.

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8.16.3Notwithstanding anything to the contrary contained in this Agreement or any of the Ancillary Agreements, no representations are made and no warranties are given (in each case, whether express or implied) by the Seller (or any member of the Seller’s Group) in relation to the Abandoned Patents (or transfer of the same) by the Seller (or a member of the Seller’s Group) to the Purchaser (or a member of the Purchaser’s Group).

8.17Sanctions

8.17.1For the purposes of Clause 8.17 only, the terms below shall have the following meanings:

(i)“Assignor” means an assignor under any Intellectual Property Assignment or any relevant member of the Seller’s Group’s (other than the Company);

(iv)“Assignee” means an assignee under any Intellectual Property Assignment or the Company;

(v)“Further Assurance Obligations” means any obligation to be performed by an Assignor under Clause 8.13 (IP Recordals), 8.16 (Abandoned Patents) and 16.1.1 (Further Assurances); and

8.17.2The parties agree that to the extent that Business Product Intellectual Property Rights which are the subject of a transfer pursuant to an Intellectual Property Assignment are registered (or are the subject of an application to register) in Iran, Iraq, Democratic People’s Republic of Korea or Syria, the Assignor’s Further Assurance Obligations shall be modified as set out in Clauses 8.17.3 to 8.17.7 below.

8.17.3If an Assignor is prevented from complying with its Further Assurance Obligations, with the effect that the recordal of assignment of legal title from the Assignor to the Assignee under the Intellectual Property Assignment (or to effect a transfer which is the subject of Clause 8.13.5) cannot be completed for any Business Product Intellectual Property Rights by reason of:

(i)Applicable Law;

(vi)other factors beyond the reasonable control of the Assignor; or

(vii)application of the Assignor’s

(a)internal sanctions and export control policy (or equivalent); or

(b)anti-bribery and corruption policy,

in each case in force from time to time, provided that such policy applies to all Affiliates of the Assignor and the policy is applied in the same way it would apply if the Assignee were an Affiliate of the Assignor,

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each such Business Product Intellectual Property Right being an “Affected Right” and each of (i), (ii) and (iii) being a “Restriction” and in the plural the “Restrictions”), Clauses 8.17.4 to 8.17.7 shall apply.

8.17.4The relevant Assignor shall notify the Assignee as soon as reasonably practicable after Closing of:

(i)each Affected Right and the country in which it is registered (or is the subject of an application to register); and

(ii)the relevant Restriction.

8.17.5As soon as reasonably practicable and, in any event within three months after the date that Assignor notifies the Assignee of an Affected Right under Clause 8.17.4 above the parties shall discuss in good faith the means by which the Assignee may be able to achieve protection in the relevant country which is equivalent or similar to the protection provided by the Affected Right.  Such means may include, without limitation:

(i)the Assignee filing a new trade mark application and the Assignor providing to the Assignee the consent of the Assignor to the new application to endeavour to overcome any objection raised by the relevant intellectual property registry on relative grounds based on the Affected Right; or

(ii)the Assignor filing a WIPO trade mark application in the name of the Assignor, which shall be assigned by the Assignor to the Assignee on grant of registration or earlier if possible.  The reasonable costs incurred by the Assignor in filing and prosecuting that registration to grant to be met by the Assignee;  or

(iii)the Assignor withdrawing or cancelling any Affected Right subject to the written consent of the Assignee.

The parties will agree such means as are possible in light of the limitations imposed by the Restrictions and both parties will use reasonable efforts to achieve the agreed means.  Neither party shall be obliged to take any action agreed pursuant to this Clause 8.17.5 to the extent that such party is prevented from doing so by a Restriction.

The reasonable costs incurred by either party in fulfilling any such actions shall be met by the Assignee.

8.17.6The relevant Assignor undertakes (at the cost of the Assignee), during the current registration period up to the next renewal date of the Affected Right:

(i)to take any action to comply with its Further Assurance Obligations to the extent it is able to do so given the Restrictions;

(ii)to comply with its Further Assurance Obligations as soon as reasonably practicable if and to the extent that such obligations are no longer prevented by the Restrictions; and

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(iii)not to take any other action in connection with an Affected Right without the consent of the Assignee.

8.17.7The parties acknowledge that in relation to Business Product Intellectual Property Rights that are Trademarks, there is nothing in this Agreement to preclude the Assignee from taking action to revoke or cancel an Affected Right and the Assignor hereby undertakes not to defend any such action.

8.18Anti-bribery and corruption

The provisions of Schedule 31 shall apply in respect of the parties’ compliance with anti-bribery and corruption laws

9.Warranties

9.1The Seller’s Warranties

9.1.1Subject to Clause 9.2, the Seller warrants (on behalf of the relevant Business Sellers or the Share Seller as applicable) to the Purchaser and each member of the Purchaser’s Group to which Assets, the Owned Product Intellectual Property Rights or the Share are transferred pursuant to this Agreement (whether directly or indirectly) that the statements set out in Schedule 14 are true and accurate as of the date of this Agreement.

9.1.2Each of the Seller’s Warranties shall be separate and independent and shall not be limited by reference to any other paragraph of Schedule 14 or by anything in this Agreement.

9.1.3The Seller does not give or make any warranty as to the accuracy of the forecasts, estimates, projections, statements of intent or statements of opinion provided to the Purchaser or any of its directors, officers, employees, agents or advisers on or prior to the date of this Agreement.

9.1.4Any Seller’s Warranty qualified by the expression “so far as the Seller is aware” or to the “Seller’s Knowledge” or any similar expression shall, unless otherwise stated, be deemed to refer to the knowledge of the following persons: [***], such persons having made due and reasonable enquiry.

9.1.5The Seller’s Warranties shall be deemed to be repeated immediately before Closing by reference to the facts, circumstances and knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date.  Without prejudice to the provisions of Clause 10, the Seller shall have no liability for any breach of any Seller’s Warranty where the Seller’s Warranty was true as at the date of this Agreement unless the fact, event or circumstances giving rise to the breach constitutes a Material Adverse Effect.  The Seller shall have no liability under this Clause 9.1.5 if the Purchaser has exercised its termination right in accordance with Clause 4.4.1(iii).

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9.2Seller’s Disclosures

9.2.1The Seller’s Warranties are subject to all matters which are fairly disclosed in this Agreement or in the Disclosure Letter.

9.2.2References in the Disclosure Letter to paragraph numbers shall be to the paragraphs in Schedule 14 to which the disclosure is most likely to relate.  Such references are given for convenience only and, shall not limit the effect of any of the disclosures, all of which are made against the Seller’s Warranties as a whole.

9.3The Purchaser’s Warranties

The Purchaser warrants to the Seller that the statements set out in Schedule 15 are true and accurate as of the date of this Agreement.

10.Limitation of Liability

10.1Time Limitation for Claims

The Seller shall not be liable under this Agreement for breach of any Seller’s Warranty in respect of any claim unless a notice of the claim is given by the Purchaser to the Seller specifying the matters set out in Clause 11.2:

10.1.1in the case of a claim under paragraphs 1 and 2.2 of Schedule 14, within the applicable statutory limitations period;

10.1.2in the case of a claim under paragraph 3 of Schedule 14, within 6 years of the Closing Date;

10.1.3in respect of claims under the Tax Warranties, before the date falling six months after the expiry of the period specified by statute during which an assessment of the relevant liability to Tax may be issued by the relevant Tax Authority; and

10.1.4in the case of any other claim, within two years of the Closing Date.

10.2Minimum Claims

10.2.1The Seller shall not be liable under this Agreement for breach of any Seller’s Warranty in respect of any individual claim (or a series of claims arising from similar or identical facts or circumstances) where the liability agreed or determined (disregarding the provisions of this Clause 10.2) in respect of any such claim or series of claims does not exceed 0.1 per cent of the Headline Amount.

10.2.2Where the liability agreed or determined in respect of any such claim or series of claims exceeds 0.1 per cent. of the Headline Amount, the liability of the Seller shall be for the whole amount of such claim(s) and not just the excess.

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10.3Aggregate Minimum Claims

10.3.1The Seller shall not be liable under this Agreement for breach of any Seller’s Warranty (other than any Tax Warranty) in respect of any claim unless the aggregate amount of all claims for which the Seller would otherwise be liable under this Agreement for breach of any Seller’s Warranty (disregarding the provisions of this Clause 10.3) exceeds 1 per cent of the Headline Amount.

10.3.2Where the liability agreed or determined in respect of all claims exceeds 1 per cent of the Headline Amount, the Seller shall be liable for the aggregate amount of all claims as agreed or determined and not just the excess.

10.3.3For the avoidance of doubt, the Purchaser may give notice of any single claim in accordance with and for the purposes of Clause 10.1 above, irrespective of whether, at the time the notice is given, the amount set out in Clause 10.3.1 has been exceeded.

10.4Maximum Liability

The aggregate liability of the Seller in respect of any breaches:

10.4.1of the Seller’s Warranties (other than Tax Warranties and the Seller’s Warranties contained in paragraphs 1, 2.2 or 3 of Schedule 14) shall not exceed an amount equal to 30 per cent. of the Headline Amount;

10.4.2of the Seller’s Warranties contained in paragraph 3 of Schedule 14 shall not exceed an amount equal to 60 per cent. of the Headline Amount; and

10.4.3of the Seller’s Warranties contained in paragraphs 1 or 2.2 of Schedule 14 shall not exceed the Headline Amount.

10.5Contingent Liabilities

The Seller shall not be liable under this Agreement for breach of any Seller’s Warranties in respect of which the liability is contingent, unless and until such contingent liability becomes an actual liability and is due and payable (but the Purchaser has the right under Clause 11.1 to give notice of such claim before such time).  For the avoidance of doubt, the fact that the liability may not have become an actual liability by the relevant date provided in Clause 10.1 shall not exonerate the Seller in respect of any claim properly notified before that date.

10.6Matters Arising Subsequent to this Agreement

The Seller shall not be liable under this Agreement for breach of any Seller’s Warranty in respect of any matter, act, omission or circumstance (or any combination thereof) to the extent that the same would not have occurred but for:

10.6.1Agreed matters

any matter or thing done or omitted to be done by the Seller or any member of the Seller’s Group before Closing pursuant to and in compliance with this Agreement or otherwise at the request in writing of the Purchaser; or

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10.6.2Changes in legislation

the passing of, or any change in, after the Closing Date, any Applicable Law or administrative practice of any government, governmental department, agency or regulatory body having the force of the law including (without prejudice to the generality of the foregoing) any increase in the rates of Taxation or any imposition of Taxation or any withdrawal of relief from Taxation not in force at the Closing Date.

10.7Insurance

Without prejudice to Clause 14, the Seller’s Liability under this Agreement for breach of any Seller’s Warranty shall be reduced by an amount equal to any loss or damage to which such claim related which has actually been recovered under a policy of insurance held by the Purchaser (after deducting any reasonable costs incurred in making such recovery including the amount of any excess or deductible).

10.8Purchaser’s Right to Recover

If the Seller has paid an amount in discharge of any claim under this Agreement for breach of any Seller’s Warranty and subsequently the Purchaser recovers (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, the Purchaser shall pay to the Seller as soon as practicable after receipt an amount equal to (i) the sum recovered from the third party less any costs and expenses incurred in obtaining such recovery and any Tax on any amounts recovered (or Tax that would have been payable on such amounts but for the availability of any Tax relief), or if less (ii) the amount previously paid by the Seller to the Purchaser.  Any payment made by the Purchaser to the Seller under this Clause shall be made or procured by way of further adjustment of the consideration paid by the Purchaser and the provisions of Clause 3.3 to 3.4 shall apply mutatis mutandis.

10.9No Double Recovery and no Double Counting

A party shall be entitled to make more than one claim under this Agreement arising out of the same subject matter, fact, event or circumstance but shall not be entitled to recover under this Agreement or otherwise more than once in respect of the same Losses suffered or amount for which the party is otherwise entitled to claim (or part of such Losses or amount), regardless of whether more than one claim arises in respect of it.  No amount (including any relief) (or part of any amount) shall be taken into account, set off or credited more than once under this Agreement or otherwise, with the intent that there will be no double counting under this Agreement or otherwise.

10.10Fraud

None of the limitations contained in this Clause 10 shall apply to any claim to the extent that such claim which arises or is increased, or to the extent to which it arises or is increased, as the consequence of, or which is delayed as a result of, fraud by any director or officer of any member of the Seller’s Group.

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11.Claims

11.1Notification of Potential Claims

Without prejudice to the obligations of the Purchaser under Clause 11.2, if the Purchaser becomes aware of any fact, matter or circumstance that may give rise to a claim against the Seller under this Agreement for breach of any Seller’s Warranty (ignoring for these purposes the application of Clauses 11.2 or 11.3), the Purchaser shall as soon as reasonably practicable give a notice in writing to the Seller of such facts, matters or circumstances as are then available regarding the potential claim.  Failure to give notice within such period shall not affect the rights of the Purchaser to make a relevant claim under this Agreement for breach of any Seller’s Warranty, except that the failure shall be taken into account in determining the liability of the Seller for such claim to the extent the Seller establishes that the amount of it is increased, or is not reduced as a result of such failure.

11.2Notification of Claims under this Agreement

Notices of claims under this Agreement for breach of Seller’s Warranty shall be given by the Purchaser to the Seller within the time limits specified in Clause 10.1 and shall specify information (giving reasonable detail) in relation to the basis of the claim and setting out the Purchaser’s estimate of the amount of Losses which are, or are to be, the subject of the claim.

11.3Commencement of Proceedings

Any claim notified pursuant to Clause 11.2 shall (if it has not been previously satisfied, settled or withdrawn) be deemed to be irrevocably withdrawn 9 months after the relevant time limit set out in Clause 10.1 unless, at the relevant time, legal proceedings in respect of the relevant claim have been commenced by being both issued and served except:

11.3.1where the claim relates to a contingent liability, in which case it shall be deemed to have been withdrawn unless legal proceedings in respect of it have been commenced by being both issued and served with 9 months of it having become an actual liability; or

11.3.2where the claim is a claim for breach of a Seller’s Warranty of which notice is given for the purposes of Clause 10.1 at a time when the amount set out in Clause 10.3.1 has not been exceeded, in which case it shall be deemed to have been withdrawn unless legal proceedings in respect of it have been commenced by being both issued and served within 9 months of the date of any subsequent notification to the Seller pursuant to Clause 11.1 above of one or more claims which result(s) in the total amount claimed in all claims notified to the Seller pursuant to Clause 10.1 exceeding the amount set out in Clause 10.3.1 for the first time.

11.4Conduct of Third Party Claims

11.4.1If the matter or circumstance that may give rise to a claim against the Seller under this Agreement for breach of any Seller’s Warranty is a result of or in connection with a claim by a third party (a “Third Party Claim”) then:

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(i)the Purchaser shall as soon as reasonably practicable give written notice thereof to the Seller and thereafter shall provide the Seller with periodic updates upon reasonable request and shall consult with the Seller so far as reasonably practicable in relation to the conduct of the Third Party Claim and shall take reasonable account of the views of the Seller in relation to the Third Party Claim;

(ii)the Third Party Claim shall not be admitted, compromised, disposed of or settled without the written consent of the Seller (such consent not to be unreasonably withheld or delayed); and

(iii)subject to the Seller indemnifying the Purchaser or other member of the Purchaser’s Group concerned against all reasonable costs and expenses (including legal and professional costs and expenses) that may be incurred thereby, the Purchaser shall, or the Purchaser shall procure that any other members of the Purchaser’s Group shall, take such action as the Seller may reasonably request to avoid, dispute, deny, defend, resist, appeal, compromise or contest the Third Party Claim, provided that this Clause 11.4.1(iii) shall not apply where the claim by the third party relates to matters or circumstances referred to in paragraphs 3 or 7 of Schedule 14 and the Purchaser shall then have the right to conduct the claim at its discretion (subject to Clauses 11.4.1(i) and (ii)),

provided that failure to give notice in accordance with Clause 11.4.1(i) shall not affect the rights of the Purchaser to make a relevant claim under this Agreement for breach of any Seller’s Warranty, except that the failure shall be taken into account in determining the liability of the Seller for such claim to the extent the Seller establishes that the amount of it is increased, or is not reduced as a result of such failure.

11.4.2Notwithstanding the provisions of Clause 11.4.1, if a Third Party Claim may also give rise to an indemnity claim under Clause 8.1.2, the provisions of Clause 8.2.2 shall apply instead of the provisions of Clause 11.4.1.

11.5Clinical Employees

During the period between the Closing Date and the Clinical Employee Transfer Date:

11.5.1the Seller shall retain operational and management control over the Clinical Employees; and

11.5.2the Seller shall procure that the Seller’s Oncology Unit leader (being a Clinical Employee) will:

(i)liaise with the Purchaser’s Head of Development OGD & GMA regarding the strategic direction of the clinical development activities in relation to the Products or the Business;

(ii)supervise the services provided by the Clinical Employees; and

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(iii)ensure the execution of such services in accordance with the strategic direction given by the Purchaser.

12.Restrictive Covenants

12.1Non-Compete

In consideration of the payment by the Purchaser of $1,600,000,000, the Seller will not, and undertakes to procure that each member of the Seller’s Group will not, do any of the following things:

12.1.1for three years from the Closing Date, manufacture, sell, commercialise, market or licence (whether as a result of M&A activity or otherwise) any oncology product which has or is proposed to have (i) the same mechanism of action as any Product; and/or (ii) the same indication as any Product or any Product Expansion (a “Competing Product”); or

12.1.2for three years from the Closing Date, solicit the custom of any person to whom goods or services have been sold by any Business Seller in the course of the Business during the two years before the Closing Date, in each case only to the extent that such solicitation is in respect of products referred to in Clause 12.1.1.

12.2Exceptions to the non-compete

The restrictions in Clause 12.1 shall not apply to:

12.2.1any activities of any nature undertaken or developed by the Seller’s Group in relation to vaccines;

12.2.2any Affiliate of Seller in which a person who is not a member of the Seller’s Group holds equity interests and with respect to whom a member of the Seller’s Group has existing contractual or legal obligations limiting its discretion to impose non-competition obligations;

12.2.3the holding of shares in a company or other entity for investment purposes provided the Seller does not exercise, directly or indirectly, Control over that company or entity;

12.2.4any business activity that would otherwise violate Clause 12.1 that is acquired in connection with an acquisition so long as the relevant member of the Seller’s Group divests all or substantially all of the business activity that would otherwise violate Clause 12.1 or otherwise terminates or disposes of such business activity, product line or assets of such acquired business that would otherwise violate Clause 12.1 within nine months after the consummation of the relevant acquisition, or such longer period as may reasonably be necessary to comply with Applicable Law (provided that in those circumstances the Seller shall procure that the such competing business activity is disposed of as soon as reasonably practicable);

12.2.5passive investments by a pension or employee benefit plan or trust for present or former employees;

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12.2.6performance of any obligation of the Seller’s Group under this Agreement or any of the Ancillary Agreements, as amended from time to time in accordance with their terms;

12.2.7any manufacturing of products that are not Competing Products by any member of the Seller’s Group for the Seller’s Group or any third party;

12.2.8any manufacturing and supply of the Divested Zofran Product by any member of the Seller’s Group exclusively for or to the order of Aspen Global Incorporated and its Affiliates for sale in Australia to the extent required under the Aspen Agreements;

12.2.9performance of any obligation of the Seller’s Group under the [***], as amended to the extent permitted by this Agreement from time to time;

12.2.10provision of data or other content to or in connection with business conducted by any person, in each case as required by Applicable Law.

12.3Non-solicit

The Seller will not, and undertakes to procure that each member of the Seller’s Group will not, for a period of two years after the Closing Date, solicit or induce any Restricted Group Employee to become employed or engaged whether as employee, consultant or otherwise by any member of the Seller’s Group.

12.4Exceptions to the non-solicit

The restrictions in Clause 12.3 may be relaxed or additional exceptions allowed by written approval of the Purchaser’s Division Head of HR and shall in any event not apply to the solicitation, inducement or recruitment of any person:

12.4.1through the placing of advertisements of posts available to the public generally;

12.4.2through an employment agency, provided that no member of the Seller’s Group encourages or advises such agency to approach any such person;

12.4.3who is no longer employed by the Purchaser’s Group; or

12.4.4who is under formal notice of termination from his employer, provided that this exception only applies if the employment or engagement by the member of the Seller’s Group is offered with a start date which is no earlier than the day after the last scheduled date of the person’s employment with the Purchaser’s Group.

12.5Reasonableness of Restrictions

Each undertaking contained in this Clause 12 shall be construed as a separate undertaking and if one or more of the undertakings is held to be against the public interest or unlawful or in any way an unreasonable restraint of trade, the remaining undertakings shall continue to bind the Seller.

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13.Confidentiality

13.1Announcements

No announcement, communication or circular concerning the existence or the subject matter of this Agreement shall be made or issued by or on behalf of any member of the Seller’s Group or the Purchaser’s Group without the prior written approval of the Seller and the Purchaser (such consent not to be unreasonably withheld or delayed).  This shall not affect any announcement, communication or circular required by law or any governmental or regulatory body or the rules of any stock exchange on which the shares of any party (or its holding company) are listed but the party with an obligation to make an announcement or communication or issue a circular (or whose holding company has such an obligation) shall consult with the other parties (or shall procure that its holding company consults with the other parties) insofar as is reasonably practicable before complying with such an obligation.

13.2Confidentiality

13.2.1Subject to Clause 13.1 and Clause 13.2.2, each of the parties shall treat as strictly confidential and not disclose or use any information received or obtained as a result of entering into this Agreement, the Ancillary Agreements (or any other agreement entered into pursuant to this Agreement) which relates to:

(i)the existence and provisions of this Agreement, the Ancillary Agreements and of any other agreement entered into pursuant to this Agreement;

(ii)the negotiations relating to this Agreement, the Ancillary Agreements and any such other agreement;

(iii)(in the case of the Seller) any information relating to the Business following Closing and any other information relating to the business, financial or other affairs (including future plans and targets) of the Purchaser’s Group; or

(iv)(in the case of the Purchaser) any information relating to the business, financial or other affairs (including future plans and targets) of the Seller’s Group including, prior to Closing, any information relating to the Business.

13.2.2Clause 13.2.1 shall not prohibit disclosure or use of any information if and to the extent:

(i)the disclosure or use is required by law, any governmental or regulatory body or any stock exchange on which the shares of any party (or its holding company) are listed;

(ii)the disclosure or use is required to vest the full benefit of this Agreement or the Ancillary Agreements in any party;

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(iii)the disclosure or use is required for the purpose of any arbitral or judicial proceedings arising out of this Agreement, the Ancillary Agreements or any other agreement entered into under or pursuant to this Agreement;

(iv)the disclosure is made to a Tax Authority in connection with the Tax affairs of the disclosing party;

(v)the disclosure is made to a ratings agency on a confidential basis in connection with the affairs of the disclosing party;

(vi)the disclosure is made by the Purchaser to any of its Representatives, any member of the Purchaser’s Group and/or any of their respective Representatives, or by the Seller to any of its Representatives, any member of the Seller’s Group and/or any of their respective Representatives, in each case on a “need-to-know” basis and provided they have a duty (contractual or otherwise) to keep such information confidential;

(vii)the information was lawfully in the possession of that party without any obligation of secrecy prior to its being received or held, in either case as evidenced by written records;

(viii)the information is or becomes publicly available (other than by breach of this Agreement);

(ix)the other party has given prior written approval to the disclosure or use; or

(x)the information is independently developed,

provided that prior to disclosure or use of any information pursuant to Clause 13.2.2(i), (ii) or (iii), the party concerned shall, where not prohibited by law, promptly notify the other parties of such requirement with a view to providing the other parties with the opportunity to contest such disclosure or use or otherwise to agree the timing and content of such disclosure or use.

14.Insurance

14.1No cover under Seller’s Group Insurance Policies from Closing

The Purchaser acknowledges and agrees that following Closing:

14.1.1the Purchaser shall not have or be entitled to the benefit of any Seller’s Group Insurance Policy in respect of any event, act or omission that takes place after Closing and it shall be the sole responsibility of the Purchaser to ensure that adequate insurances are put in place in relation to the Business with effect from Closing;

14.1.2except in respect of any Delayed Business until the appropriate Delayed Closing Date, neither the Seller nor any member of the Seller’s Group shall

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be required to maintain any Seller’s Group Insurance Policy in relation to the Business; and

14.1.3the Purchaser shall not be entitled to make or notify a claim under any Seller’s Group Insurance Policy in respect of any event, act or omission that occurred prior to the Closing Date.

15.France Business and Netherlands Business

15.1France Business

Notwithstanding any other provision of this Agreement, this Agreement shall not constitute a binding agreement to sell or purchase the France Business, provided that:

15.1.1in the event that the France Put Option Exercise occurs before Closing, this Clause 15.1 (other than this Clause 15.1.1) shall terminate and shall cease to have effect and the sale of the France Business shall be subject to the provisions of this Agreement as if it were part of the Business to be sold as and from the date of this Agreement;

15.1.2in the event that the France Put Option Exercise does not occur before Closing:

(i)the provisions of Clauses 2 and 6 (the “Disapplied Provisions”) shall not apply to the France Business;

(ii)prior to the France Closing, the provisions of Clause 12, Schedule 8 and Schedule 9 (the “Suspended Provisions”) shall not apply to the France Business; and

(iii)in respect of the Disapplied Provisions and, prior to the France Closing, the Suspended Provisions only:

(a)the term “Business” shall be deemed to exclude the France Business;

(b)the term “Assumed Liabilities” shall be deemed to exclude the France Assumed Liabilities; and

(c)the term “Employees” shall be deemed to exclude the France Employees;

15.1.3with effect from the France Closing, the Suspended Provisions shall apply to the France Business mutatis mutandis save that in respect of the Suspended Provisions only (A) the term “Closing” shall be deemed to refer to the France Closing and (B) the term “Closing Date” shall be deemed to refer to the date of the France Closing; and

15.1.4the parties shall negotiate in good faith to agree any amendments to this Agreement and any of the Ancillary Agreements as are required in order to give effect to the principles set forth in this Clause 15.1 for the purposes of

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complying with the information and consultation requirements in respect of the relevant works council in respect of the France Business; and

15.1.5the provisions of Clause 10 shall apply to the France Business as if the remaining provisions of this Clause 15.1 did not have any force or effect.

15.2Netherlands Business

Notwithstanding any other provision of this Agreement, this Agreement shall not constitute a binding agreement to sell or purchase the Netherlands Business, provided that:

15.2.1in the event that the Netherlands Put Option Exercise occurs before Closing, this Clause 15.2 (other than this Clause 15.2.1) shall terminate and shall cease to have effect and the sale of the Netherlands Business shall be subject to the provisions of this Agreement as if it were part of the Business to be sold as and from the date of this Agreement;

15.2.2in the event that the Netherlands Put Option Exercise does not occur before Closing:

(i)the Disapplied Provisions shall not apply to the Netherlands Business;

(ii)prior to the Netherlands Closing, the Suspended Provisions shall not apply to the Netherlands Business; and

(iii)in respect of the Disapplied Provisions and, prior to the Netherlands Closing, the Suspended Provisions only:

(a)the term “Business” shall be deemed to exclude the Netherlands Business;

(b)the term “Assumed Liabilities” shall be deemed to exclude the Netherlands Assumed Liabilities; and

(c)the term “Employees” shall be deemed to exclude the Netherlands Employees;

15.2.3with effect from the Netherlands Closing, the Suspended Provisions shall apply to the Netherlands Business mutatis mutandis save that in respect of the Suspended Provisions only (A) the term “Closing” shall be deemed to refer to the Netherlands Closing and (B) the term “Closing Date” shall be deemed to refer to the date of the Netherlands Closing; and

15.2.4the parties shall negotiate in good faith to agree any amendments to this Agreement and any of the Ancillary Agreements as are required in order to give effect to the principles set forth in this Clause 15.2 for the purposes of complying with the information and consultation requirements in respect of the relevant works council in respect of the Netherlands Business; and

15.2.5the provisions of Clause 10 shall apply to the Netherlands Business as if the remaining provisions of this Clause 15.2 did not have any force or effect.

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16.Other Provisions

16.1Further Assurances

16.1.1Without prejudice to any restriction or limitation on the extent of any party’s obligations under this Agreement, each of the parties shall from time to time, so far as each is reasonably able, do or procure the doing of all such acts and/or execute or procure the execution of all such documents in a form reasonably satisfactory to the party concerned as they consider necessary to transfer the Business to the Purchaser or otherwise to give the other party the full benefit of this Agreement.

16.1.2If the parties determine at any time after Closing that, in respect of any country in which Assets are required to transfer under this Agreement, the transfer of certain such Assets is prohibited or restricted in such country under Applicable Law, the parties agree that such country shall be treated as a Delayed Business and the provisions of Schedule 25 shall apply to the transfer of Assets and/or Employees (as applicable) in such country.

16.2Whole Agreement

16.2.1This Agreement and the Ancillary Agreements contain the whole agreement between the parties relating to the subject matter of this Agreement at the date hereof to the exclusion of any terms implied by law which may be excluded by contract and supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in this Agreement.

16.2.2The Purchaser acknowledges that, in entering into this Agreement, it is not relying on any representation, warranty or undertaking not expressly incorporated into it.

16.2.3Each of the parties agrees and acknowledges that its only right and remedy in relation to any representation, warranty or undertaking made or given in connection with this Agreement shall be for breach of the terms of this Agreement and each of the parties waives all other rights and remedies (including those in tort or arising under statute) in relation to any such representation, warranty or undertaking.

16.2.4In Clauses 16.2.1 to 16.2.3, “this Agreement” includes the Ancillary Agreements and all other documents entered into pursuant to this Agreement.

16.2.5Nothing in this Clause 16.2 excludes or limits any liability for fraud.

16.3No Assignment

No party may without the prior written consent of the other parties, assign, grant any security interest over, hold on trust or otherwise transfer the benefit of the whole or any part of this Agreement.

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16.4Third Party Rights

16.4.1Subject to Clause 16.4.2, the parties to this Agreement do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.

16.4.2Certain provisions of this Agreement confer benefits on the Affiliates of the Purchaser and the Affiliates of the Seller (each such Affiliate being, for the purposes of this Clause 16.4, a “Third Party”) and, subject to Clause 16.4.3, are intended to be enforceable by each Third Party by virtue of the Contracts (Rights of Third Parties) Act 1999.

16.4.3Notwithstanding Clause 16.4.2, this Agreement may be varied in any way and at any time without the consent of any Third Party.

16.5Variation or waiver

16.5.1No variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the parties.

16.5.2No failure or delay by a party in exercising any right or remedy provided by Applicable Law or under this Agreement or any Ancillary Agreement shall impair such right or remedy or operate or be construed as a waiver or variation of it or preclude its exercise at any subsequent time and no single or partial exercise of any such right or remedy shall preclude any further exercise of it or the exercise of any other remedy.

16.6Method of Payment and set off

16.6.1Payments (including payments pursuant to an indemnity, compensation or reimbursement provision) made or expressed to be made by the Purchaser or the Seller pursuant to this Agreement or any claim for breach of this Agreement shall, insofar as the payment or claim relates to or affects the Share (including the Company by reason of the transfer of the Share) or any assets or liabilities transferred pursuant to this Agreement, be made or received (as the case may be) by:

(i)the Seller, for itself or as agent on behalf of the relevant Business Seller or the Share Seller (each in respect of the assets and liabilities to be transferred by it pursuant to this Agreement including, in the case of the Share Seller, the Share); and

(ii)the Purchaser, for itself or as agent on behalf of the relevant members of the Purchaser’s Group (each in respect of the assets and liabilities to be transferred to it pursuant to this Agreement, including the Share).

16.6.2Payments pursuant to this Agreement shall be settled by payments between the Seller, on behalf of the relevant members of the Seller’s Group, and the Purchaser, on behalf of the relevant members of the Purchaser’s Group.

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16.6.3Any payments pursuant to this Agreement shall be made in full, without any set-off, counterclaim, restriction or condition and without any deduction or withholding (save as may be required by law or as otherwise agreed).

16.6.4Any payments pursuant to this Agreement shall be effected by crediting for same day value the account specified by the Seller or the Purchaser (as the case may be) on behalf of the party entitled to the payment (reasonably in advance and in sufficient detail to enable payment by telegraphic or other electronic means to be effected) on or before the due date for payment.

16.6.5Payment of a sum in accordance with this Clause 16.6 shall constitute a payment in full of the sum payable and shall be a good discharge to the payer (and those on whose behalf such payment is made) of the payer’s obligation to make such payment and the payer (and those on whose behalf such payment is made) shall not be obliged to see to the application of the payment as between those on whose behalf the payment is received.

16.7Costs

16.7.1Except as otherwise expressly provided for in this Agreement, the Seller shall bear all costs incurred by it and its Affiliates in connection with the preparation and negotiation of, and the entry into, this Agreement, any Ancillary Agreement and the sale of the Business.

16.7.2Except as otherwise expressly provided for in this Agreement, the Purchaser shall bear all such costs incurred by it and its Affiliates in connection with the preparation and negotiation of, and the entry into, this Agreement, any Ancillary Agreement and the purchase of the Business.

16.8Notarial Fees, Registration, Stamp and Transfer Taxes and Duties

Subject to Clause 8.13, the Seller shall bear the cost of all notarial fees and all registration, stamp and transfer taxes and duties (including, for the avoidance of doubt, stamp duty reserve tax) or their equivalents (“Transfer Taxes”) in all jurisdictions where such fees, taxes and duties are payable as a result of the transactions contemplated by this Agreement.  The Purchaser shall be responsible for arranging the payment of all Transfer Taxes payable as a result of transactions taking place at or after Closing, including fulfilling any administrative or reporting obligation imposed by the jurisdiction in question in connection with such payment.  The Seller shall indemnify the Purchaser or any other member of the Purchaser’s Group against any Transfer Taxes payable as a result of the transactions contemplated by this Agreement to the extent that such amounts have not already been deducted from the amount payable by the Purchaser at Closing under Clause 6.3.1(i)(d).

16.9Interest

If any party defaults in the payment when due of any sum payable under this Agreement, the liability of that party shall be increased to include interest on such sum from the date when such payment is due until the date of actual payment (as

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well after as before judgment) at a rate per annum of two per cent. above LIBOR. Such interest shall accrue from day to day.

16.10Grossing-up

16.10.1All sums payable under this Agreement and the Local Transfer Documents shall be paid free and clear of all deductions, withholdings, set-offs or counterclaims whatsoever save only as required by Applicable Law or as may be otherwise agreed.  Subject to Clauses 16.10.2 to 16.10.7 if any deductions or withholdings are required by law the party making the payment shall (except in the case of any interest payable under Clause 16.9) be obliged to pay to the other party such sum as will after such deduction or withholding has been made leave the other party with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding, provided that if either party to this Agreement shall have assigned or novated the benefit in whole or in part of this Agreement or shall, after the date of this Agreement, have changed its tax residence or the permanent establishment to which the rights under this Agreement are allocated then the liability of the other party under this Clause 16.10.1 shall be limited to that (if any) which it would have been had no such assignment, novation or change taken place.

16.10.2If either party is or becomes aware of any facts making it reasonably likely that the Purchaser, or any relevant member of the Purchaser’s Group, will be required to deduct or withhold any amount in respect of the Business Consideration and/or the Share Consideration (a “Relevant Tax Deduction”), then that party shall, as soon as reasonably practicable, give notice to the other party (including details of the relevant facts and, so far as possible, details of the rate and basis of such withholding).

16.10.3The Seller and the Purchaser shall, and shall procure that the members of their respective groups shall (at the Seller’s cost), co-operate with each other in good faith and use all reasonable efforts to reduce or mitigate any Relevant Tax Deduction (or its amount) and/or to enable the Seller or the relevant Business Seller or Share Seller to obtain any available credit or refund in respect of such Relevant Tax Deduction, including, without limitation, making any available claim under an applicable double taxation treaty.

16.10.4Without prejudice to the generality of Clause 16.10.3, the Seller and the Purchaser shall co-operate in good faith to establish or agree the amount or basis of calculation of any Relevant Tax Deduction prior to Closing (and in this regard the Purchaser shall consider reasonably any relevant information or evidence provided or obtained by the Seller) including, if requested by the Seller and at the Seller’s expense, by seeking to obtain a ruling or confirmation from a relevant Tax Authority, or obtaining an opinion from reputable local tax counsel or a firm of accountants of international standing satisfactory to the Purchaser (acting reasonably) and instructed jointly by the Seller and the Purchaser.

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16.10.5The Purchaser shall, or shall procure that the relevant member of the Purchaser’s Group shall, make any Relevant Tax Deduction in the minimum amount required by Applicable Law, provided that:

(i)if a double taxation treaty between the jurisdiction under the laws of which the Relevant Tax Deduction is required and the jurisdiction of residence of the Seller or the relevant Share Seller or Business Seller is in force, the Purchaser shall (and shall procure that any relevant member of the Purchaser’s Group shall) make any Relevant Tax Deduction in an amount not exceeding the rate specified in such double taxation treaty (which may be nil), provided that the Seller has provided the Purchaser with such evidence as is required under Applicable Law to establish the entitlement of the Seller (or relevant Share Seller or Business Seller) to the benefit of the applicable treaty; and

(ii)if an opinion from reputable local counsel or a firm of accountants of international standing has been obtained as envisaged by Clause 16.10.4, the Purchaser shall (and shall procure that any relevant member of the Purchaser Group shall) make such Relevant Tax Deduction in an amount or on a basis which is consistent with that opinion (which may result in no withholding or deduction), provided that the Seller has indemnified the Purchaser and any relevant member of the Purchaser’s Group, to the Purchaser’s reasonable satisfaction, against any Liabilities arising (including any interest and penalties) should such opinion be wholly or partly incorrect.

16.10.6The Purchaser shall promptly provide the Seller with evidence reasonably satisfactory to the Seller that a Relevant Tax Deduction has been made and an appropriate amount paid to the relevant Tax Authority.

16.10.7If any Relevant Tax Deduction is required, an additional sum shall be payable in accordance with Clause 16.10.1 only if and to the extent that such deduction or withholding would not have been required had the Purchaser and each member of the Purchaser’s Group making such payment or to which such payment relates been resident for Tax purposes only in Switzerland.

16.11Notices

16.11.1Any notice or other communication in connection with this Agreement (each, a “Notice”) shall be:

(i)in writing in English; and

(ii)delivered by hand, fax, or by courier using an internationally recognised courier company.

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16.11.2A Notice to the Seller shall be sent to such party at the following address, or such other person or address as the Seller may notify to the Purchaser from time to time:

GlaxoSmithKline plc
980 Great West Road
Brentford
Middlesex TW8 9GS

Fax:+44 (0)208 0476904

Attention:Company Secretary

with a copy to the Seller’s Lawyers, marked for the urgent attention of Simon Nicholls (delivery of such copy shall not itself constitute valid notice).

16.11.3A Notice to the Purchaser shall be sent to such party at the following address, or such other person or address as the Purchaser may notify to the Seller from time to time:

Novartis AG
Postfach
CH-4002 Basel
Switzerland

Fax:+41 613244300

Attention:Head Legal M&A, Novartis International AG

with a copy to the Purchaser’s Lawyers, marked for the urgent attention of Jennifer Bethlehem (delivery of such copy shall not itself constitute valid notice).

16.11.4A Notice shall be effective upon receipt and shall be deemed to have been received:

(i)at the time of delivery, if delivered by hand or courier;

(ii)at the time of transmission in legible form, if delivered by fax.

16.12Invalidity or Conflict

16.12.1If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, the provision shall apply with whatever deletion or modification is necessary so that the provision is legal, valid and enforceable and gives effect to the commercial intention of the parties.

16.12.2To the extent it is not possible to delete or modify the provision, in whole or in part, under Clause 16.12.1, then such provision or part of it shall, to the extent that it is illegal, invalid or unenforceable, be deemed not to form part of this Agreement and the legality, validity and enforceability of the remainder of this Agreement shall, subject to any deletion or modification made under Clause 16.12.1, not be affected.

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16.12.3If there is any conflict between the terms of this Agreement and any of the Ancillary Agreements this Agreement shall prevail (as between the parties between this Agreement and as between any member of the Seller’s Group and any member of the Purchaser’s Group) unless (i) such Ancillary Agreement expressly states that it overrides this Agreement in the relevant respect and (ii) the Seller and the Purchaser are either also parties to that Ancillary Agreement or otherwise expressly agree in writing that such Ancillary Agreement shall override this Agreement in that respect.

16.12.4For the avoidance of doubt, nothing in this Agreement is intended to limit or exclude the Liabilities of any party under any Ancillary Agreement.

16.13Counterparts

This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument.  Any party may enter into this Agreement by executing any such counterpart.  Delivery of a counterpart of this Agreement by email attachment shall be an effective mode of delivery.

16.14Governing Law and Submission to Jurisdiction

16.14.1This Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, and any non-contractual obligations arising out of or in connection with the Agreement and such documents shall be governed by and construed in accordance with English law.

16.14.2Each of the parties irrevocably agrees that the courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, and that accordingly any proceedings arising out of or in connection with this Agreement and the documents to be entered into pursuant to it shall be brought in such courts.  Each of the parties irrevocably submits to the jurisdiction of such courts and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

16.15Appointment of Process Agent

16.15.1The Purchaser hereby irrevocably appoints Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the Purchaser.

16.15.2The Purchaser agrees to inform the Seller in writing of any change of address of such process agent within 28 days of such change.

16.15.3If such process agent ceases to be able to act as such or to have an address in England and Wales, the Purchaser irrevocably agrees to appoint a new process agent in England and Wales and to deliver to the Seller within 14 days a copy of a written acceptance of appointment by the process agent.

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16.15.4Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law.

This Agreement has been entered into on the date stated at the beginning.

SIGNED by

And

For and on behalf of

NOVARTIS AG

SIGNED by

For and on behalf of

GLAXOSMITHKLINE PLC

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Schedule 1
Products

[***]

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Schedule 2
Certain Intellectual Property Rights Matters (Clause 2.3.1)

[***]

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Schedule 3
Excluded Assets and Excluded Contracts (Clause 2.3.2)

Part 1Excluded Assets

The Import Drug Licence

Part 2Excluded Contracts

The China Contracts

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Schedule 4
Excluded Liabilities (Clause 2.3.4)

Not Used

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Schedule 5
Permitted Encumbrances (Clause 1.1)

(i) Co-Owned Business Product Intellectual Property Rights listed at Part 1 of Schedule 2.

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Schedule 6
Product Approvals (Clause 6.2.2)

Part 1Terms relating to the Product Approvals

1.General Provisions

1.1The Purchaser shall do all things necessary to effect the transfer of each Product Approval, including complying with requirements and requests of Governmental Entities with respect to the transfer of each Product Approval.

1.2The Marketing Authorisations shall be transferred in accordance with Part 2 of this Schedule 6.

2.Fees and expenses

From and after the Closing Date, the Purchaser shall promptly reimburse the relevant members of the Seller’s Group for all maintenance and renewal fees and similar fees paid, and all out of pocket expenses reasonably incurred in connection with the satisfaction of any commitments or obligations by such member of the Seller’s Group with respect to each Product Approval.

3.Product Expansion Applications

3.1The Purchaser shall file or cause to be filed applications for the transfer of each Product Expansion Application in each country or territory in which such transfer is required to be submitted as soon as possible after the Closing Date.

3.2Pending the transfer of each Product Expansion Application the Seller shall, and shall cause the relevant members of the Seller’s Group to:

3.2.1upon reasonable request from the Purchaser and at the Purchaser’s expense, reasonably cooperate and coordinate with the Purchaser in relation to the transfer of the Product Expansion Applications, including by providing the Purchaser with regulatory documentation concerning the Products owned or controlled by Seller or its Affiliates;

3.2.2perform such acts and services as may be requested by the Purchaser that are reasonably necessary or required by any Governmental Entity to maintain or renew any Product Expansion Application or are reasonably necessary for the Purchaser to pursue the regulatory approval for any Product Expansion Application, including conducting any studies, including clinical and stability studies, concerning the Products and the Product Expansions; and

3.2.3notify the Purchaser as soon as is reasonably practicable of any written communication received by the Seller or any member of the Seller’s Group with respect to any Product Expansion Application and shall consult with the Purchaser with respect to such communication and take into account the Purchaser’s views as to the form and content of any communication with any Governmental Entity concerning such Product Expansion Application.

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Part 2Marketing Authorisation Transfer Provisions

1.Transfer of Marketing Authorisations

Marketing Authorisation Transfer and Marketing Authorisation Re-registration

1.1The Seller and the Purchaser hereby agree they will each use, and will procure that their respective Affiliates will use, all reasonable endeavours to ensure that, as soon as reasonably practicable after the Closing Date:

1.1.1subject to paragraphs 1.1.2 and 1.1.3, each Marketing Authorisation shall be transferred in accordance with Applicable Law by the Marketing Authorisation Holder to the Marketing Authorisation Transferee (“Marketing Authorisation Transfer”);

1.1.2where Applicable Law does not permit Marketing Authorisation Transfer, a new marketing authorisation shall be registered in the name of the Marketing Authorisation Transferee to replace the existing Marketing Authorisation (“Marketing Authorisation Re-registration”) and the Seller shall procure that the relevant Marketing Authorisation Holder takes all necessary steps to withdraw, abandon, cancel or allow to lapse the superseded Marketing Authorisation as soon as practicable after the Marketing Authorisation Re-registration Date; and

1.1.3good faith discussions are held between the Seller and the Purchaser (or their respective Affiliates) to determine whether a structure may be implemented such that the Marketing Authorisation Transfers in Brazil may be effected without the need for a Marketing Authorisation Re-registration, such as by means of a spin-off structure under Applicable Law (the “Brazilian Spin-off”).  For the avoidance of doubt, nothing in this sub-paragraph 1.1.3 shall oblige the Seller or the Purchaser to carry out any Brazilian Spin-off.

1.2Without prejudice to any rights the Purchaser may have under the terms of this Agreement, to the extent that, before Closing, and in the event that, at Closing, the Marketing Authorisation Holder of the Marketing Authorisation for Argatroban in the United States and Canada (the “Argatroban MA”) is not the Seller or a member of the Seller’s Group, the Seller shall use all reasonable endeavours to procure or assist the Purchaser to procure the transfer of (i) the Argatroban MA and (ii) all data relevant to Argatroban held in the safety database of the Marketing Authorisation Holder of the Argatroban MA (or any of its Affiliates) (the “Argatroban Safety Data”) to the Marketing Authorisation Transferee as soon as reasonably practicable. The Seller shall use all reasonable endeavours to procure that the Marketing Authorisation Holder of the Argatroban MA shall continue to support the Argatroban MA for pharmacovigilance activities until the Argatroban Safety Data has transferred to a member of the Purchaser’s Group.

1.3The parties agree that the transfer of any Marketing Authorisation from the Marketing Authorisation Holder to the Marketing Authorisation Transferee in respect of any Delayed Business shall not complete until on or after the relevant Delayed Closing Date.

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1.4Any Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as applicable) shall each be effected on a Market-by-Market basis (such that there shall not be any staggered Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as the case may be) on a Product-by-Product basis in any Market), unless otherwise agreed between the Seller and the Purchaser.

1.5With effect from the Closing Date until the Marketing Authorisation Transfer Date or the Marketing Authorisation Re-registration Date (as applicable), the Seller shall procure that each Marketing Authorisation Holder shall hold the Marketing Authorisation(s) in its name but for the account, risk and benefit of the relevant Marketing Authorisation Transferee.

Submission of MA Documentation

1.6Without prejudice to paragraph 1.7, the Purchaser shall be responsible for preparing and submitting, or for procuring that there is prepared and submitted (in any such case at the Purchaser’s cost and expense), all notices, applications, submissions, reports and any other instruments, documents, correspondence or filings necessary to complete Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as applicable) (the “MA Documentation”).  The MA Documentation shall be prepared in accordance with Applicable Law as soon as reasonably practicable.

1.7At the Seller’s election, the Purchaser shall procure that advanced drafts of the MA Documentation are submitted to the Seller so as to allow the Seller and/or the Marketing Authorisation Holder a reasonable opportunity to provide comments on such MA Documentation before it is submitted to the relevant Governmental Entity. The Purchaser shall incorporate all comments on such drafts as may reasonably be made by the Seller and/or the Marketing Authorisation Holder PROVIDED THAT the Purchaser shall not be obliged to incorporate any comments if the Purchaser considers, acting reasonably that to do so would materially delay Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as applicable).

1.8Where under Applicable Law the MA Documentation is required to be submitted to the relevant Governmental Entity:

1.8.1by the Marketing Authorisation Holder, the Purchaser shall procure that the finalised MA Documentation is provided to the Seller after such MA Documentation is finalised in accordance with paragraph 1.7 above and the Seller shall, in turn, procure that the Marketing Authorisation Holder submits such MA Documentation to the relevant Governmental Entity (the timing and date of such submission to be agreed with the Purchaser) and the Seller shall promptly thereafter advise the Purchaser of such submission and provide a copy of the relevant MA Documentation (in the form submitted) to the Purchaser; and

1.8.2by the Marketing Authorisation Transferee, the Purchaser shall procure that the relevant Marketing Authorisation Transferee submits the finalised MA Documentation to the relevant Governmental Entity as soon as reasonably practicable after such MA Documentation is finalised in accordance with paragraph 1.7 above and the Purchaser shall promptly thereafter advise the

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Seller of such submission and provide a copy of the relevant MA Documentation (in the form submitted) to the Seller.

1.8.3From the Closing Date, the Seller shall procure that the relevant Marketing Authorisation Holder shall, as soon as reasonably practicable, sign any notices, applications, submissions, reports and other instruments, documents, correspondence or filings presented to it by the Purchaser or the relevant Marketing Authorisation Transferee that are necessary to effect Marketing Authorisation Transfer or Marketing Authorisation Re-registration (as applicable).  The Marketing Authorisation Holder shall:

(i)provide notice of its consent to a Marketing Authorisation Transfer or Marketing Authorisation Re-registration if required by any Governmental Entity; and

(ii)provide to the Purchaser or the relevant Marketing Authorisation Transferee any information or other data or technical or other information in its possession that relates to the relevant Marketing Authorisation and that is required by a relevant Governmental Entity or otherwise reasonably required by the Purchaser or the relevant Marketing Authorisation Transferee to assist the Purchaser or the relevant Marketing Authorisation Transferee to effect the relevant Marketing Authorisation Transfer or Marketing Authorisation Re-registration;

(iii)in the event of any request for information or any query from any relevant Governmental Entity in respect of Marketing Authorisation Transfer or the Marketing Authorisation Re-registration (as applicable), the relevant party receiving such request or query shall provide copies of any such request or query to the Seller or, as the case may be, to the Purchaser.  The Purchaser shall be responsible for preparing, or shall be responsible for procuring that there is prepared, (at the Purchaser’s cost and expense) any response to such a request or query with the intention that such request or query shall be dealt with as promptly and efficiently as possible.  In advance of finalising any such response, the Purchaser shall procure that the relevant response is submitted to the Seller so as to allow the Seller and/or the relevant Marketing Authorisation Holder a reasonable opportunity to provide comments on such response before it is submitted to the Governmental Entity.  The Purchaser shall procure that relevant Marketing Authorisation Transferee (i) shall submit the response to the relevant Governmental Entity as soon as reasonably practicable after the same has been finalised in accordance with this paragraph 1.8.3(iii) and (ii) shall provide a copy of the relevant response (in the form submitted) to the Seller.

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2.Obligations Pending Marketing Authorisation Transfer or Marketing Authorisation Re-Registration

2.1Unless otherwise required by Applicable Law or a relevant Governmental Entity (or unless otherwise agreed in writing by the Seller and the Purchaser), from the Closing Date until the applicable Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date:

2.1.1the Seller shall:

(i)maintain in force (or procure that there is maintained in force) each Marketing Authorisation, and shall not voluntarily amend, cancel or surrender any Marketing Authorisation unless requested to do so in writing by the Purchaser or required to do so by any Applicable Law or any Governmental Entity;

(ii)with the Purchaser’s consent (not to be unreasonably withheld or delayed) progress (or procure that there is progressed) any registrations, variations or renewals to Marketing Authorisations initiated by the Seller (or any other member of the Seller’s Group) prior to the Closing Date or withdraw them upon the request of the Purchaser;

(iii)procure that each Marketing Authorisation Holder shall comply with the terms of any Marketing Authorisation and shall notify the Purchaser as soon as reasonably practicable of the details of any variations or renewals initiated following the Closing Date;

(iv)inform the Purchaser of any impending renewals of Marketing Authorisations as at the Closing Date and the parties shall discuss in good faith to what extent any such renewal will be pursued or withdrawn (it being agreed that the Purchaser shall have the final decision in any such matter);

(v)not without the consent of the Purchaser, initiate any additional variations or amendments to the Marketing Authorisations, except to the extent required by any Governmental Entity or where failure to do so would breach Applicable Law; and

(vi)consider in good faith any request by the Purchaser to apply for a new marketing authorisation in respect of a Product PROVIDED THAT if the Seller agrees to submit such application, any costs or expenses incurred by the Seller in making such application shall be for the Purchaser’s account and shall constitute MA Costs;

2.1.2without prejudice to the generality of the foregoing paragraph 2.1.1(iii), the Purchaser acknowledges and agrees that each Marketing Authorisation Holder shall be entitled to do (or to procure that there is done) any or all of the following (and the Purchaser acknowledges that, where the relevant Marketing Authorisation Holder so chooses and unless otherwise agreed,

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responsibility for each of the following activities shall rest with the relevant Marketing Authorisation Holder):

(i)pharmacovigilance activities related to the Marketing Authorisations, which activities shall be conducted in accordance with the Applicable Law, the Pharmacovigilance Agreement, and the standards, policies and procedures of the Seller’s Group from time to time in force; and

(ii)conducting any and all communications with a Governmental Entity in respect of a Marketing Authorisation (including, without limitation to the generality of the foregoing, attending any meetings with relevant Governmental Entities and filing and submitting all reports and other documents which it reasonably considers necessary to be submitted in order to comply with Applicable Law or its obligations under this Agreement), PROVIDED THAT responsibility for (a) the costs of preparation of any such documents, reports and/or filings shall be borne by the Purchaser (or the relevant Marketing Authorisation Transferee) to the extent such costs are reasonably necessary, and (b) the submission of MA Documentation shall be the responsibility of the Purchaser in accordance with paragraph 1.6 above, PROVIDED THAT the Seller shall ensure that the Purchaser is kept fully and promptly informed of any such communications or submissions in advance, to the extent reasonably practicable; and

2.1.3the Seller shall procure that each Marketing Authorisation Holder shall act in accordance with the reasonable instructions of the Purchaser or the Marketing Authorisation Transferee in respect of each Marketing Authorisation in respect of which such Marketing Authorisation Holder is the holder, PROVIDED THAT no Marketing Authorisation Holder shall be obliged to comply with such instructions to the extent the same: (i) infringe the terms of the relevant Marketing Authorisation(s); or (ii) are otherwise inconsistent with the provisions of the Pharmacovigilance Agreement relating to the Seller;

2.1.4the Purchaser shall only request artwork changes to the extent such changes are required in order to comply with Applicable Law; and

2.1.5the Purchaser shall submit to the Seller (or shall procure that there is submitted) written details (in such form and with such supporting materials as the Seller may reasonably request) of any new, amended or proposed advertising and promotional activity or training materials in respect of any Product Commercialised pursuant to any Marketing Authorisation (including (without limitation) any material reasonably requested by the Seller in order to validate new and/or amended promotional or training materials), and the Purchaser acknowledges and agrees that no such advertising, promotional or training activity shall be implemented, undertaken or otherwise commenced without the prior written consent of the Seller (for itself and on behalf of the relevant Marketing Authorisation Holder), such consent not to be unreasonably withheld.  The Purchaser further agrees and acknowledges that, if it so chooses, the Seller shall be entitled to assume responsibility for

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obtaining (or procuring that there is obtained) the consent(s) and approval(s) of any relevant Governmental Entity required for such new, amended or proposed advertising and promotional activity or training activity; and

2.1.6to the extent permitted by the terms of the relevant Marketing Authorisation and provided for in the Transitional Distribution Services Agreement, the Purchaser or any other member of the Purchaser’s Group shall Commercialise the Product(s) which are the subject of such Marketing Authorisation (notwithstanding that such Marketing Authorisation is held in the name of the relevant Marketing Authorisation Holder and, for the avoidance of doubt, the proceeds of any such Commercialisation shall be for the benefit of the Purchaser’s Group) and the Purchaser shall:

(i)indemnify each member of the Seller’s Group against any and all actions, claims, demands, investigations, judgments, proceedings, liabilities, loss, damages, payments, costs and expenses arising in relation to the Commercialisation of the Product(s) by the Purchaser or any other member of the Purchaser’s Group under this paragraph 2.1.6; and

(ii)procure that such Product(s) are Commercialised in compliance with the terms of the relevant Marketing Authorisation and/or the requirements of the relevant Governmental Entity.

2.2Unless otherwise required by Applicable Law or a relevant Governmental Entity, from the Closing Date until the applicable Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date, where any Market Authorisation Holder is required by Applicable Law to consult with a Governmental Entity in order to negotiate the discounts, rebates or other pricing mechanisms (including reimbursement) (the “Pricing”) applicable to the Commercialisation of the Products in the relevant Market (a “Pricing Negotiation”):

2.2.1the Seller shall (or shall procure that the Marketing Authorisation Holder shall) notify the Purchaser as soon as reasonably practicable after the Marketing Authorisation Holder becomes aware of any opportunity or requirement to enter into a Pricing Negotiation;

2.2.2the Purchaser shall be responsible for preparing or procuring that there is prepared (at the Purchaser’s cost) all notices, submissions and reports, and any other documents or correspondence necessary for the purposes of the Pricing Negotiation (the “Pricing Negotiation Documentation”);

2.2.3the Seller shall (or shall procure that the Marketing Authorisation Holder shall) co-operate with the Purchaser and provide the Purchaser with such data and information as the Purchaser may reasonably request for the purposes of preparing the Pricing Negotiation Documentation;

2.2.4the Purchaser shall procure that the Pricing Negotiation Documentation is provided to the Seller and/or Marketing Authorisation Holder prior to the intended date of submission to the relevant Governmental Entity with such advance notice as is reasonably sufficient for the Seller and/or the Marketing

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Authorisation Holder to determine whether any of the information or any proposal included in the Pricing Negotiation Documentation would constitute or result in a breach of Applicable Law by the Marketing Authorisation Holder or any other member of the Seller’s Group;

2.2.5if the Seller and/or the Marketing Authorisation Holder believes (acting reasonably) that any of the information or any proposal included in the Pricing Negotiation Documentation prepared by the Purchaser (or a member of the Purchaser’s Group) would constitute or result in a breach of Applicable Law by the Marketing Authorisation Holder, then it shall submit to the Purchaser (or relevant member of the Purchaser’s Group) within 10 Business Days of the date of receipt of the Pricing Negotiation Documentation from the Purchaser pursuant to paragraph 2.2.4, a written legal opinion specifying why any of the information or any proposal included in the Pricing Negotiation Documentation would constitute or result in a breach of Applicable Law.  Following receipt of the legal opinion by the Purchaser (or relevant member of the Purchaser’s Group), the parties shall consult with each other, in good faith, in order to agree amendments to the Pricing Negotiation Documentation that are reasonably required in order to ensure compliance with Applicable Law and the Seller (or the relevant Marketing Authorisation Holder) shall submit the revised Pricing Negotiation Documentation to the relevant Governmental Entity as soon as possible thereafter;

2.2.6if the Seller and/or Marketing Authorisation Holder believes (acting reasonably) that neither the information nor any proposal included in the Pricing Negotiation Documentation would constitute or result in a breach of Applicable Law by the Marketing Authorisation Holder or any other member of the Seller’s Group, then the relevant member of the Purchaser’s Group shall submit such Pricing Negotiation Documentation directly to the Governmental Entity unless prohibited by Applicable Law or by the Governmental Entity, in which case, the Seller shall procure that the Marketing Authorisation Holder makes the submission to the Governmental Entity as soon as reasonably practicable after it is received from the Purchaser (or relevant member of the Purchaser’s Group);

2.2.7the Purchaser (or a member of the Purchaser’s Group) shall be entitled to correspond with and attend all meetings with the Governmental Entity in relation to the Pricing Negotiation and, to the extent that the Marketing Authorisation Holder is required to be present at any such meetings under Applicable Law or by the Governmental Entity, the Seller shall procure that the Marketing Authorisation Holder shall jointly attend any such meetings with the relevant member of the Purchaser’s Group;

2.2.8the Purchaser (or a member of the Purchaser’s Group) shall be entitled to conduct the Pricing Negotiation unless prohibited under Applicable Law or by the Governmental Entity, in which case, the Seller shall procure that the Marketing Authorisation Holder shall conduct the Pricing Negotiation and in any event enter into any related agreement with the Governmental Entity in

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accordance with the reasonable instructions of the Purchaser (or a member of the Purchaser’s Group); and

2.2.9the Seller undertakes (and shall procure that the Marketing Authorisation Holder undertakes) to ensure that the Pricing Negotiation Documentation and any information received in connection with or as part of the Pricing Negotiation: (i) is kept confidential and is only disclosed to employees of the Seller’s Group on a need to know and confidential basis; and (ii) is used by the Seller, the Marketing Authorisation Holder and/or employees of the Seller’s Group for the sole purpose of making a determination under sub-paragraph 2.2.4 above.

2.3Subject to paragraph 2.4, the parties agree that nothing in paragraph 2.2 above shall preclude the Seller and/or Marketing Authorisation Holder from: (i) preparing and submitting to any Governmental Entity any notices, submissions and reports, and any other documents or correspondence, (ii) attending meetings with any Governmental Entity, (iii) making representations to any Governmental Entity, and (iv) taking any and all steps as the Seller and/or Marketing Authorisation Holder shall consider necessary or desirable, in each case in relation to the negotiation of Pricing applicable to the products that form part of the Seller’s Group Retained Business (and, for the avoidance of doubt, excluding the Products).

2.4Where Applicable Law does not permit the Purchaser to participate in a Pricing Negotiation as contemplated by paragraph 2.2 above or the Seller’s interest in respect of the outcome of a Pricing Negotiation conflicts or is reasonably likely to conflict with the interests of the Purchaser in the outcome of the Pricing Negotiation, the Seller shall (or shall procure that the relevant Marketing Authorisation Holder shall):

2.4.1notify the Purchaser of such conflict of interest as soon as reasonably practicable after becoming aware of it; and

2.4.2afford the Purchaser to the fullest extent permissible under Applicable Law, the rights it has under paragraph 2.2 above.

Following notification of a conflict of interest the parties shall, to the extent permitted by Applicable Law, consult together to agree the approach to be taken by the Seller (or the relevant Marketing Authorisation Holder) to minimise the impact of the conflict of interest on the Purchaser’s interests and if the parties cannot agree on the approach to be taken, the matter shall be escalated at the Purchaser’s request to the chief financial officers of each party, or their nominees, for resolution.

3.New and Pending Marketing Authorisations in Respect of the Products

3.1If, at any time prior to Closing, any member of the Seller’s Group is granted or otherwise comes to hold any marketing authorisation which relates exclusively to one or more Products (a “New Marketing Authorisation”) then:

3.1.1the Seller undertakes to the Purchaser to notify the Purchaser as soon as reasonably practicable following the date on which the relevant member of

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the Seller’s Group is granted, or becomes entitled to, the New Marketing Authorisation; and

3.1.2the provisions of paragraphs 1 and 2 above shall apply to that new Marketing Authorisation.

3.2Where a member of the Seller’s Group has submitted to any Governmental Entity any application relating to the grant of a new marketing authorisation in respect of the Business which is pending or in process as at the date of this Agreement (a “Pending Marketing Authorisation”):

3.2.1the Seller shall continue to be responsible for preparation and submission of all documents required to register such Pending Marketing Authorisation but, following Closing, it shall do so at the Purchaser’s cost and shall pass responsibility for such Pending Marketing Authorisation to the Purchaser (or such member of the Purchaser’s Group as the Purchaser may nominate) as soon reasonably possible after Closing, subject to Applicable Law;

3.2.2from the Closing Date, the provisions of paragraph 1 shall apply mutatis mutandis to any registration process for any Pending Marketing Approval.

4.MA Costs

4.1From the Closing Date, the Purchaser shall be responsible for all necessary costs of preparation and submission of MA Documentation and, save as expressly provided in this Agreement, any other necessary costs incurred by the Seller or a member of the Seller’s Group in connection with the maintenance and any variations, amendments and renewals of the Marketing Authorisations relating to the Products or for any matter requested by the Purchaser pursuant to this Part 2 of Schedule 6 and for all fees and costs reasonably incurred by the relevant member of the Seller’s Group in complying with its obligations in respect of a Marketing Authorisation Transfer or Marketing Authorisation Re-registration (“MA Costs”).

5.Obligations following Marketing Authorisation Transfer or Marketing Authorisation Re-Registration

5.1On and from the relevant Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date (as applicable), the Purchaser shall procure that each Marketing Authorisation Transferee shall assume and be solely responsible for:

5.1.1all obligations as the holder of such Marketing Authorisation including (subject to the terms of the Pharmacovigilance Agreement) pharmacovigilance activities related to such Marketing Authorisation;

5.1.2all activities and actions required by Applicable Law in connection with such Marketing Authorisation; and

5.1.3any and all outstanding commitments and obligations to the relevant Governmental Entities with respect to the relevant Marketing Authorisation, save for any such commitments or obligations arising from a breach of this Agreement by the Seller.

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5.2In the event that, following Marketing Authorisation Transfer or Marketing Authorisation Re-registration in respect of any Product, the Seller wishes to apply for a marketing authorisation in respect of a retained product, the Purchaser shall (and shall procure that the relevant Marketing Authorisation Transferee shall) co-operate with and provide all reasonable assistance to the Seller (or the relevant member of the Seller’s Group) at the Seller’s costs as may be reasonably required for the purposes of applying for such new marketing authorisation, including (without limitation) providing the Seller (or the relevant member of the Seller’s Group) and/or any Governmental Entity with such access to Marketing Authorisation Data or such other data or technical or other information as is reasonably requested by the relevant Governmental Entity or is otherwise reasonably required by the Seller or the relevant member of the Seller’s Group.

5.3Except to the extent provided for in the Ofatumumab Intellectual Property Licence Agreement, nothing in paragraph 5.2 above shall require the Purchaser to consent to or assist the Seller or any member of the Seller’s Group to apply for a marketing authorisation for any product which contains the same compound as any Product.

Part 3Tenders

1.1From Closing until the Marketing Authorisation Transfer Date in any Market, the Seller shall, and shall procure that each member of the Seller’s Group and the relevant Marketing Authorisation Holder shall, to the extent permitted by Applicable Law:

1.1.1inform the Purchaser in writing of any Call for New Tender as soon as reasonably practicable following receipt; and

1.1.2co-operate with and provide reasonable assistance to the Purchaser (or the relevant member of the Purchaser’s Group) for the purposes of responding to the Call for New Tender or otherwise applying for a new tender; and

1.1.3where Applicable Law requires such responses or applications to be made by the Marketing Authorisation Holder, the Seller shall procure that the Marketing Authorisation Holder submits such responses or applications on behalf of the Purchaser PROVIDED THAT the Purchaser shall indemnify the Seller and/or the relevant Marketing Authorisation Holder (as the case may be) for any and all costs, expenses and liabilities suffered or reasonably incurred by the Seller and/or the Marketing Authorisation Holder in complying with or as a result of the provisions of this paragraph.

1.2If, prior to Closing, the Seller or any member of the Seller’s Group has submitted a bid in any Market in response to any call for a tender (whether a new tender or the renewal of an existing tender) which includes the Products (the “Bid”), then, following Closing:

1.2.1to the extent that the Purchaser (or any member of the Purchaser’s Group) is prohibited from progressing the Bid in place of the relevant member of the Seller’s Group under Applicable Law, the Seller shall (or shall procure that the relevant member of the Seller’s Group shall) take all steps as may be reasonably required in order to progress the Bid, including responding to all

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questions raised by the relevant third party and the Purchaser shall provide all assistance (including access to the Purchaser’s employees) reasonably requested by the Seller to enable it to progress the Bid; and

1.2.2if the Bid is successful, then either:

(i)if permitted by Applicable Law and the relevant third party consents, the Purchaser (or any member of the Purchaser’s Group as the Purchaser shall nominate) shall enter into any contracts or other arrangements as are required to give effect to the tender with the relevant third party and no member of the Seller’s Group shall be obliged to enter into any such contracts or arrangements; or

(ii)if paragraph (i) does not apply, the Seller (or any member of the Seller’s Group as the Seller shall nominate) shall enter into any contracts or other arrangements as are required to give effect to the tender with the relevant third party and the tender shall be deemed to be a Transferred Contract, Shared Business Contract and/or a Non-Transferring Tender (as the case may be) and the provisions of Schedule 7 shall apply accordingly.

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Schedule 7
Transferred Contracts, Transferred Intellectual Property Contracts, Co-Owned Transferred Product Intellectual Property Rights, and Shared Business Contracts
(Clause 2.3.1)

1.Delayed Transfer of Certain Transferred Contracts and Shared Business Contracts

1.1Subject to paragraph 4.6, any Transferred Contract, Transferred Intellectual Property Contract or Shared Business Contract relating to a Delayed Business (“Delayed Business Contracts”) shall not be transferred to the relevant member of the Purchaser’s Group until the relevant Delayed Closing Date and references in this Schedule 7 to “Closing”, “Closing Date” or “Effective Time” shall be deemed to be to “Delayed Closing Date” insofar as they relate to such Delayed Business Contracts except, in paragraphs 2, 3.1, 3.2, and 4.1 (in relation to Delayed Businesses that are not Non-Controlled Delayed Businesses).

2.Disclosure

From Closing, the Purchaser shall have the right to full disclosure of all Transferred Contracts and Full Disclosure of the Relevant Part of the Shared Business Contracts and the Seller shall use reasonable efforts to facilitate such disclosure as soon as reasonably practicable.

3.Separation of Shared Business Contracts

3.1Prior to Closing, the Seller and the Purchaser shall discuss and agree in good faith a process to identify all material Shared Business Contracts.

3.2The Seller shall use its reasonable efforts to maintain relationships under the Shared Business Contracts and continue to operate the Shared Business Contracts, including without limitation fulfilling all its obligations under the Shared Business Contracts (excluding the Relevant Parts), in the same manner as it has for the twelve months prior to the date of this Agreement.

3.3The Purchaser may, by notice to the Seller at any time prior to the later of:

3.3.1the date falling 90 days after the Closing Date or, if the Seller has not provided Full Disclosure of a Shared Business Contract on or prior to Closing, the date falling 90 days after the date on which Full Disclosure of the relevant Shared Business Contract is made; and

3.3.2the Marketing Authorisation Transfer Date in respect of the relevant Product in the relevant territory

(the “Relevant Election Date”),

elect to take the rights and obligations of the Relevant Part of any Shared Business Contract. For the purposes of paragraph 3.3.2 above only, if a Shared Business Contract is in relation to more than one Product and/or territory, the first Marketing

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Authorisation Transfer Date in respect of a Product covered by that Shared Business Contract shall be the relevant date.

3.4If the Purchaser makes an election under paragraph 3.3 above:

3.4.1the Seller and the Purchaser shall use their respective reasonable endeavours to procure that an arrangement is entered into with the relevant counterparty to each Shared Business Contract, the effect of which shall be that, with effect from whichever is the later of the Marketing Authorisation Transfer Date and the date of the relevant arrangement, the benefit and burden of the Relevant Part is severed from such Shared Business Contract and an agreement or arrangement equivalent to such Shared Business Contract is entered into between the relevant counterparty and a member of the Purchaser’s Group (or the Relevant Part of the Shared Business Contract is sub-licensed to such Purchaser) (a “Separation”). For the avoidance of doubt, no part of any such Shared Business Contract shall be severed and transferred to any member of the Purchaser’s Group in so far as it relates to the Seller’s Group Retained Business, any product other than the Products or any Excluded Asset; and

3.4.2in the event that the Marketing Authorisation Transfer Date occurs before the effective date of a Separation, the provisions of sub-paragraphs 5.2.1, 5.2.2 and 6.1 of this Schedule shall apply in respect of such Shared Business Contracts.

3.5If no election is made by the Purchaser under paragraph 3.3 above by the Relevant Election Date, the provisions of sub-paragraphs 5.2.1 and 5.2.2 of this Schedule shall apply in respect of the Relevant Part of such Shared Business Contract until:

3.5.1in the case of any Shared Business Contract that is not a development contract or otherwise related to any Ongoing Clinical Trials, the earlier of 9 months from the Relevant Election Date and the date on which the Purchaser notifies the Seller that an alternative arrangement has been put in place; and

3.5.2in the case of any Shared Business Contract that is a development contract or which otherwise relates to any Ongoing Clinical Trials, the end of the period specified in the Transitional Services Agreement which in any event shall be no less than 9 months from Closing.

3.6For the avoidance of doubt, (i) paragraphs 3.3, 3.4 and 3.5 shall not apply in respect of any Shared Business Contract which terminates before the Relevant Election Date, and (ii) paragraph 4.6 shall not apply in respect of Shared Business Contracts.

3.7The parties acknowledge that the Purchaser has elected to take the rights and obligations of the Zofran Trade Mark and Domain Name Licence from Closing in so far as such agreement relates to Business Product Intellectual Property Rights.

4.Obligation to obtain Third Party Consents

4.1Subject to paragraphs 3.4 and 4.4, in relation to any Transferred Contract (excluding, for the purposes of this Schedule, any Product Approval) or Transferred Intellectual

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Property Contract  or rights in a Co-Owned Transferred Product Intellectual Property Right which is not assignable or sub-licensable without a Third Party Consent or a Separation of a Shared Business Contract which is not separable without a Third Party Consent, this Agreement shall not be construed as an assignment, an attempted assignment, a sub-licensing or an attempted sub-licensing and the Seller and the Purchaser shall each use their respective reasonable endeavours both before and after Closing (or, in the case of OBM Intellectual Property Contracts, before and after the OBM Transfer Date) to obtain all necessary Third Party Consents as soon as possible and shall keep the other informed of progress in obtaining such Third Party Consents.  The Seller shall deliver to the Purchaser, on Closing or, if later, as soon as possible after receipt, any Third Party Consent.

4.2In connection with the obtaining of any Third Party Consent referred to in paragraph 4.1, the Purchaser shall supply to the Seller such information as may be reasonably requested by the Seller or any relevant third party.

4.3Subject to paragraph 4.4, and save as otherwise provided in this Agreement, the cost of any fee demanded by the third party as consideration for giving the Third Party Consent shall be borne by the Purchaser, provided that:

4.3.1the cost is agreed in advance by the Purchaser (such agreement not to be unreasonably withheld or delayed); and

4.3.2no party shall be required to bear any internal or administrative costs of the other party in relation to any Third Party Consent.

4.4In relation to any rights in a Co-Owned Transferred Product Intellectual Property Right for which a Third Party Consent is required for the satisfaction of any step of the Pre-Closing Products Reorganisation, the following shall apply:

4.4.1the Seller shall use reasonable endeavours to obtain all necessary Third Party Consents required for:

(i)the satisfaction of any step of the Pre-Closing Products Reorganisation that takes place prior to the Closing Date; and

(ii)the assignment or transfer to the Purchaser or any member of the Purchaser’s Group of the Co-Owned Transferred Product Intellectual Property Rights after the Closing Date;

4.4.2If the Seller has not, prior to the date on which Step 5 of the Pre-Closing Products Reorganisation takes effect, obtained all of the Third Party Consents referred to in paragraphs 4.4.1(i) and (ii) above which are required for the transfer of any Co-Owned Transferred Product Intellectual Property Rights:

(i)the legal title in that Co-Owned Transferred Product Intellectual Property Right shall not be transferred to the Company pursuant to Schedule 18; and

(ii)the terms of paragraphs 5 and 6 shall apply to that Co-Owned Transferred Product Intellectual Property Right; and

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4.4.3the cost of any fee demanded by the third party as consideration for giving any Third Party Consent in connection with paragraph 4.4.1 shall be paid by the Seller and shall be allocated between the Seller and Purchaser as follows:

(i)the Seller shall meet the cost of any fee demanded by the third party as consideration for giving any Third Party Consent in connection with 4.4.1(i);

(ii)the Purchaser shall meet the cost of any fee demanded by the third party as consideration for giving any Third Party Consent in connection with 4.4.1(ii) provided that:

(a)the cost is agreed in advance by the Purchaser (such agreement not to be unreasonably withheld or delayed); and

(b)the Purchaser shall not be required to bear any internal or administrative costs of the other party in relation to any Third Party Consent; and

(iii)if the cost of any fee demanded by the third party as consideration for giving any Third Party Consent does not distinguish between consent provided for the purposes of paragraph 4.4.1(i) and 4.4.1(ii), the Seller and Purchaser shall discuss in good faith the allocation of the fee that should be payable by each in connection with any Third Party Consent.  If the Seller and Purchaser are unable to agree on the allocation within a period of 14 calendar days the allocation of the fee payable by each of the Seller and Purchaser shall be split equally.

4.5The parties agree that the provisions of any document entered into in connection with a Third Party Consent (including by way of novation) shall be without prejudice to the provisions of Clauses 8.1, 8.2 and 13 of this Agreement.

4.6Without prejudice to the obligation in paragraph 4.1 for the Seller and the Purchaser to use their respective reasonable endeavours to obtain Third Party Consents as soon as possible, the transfer to the Purchaser (or any member of the Purchaser’s Group or its third party nominee) of any Transferred Contract shall not occur on Closing or, if later, the date on which the relevant Third Party Consent is obtained (a “Delayed Contract”), in the following circumstances:

4.6.1if the Seller or the relevant Business Seller and a member of the Purchaser’s Group agree in writing in respect of a specific Market that the Delayed Contract shall transfer at a later agreed date (a “Delayed Contract Transfer Date”) in which case such Delayed Contract shall transfer on the Delayed Contract Transfer Date;

4.6.2if a Delayed Contract Transfer Date has not been agreed under sub-paragraph 4.6.1 and such Delayed Contract relates to an Ongoing Clinical Trial (a “Clinical Trial Agreement”), the Clinical Trial Agreement shall not

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transfer before 1 May 2015 and shall transfer after that date but only to the extent permitted by Applicable Law; or

4.6.3if a Delayed Contract Transfer Date has not been agreed under sub-paragraph 4.6.1 and such Delayed Contract is required to facilitate the provision of services by the Seller’s Group under the Transitional Distribution Services Agreement in any Market (a “Distribution Contract”), such Delayed Contract shall transfer in accordance with paragraph 4.7.

The Parties agree that the provisions of this paragraph 4.6 shall not apply where a Contract is required under Applicable Law to transfer at a date earlier than the dates set out in sub-paragraphs 4.6.1 to 4.6.3 and paragraph 4.7.

4.7The parties agree that no Distribution Contracts shall transfer to the Purchaser (or a member of the Purchaser’s Group) before the date falling 90 days after the Closing Date (the “Moratorium Date”) (unless such Distribution Contract relates to distribution services provided in the USA).  Following the Moratorium Date (or after the Closing Date if the Distribution Contract relates to distribution services in the USA), the Distribution Contracts shall transfer to the Purchaser (or a member of the Purchaser’s Group) as soon as possible after any relevant Third Party Consent is obtained unless either party notifies the other by the date which is 15 Business Days prior to the Moratorium Date that it believes (acting reasonably) that the transfer of the relevant Distribution Contract prior to the Planned Distribution Transfer Date will result in one or more Identified Risks, in which case, the relevant Distribution Contract shall not transfer to the Purchaser (or a member of the Purchaser’s Group) until the relevant Distribution Transfer Date unless any and all of the Identified Risks have been resolved to the reasonable satisfaction of the party that may be adversely affected by the relevant Identified Risks before such date.

4.8From the Effective Time until the transfer of any Delayed Contract is effected in accordance with sub-paragraphs 4.6 or 4.7, the provisions of paragraph 5 of this Schedule shall apply to such Delayed Contracts.  Nothing in this sub-paragraph 4.8 shall preclude the Purchaser or any member of the Purchaser’s Group from informing the counterparty to any Delayed Contract of the transfer of the Business to it or from engaging with such counterparty with respect to any matter relating to such Delayed Contract.

4.9The provisions of sub-paragraphs 3.3 to 3.6 (inclusive), sub-paragraphs 4.1 to 4.8 (inclusive) and the entirety of paragraph 6 of this Schedule 7 shall not apply to Non-Transferring Tenders.  The parties agree that each Non-Transferring Tender shall remain with the relevant member of the Seller’s Group that is the contracting party to the Non-Transferring Tender as at the date of this Agreement and no Third Party Consents shall be sought in respect of any Non-Transferring Tenders.

5.Obligations until Third Party Consents are obtained/where Third Party Consents are refused and with respect to Non-Transferring Tenders

5.1Subject to paragraph 5.2 and the Seller’s obligations under the Transitional Distribution Services Agreement, the Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group shall) assume, carry out, perform and

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discharge the Seller’s and the Business Sellers’ obligations arising under the Transferred Contracts, the Transferred Intellectual Property Contracts, the Co-Owned Transferred Product Intellectual Property Right, and the Relevant Part of the Shared Business Contracts as from the Effective Time (or, in the case of OBM Intellectual Property Contracts, as from the OBM Transfer Date) but only to the extent such obligations do not constitute Excluded Liabilities.

5.2In respect of any Transferred Contract (other than a Products-Only Tender that is a Non-Transferring Tender) or Transferred Intellectual Property Contract, Relevant Part of any Shared Business Contract (other than a Non-Transferring Tender) or Co-Owned Transferred Product Intellectual Property Right from the Effective Time (or, in the case of OBM Intellectual Property Contract, as from the OBM Transfer Date) until the relevant Third Party Consent has been obtained as contemplated by paragraphs 4.1 or 4.4 or where the Third Party Consent has been refused and in respect of the Non-Transferring Tenders:

5.2.1the relevant Business Seller shall hold on trust to the extent it is lawfully able to do so or, where it is not lawfully able to do so or where holding on trust is not possible under local law or otherwise impracticable, the relevant Business Seller and the relevant member of the Purchaser’s Group shall make such other arrangements between themselves to provide to the relevant member of the Purchaser’s Group the benefits of the Contract (other than (i) amounts corresponding to any Tax payable by the relevant Business Seller in respect of amounts due under the Transferred Contract or Transferred Intellectual Property Contract or Relevant Part of the Shared Business Contract or Co-Owned Transferred Product Intellectual Property Right or any Non-Transferring Tender and (ii) any Pre-Closing Receivables), including the enforcement at the cost and for the account of the relevant member of the Purchaser’s Group of all rights of the relevant Business Seller against any other party thereto;

5.2.2to the extent that the Purchaser (or the relevant member of the Purchaser’s Group) is lawfully able to do so and subject to the Seller’s obligations under the Transitional Distribution Services Agreement, the Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group shall) perform the relevant Business Seller’s obligations under the Contract (but only to the extent such obligations do not constitute Excluded Liabilities) as agent or sub-contractor and shall indemnify the Seller and the relevant Business Seller if the Purchaser or the relevant member of the Purchaser’s Group fails to do so;

5.2.3to the extent that the Purchaser (or a member of the Purchaser’s Group) is not lawfully able to perform such obligations, the Seller shall procure that relevant Business Seller shall, (subject to being indemnified by the Purchaser for any Losses the Seller or the relevant Business Seller may incur in connection therewith) do all such things as the Purchaser (or the relevant member of the Purchaser’s Group may direct or reasonably require to enable due performance of the Contract;

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5.2.4the Seller shall (or shall procure that the relevant Business Seller shall) act in accordance with any reasonable instructions or directions provided to it by the Purchaser (or a relevant member of the Purchaser’s Group) in relation to the management and operation of any Transferred Contract or Relevant Part of any Shared Business Contract (excluding, for the avoidance of doubt, any part of any Shared Business Contract which relates exclusively to the Seller Group’s Retained Business), and the Purchaser shall indemnify the relevant Business Seller in respect of any Losses that Business Seller may incur in connection therewith, provided that should the Seller (or relevant Business Seller) believe (acting reasonably) that compliance with any instruction or direction given by the Purchaser (or a member of the Purchaser’s Group) pursuant to this sub-paragraph 5.2.4 will result in a breach of Applicable Law (including a breach of the terms of the relevant Contract): (i) the Seller (or relevant member of the Seller’s Group), shall inform the Purchaser (or the member of the Purchaser’s Group which gave the instruction) and shall not be required to implement such instruction or direction; and (ii) the parties shall discuss the concerns of the relevant member of the Seller’s Group in good faith, to determine whether an agreement can be reached such that the relevant instruction or direction can be implemented by the Seller (or the relevant Business Seller).

5.2.5without prejudice to the provisions of paragraph 5.2.2, the Seller shall provide (or procure that the relevant Business Seller shall provide) the Purchaser (or the relevant member of the Purchaser’s Group) with such information and assistance as the Purchaser (or the relevant member of the Purchaser’s Group) may reasonably require (including licensing the relevant member of the Purchaser’s Group any relevant Intellectual Property Rights owned by, or licensed to, the Seller’s Group) with respect to any Transferred Contract, the Transferred Intellectual Property Contract, the Co-Owned Transferred Product Intellectual Property Right, and the Relevant Part of the Shared Business Contract which is subject to the provisions of this paragraph 5;

5.2.6in respect of any Contract for the sale of any Product or Products and any Non-Transferring Tender, the amount of any profit arising from sales pursuant to any such Contract shall be calculated and remitted to the Purchaser in accordance with the relevant provisions of the Transitional Distribution Services Agreement.

6.Failure to Obtain Third Party Consents

6.1If a Third Party Consent is refused or otherwise not obtained on terms reasonably acceptable to the Purchaser within 18 months of Closing (or in the case of OBM Intellectual Property Contracts, within 18 months of the OBM Transfer Date), or in the case of a Separation, 18 months of the Relevant Election Date applicable to such Shared Business Contract:

6.1.1the Seller shall be entitled to procure the termination of the Transferred Contract, Transferred Intellectual Property Contract or the Relevant Part of the Shared Business Contract or Co-Owned Transferred Product Intellectual Property Right and the obligations of the parties under this Agreement in

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relation to such Transferred Contract, Transferred Intellectual Property Contract or Relevant Part of the Shared Business Contract or Co-Owned Transferred Product Intellectual Property Right shall cease forthwith;

6.1.2references in this Agreement to the Transferred Contracts, Transferred Intellectual Property Contracts or Relevant Part of the Shared Business Contract or Co-Owned Transferred Product Intellectual Property Right (other than in this paragraph 6) shall be construed as excluding such Transferred Contract, Transferred Intellectual Property Contract or the Relevant Part of the Shared Business Contract or Co-Owned Transferred Product Intellectual Property Right; and

6.1.3the Seller and the Purchaser shall each use all reasonable efforts to put in place alternative arrangements so as to give the Purchaser equivalent benefits or rights as would have been enjoyed under the terminated Transferred Contract, Transferred Intellectual Property Contract or the Relevant Part of the Shared Business Contract or Co-Owned Transferred Product Intellectual Property Right.

7.Non-Transferring Tenders

7.1Subject to the termination of any Non-Transferring Tender (or any Relevant Part thereof) pursuant to sub-paragraphs 7.2 and 7.3 below, the provisions of sub-paragraph 5.2 of this Schedule 7 shall continue to apply in respect of a Non-Transferring Tender for the term of the relevant Non-Transferring Tender.

7.2The Purchaser may serve written notice on the Seller requesting it at its absolute discretion to (i) terminate (or to procure the termination of) any Non-Transferring Tender which is a Product-Only Tender (an “NTT Products-Only Tender”) or (ii) amend or to procure the amendment of any Non-Transferring Tender which is a Multi-Basket Tender (a “NTT Multi-Basket Tender”) such that the Relevant Part thereof shall be terminated.

7.3Upon receipt of such notice, the Seller shall as soon as reasonably practicable thereafter (i) take such steps as are reasonably necessary to terminate the relevant NTT Products-Only Tender and (ii) use its reasonable endeavours to procure an amendment of the relevant NTT Multi-Basket Tender.  Where the Purchaser serves such a request:

7.3.1any and all actions, claims, demands, proceedings, judgments, liabilities, loss, damages, payments, costs and expenses arising in connection with such termination or amendment (including in respect of any early termination or similar fee or payment and all liabilities costs, expenses and payments suffered or reasonably incurred by the Business Seller in procuring such termination or amendment (as applicable)) shall be for the account of the Purchaser and the Purchaser shall indemnify the relevant Business Seller in respect thereof; and

7.3.2the Purchaser shall be solely responsible for putting in place its own arrangements in respect of the matters the subject of such terminated NTT Products-Only Tender or amended NTT Multi-Basket Tender (as the case

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may be) and no member of the Seller’s Group shall have any responsibility for putting in place any such arrangements.

7.4For the avoidance of doubt, if any NTT Products-Only Tender is terminated (or, in the case of a NTT Multi-Basket Tender, amended such that the Relevant Part thereof is terminated) by the relevant Business Seller pursuant to sub-paragraph 7.2 then no member of the Seller’s Group shall be liable to make any payment to the Purchaser or any other member of the Purchaser’s Group in respect of any consideration payable or allocation made under this or any other Ancillary Agreement.

8.[***]

9.For the purposes of this Schedule, the following terms shall have the following meanings:

“Separation Plan” has the meaning given to it under the Transitional Distribution Services Agreement;

“Identified Risk” means a specifically identified adverse operational, legal or tax impact affecting either the Seller’s Group or the Purchaser’s Group (including an impact on the ability of the Seller’s Group to perform its obligations under the Transitional Distribution Services Agreement) which would arise or which would increase (by more than a de minimis amount) solely by reason of the relevant Distribution Contract transferring to the Purchaser (or the relevant member of the Purchaser’s Group) on a date prior to the Planned Distribution Transfer Date; and

“Planned Distribution Transfer Date” means the Distribution Transfer Date for the applicable Market as set out in the Separation Plan.

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Schedule 8
Employees
(Clause 2.4.1)

1.Information and consultation

1.1At such time as the parties agree to be appropriate following the public announcement of the matters contemplated by this Agreement, the Seller and the Purchaser or the relevant member of the Purchaser’s Group shall jointly communicate to the Employees an agreed notice which shall (other than to the extent the parties agree otherwise):

1.1.1inform the Employees that following Closing those Employees who continue to be employed in the Business would be employed by the Purchaser or relevant member of the Purchaser’s Group; and

1.1.2comply with the requirements of any applicable national law.

For the avoidance of doubt, the parties may agree to issue such notice to different Employees or categories of Employees at different times and in different forms.

1.2Notwithstanding the operation of paragraph 1.1 above, the Seller and the Purchaser agree to comply with any more onerous notice requirements imposed by local laws.

1.3The Purchaser (on its own behalf and on behalf of any relevant member of the Purchaser’s Group) shall provide the Seller (for itself and any relevant member of the Seller’s Group) with such information and assistance at such times as the Seller may reasonably request or as may be reasonably necessary for the Seller or any other member of the Seller’s Group to comply with any formal or informal requirement to inform or consult with the Employees, a relevant trade union, a relevant works council, or any other employee representatives in connection with the matters contemplated by this Agreement (which formal or informal requirements the Seller hereby undertakes to comply or procure compliance with).  Where reasonably necessary to ensure compliance with any formal or informal requirements or obligations to inform or consult with Employees, a relevant trade union, a relevant works council or any other employee representatives in connection with the matters contemplated by this Agreement, the Seller (for itself and for each member of the Seller’s Group) and the Purchaser (for itself and for each member of the Purchaser’s Group) agree that the Purchaser or relevant member of the Purchaser’s Group shall cooperate with and participate in any information, negotiation and/or consultation process as reasonably required by the Seller.

1.4As soon as practicable following the date of this Agreement, the Purchaser agrees to provide on a timely basis such information, in writing, in respect of its existing terms and conditions of employment as may reasonably be required by the Seller so as to facilitate the Seller’s information and consultation exercise with its Employees in respect of the matters set out in this Agreement.

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2.Employees

2.1General

2.1.1The Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group shall) fulfil all its duties and obligations under Applicable Law in relation to the Employees.  Where the provisions of local law do not provide for an automatic transfer of the employment of the Employees to the Purchaser or a relevant member of the Purchaser’s Group with effect from (and including) the Closing Date, then paragraph 2.2 below shall apply.  Where the provisions of local law do provide for an automatic transfer of employment of the Relevant Employees to the Purchaser or the relevant member of the Purchaser’s Group with effect from (and including) the Closing Date, then paragraph 2.3 below shall apply.

2.1.2The parties acknowledge and agree that:

(i)any Deferred Employee shall be treated for all purposes under this Agreement as if such Deferred Employee were an Employee; and

(ii)the Purchaser’s obligations under this Schedule 8 shall apply in respect of each Deferred Employee in the same way as they do to each Employee; and

(iii)if any Deferred Employee accepts an offer of employment made by the Purchaser under paragraph 2.2.1 below, such Deferred Employee shall further be treated for all purposes under this Agreement as a Transferred Employee.

2.1.3For the avoidance of doubt, this paragraph 2 shall not apply to any Excluded Employee, who will remain employed by the Seller or the relevant member of the Seller’s Group.

2.1.4The parties agree that no provisions in this paragraph 2 shall require the Purchaser or another member of the Purchaser’s Group to employ a Relevant Employee on and from the Closing Date until such time as such employee has the right (including, for the avoidance of any doubt, under any grace period) or is otherwise permitted under Applicable Law to accept an offer to work for the Purchaser or relevant member of the Purchaser’s Group and to commence working for the Purchaser or relevant member of the Purchaser’s Group.  Any such employee will only be a “Transferred Employee” for the purposes of this Agreement from the time (the “Transfer Date”) he becomes an employee of a member of the Purchaser’s Group, and any provisions relating to Transferred Employees in this Agreement shall only apply to any such employee with effect on and from the Transfer Date and with the following amendments:

(i)references to the “Closing Date” and the “Effective Time” in paragraphs 4.1, 4.3.1, 4.3.2 and 4.4 shall be replaced with references to the “Transfer Date”;

(ii)references to an “Employee” in paragraphs 4.2.1, 4.2.2 and 4.3.5 shall be extended to refer to such Transferred Employee, and to the extent required in respect of such Transferred Employee references

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to the “Closing Date” and “Effective Time” shall be replaced with references to the “Transfer Date”;

(iii)the reference to “basic salary” in paragraph 5.1.1 shall mean the basic salary that applied to such Transferred Employee immediately prior to the Transfer Date;

(iv)references to the “Closing Date” and the “Effective Time” in paragraph 6.2 shall be replaced with references to the “Transfer Date”;

(v)for the purposes of paragraphs 10.2 and 10.8, references to “Closing” and the “Closing Date” shall be construed as references to the “Transfer Date”; and

(vi)such other amendments as the parties may agree, each acting in good faith.

2.1.5Notwithstanding any other provisions of this Agreement the parties agree that a Relevant Employee who works in France and is an employee representative (a “French Employee”) shall not transfer to the Purchaser’s Group until such time as the French Labour Inspectorate has authorised such French Employee to transfer to and commence working for the Purchaser or relevant member of the Purchaser’s Group.  Any such French Employee will only be a “Transferred Employee” for the purposes of this Agreement from the time (the “French Transfer Date”) he becomes an employee of a member of the Purchaser’s Group, and any provisions relating to Transferred Employees in this Agreement shall only apply to any French Employee with effect on and from the French Transfer Date and with the following amendments:

(i)references to the “Closing Date” and the “Effective Time” in paragraphs 4.1, 4.3.1, 4.3.2 and 4.4 shall be replaced with references to the “French Transfer Date”;

(ii)references to an “Employee” in paragraphs 4.2.1, 4.2.2 and 4.3.5 shall be extended to refer to such French Employee, and to the extent required in respect of such French Employee references to the “Closing Date” and the “Effective Time” shall be replaced with references to the “French Transfer Date;

(iii)the reference to “basic salary” in paragraph 5.1.1 shall mean the basic salary that applied to such French Employee immediately prior to the French Transfer Date;

(iv)references to the “Closing Date” and “Effective Time” in paragraph 6.2 shall be replaced with references to the “French Transfer Date”;

(v)for the purposes of paragraphs 10.2 and 10.8, references to “Closing” and the “Closing Date” shall be construed as references to the “French Transfer Date”; and

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(vi)such other amendments as the parties may agree, each acting in good faith.

2.2Where no automatic transfer of employment

2.2.1In such timescale as the parties may agree, in order to comply with Applicable Law, but in any event at least 15 days prior to the Closing Date, unless agreed otherwise by the parties (such agreement not to be unreasonably withheld by any party), the Purchaser or relevant member of the Purchaser’s Group shall make an offer to each Employee employed by the Seller or a member of the Seller’s Group to employ him or her under a new contract of employment to commence with effect from (and including) the Closing Date provided that such employee continues to be an Employee until the Closing Date.  Save as otherwise agreed with the Seller (such agreement not to be unreasonably withheld), the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that Employee immediately prior to the Closing Date.  The Purchaser shall keep the Seller updated throughout the offer process on when offers are made and accepted or rejected.

2.2.2If the Employee wishes to accept the offer of employment from the Purchaser or the relevant member of the Purchaser’s Group, then the Seller shall (or shall procure that the relevant member of Seller’s Group shall), insofar as it is permitted by Applicable Law, waive the requirement on the Employee concerned to give any period of notice of termination of his or her employment under the terms of his or her employment so as to allow the Employee to commence employment with the Purchaser or relevant member of the Purchaser’s Group with effect from (and including) the Closing Date.

2.2.3The parties agree that where: (i) a Relevant Employee in the United States is absent on short term disability (including, without limitation, maternity) leave or military leave; (ii) a Relevant Employee in Russia is on maternity leave; or (iii) such other Relevant Employee, as the parties may agree in writing prior to the Closing Date, is on leave (each being a “Leave Employee”) in each case where such leave will end on or after the Closing Date, and where such Leave Employee would otherwise have been made an offer of employment to commence with effect from (and including) the Closing Date by the Purchaser or relevant member of the Purchaser’s Group, such an offer shall be made, but employment pursuant to such offer shall commence only with effect from (and including) the date on which such Leave Employee returns to work at the end of such period of such leave, provided always that the date of such return to work is no more than six months after the date on which such leave began or such later date as may be agreed by the parties. Any such employee will only be a “Transferred Employee” for the purposes of this Agreement from the time (the “Transfer Date”) he becomes an employee of a member of the Purchaser’s Group, and any provisions relating to Transferred Employees in this Agreement shall only apply to any such employee with effect on and from the Transfer Date and with the following amendments:

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(i)references to the “Closing Date” and the “Effective Time” in paragraphs 4.1, 4.3.1, 4.3.2 and 4.4 shall be replaced with references to the “Transfer Date”;

(ii)references to an “Employee” in paragraphs 4.2.1, 4.2.2 and 4.3.5 shall be extended to refer to such Transferred Employee, and to the extent required in respect of such Transferred Employee references to the “Closing Date” and the “Effective Time” shall be replaced with references to the “Transfer Date;

(iii)the reference to “basic salary” in paragraph 5.1.1 shall mean the basic salary that applied to such Transferred Employee immediately prior to the Transfer Date;

(iv)references to the “Closing Date” and the “Effective Time” in paragraph 6.2 shall be replaced with references to the “Transfer Date”;

(v)for the purposes of paragraphs 10.2 and 10.8, references to “Closing” and the “Closing Date” shall be construed as references to the “Transfer Date”; and

(vi)such other amendments as the parties may agree, each acting in good faith.

2.2.4If any Leave Employee has not returned to work by the date falling six months after the date on which such leave began or such later date as may be agreed between the parties, then such Leave Employee shall be treated for all purposes under this Agreement as an Excluded Employee.

2.2.5Transfer of Relevant Employees on a Relevant Working Day

If in relation to any Relevant Employee, the day prior to the Closing Date occurs on a day which is not a Relevant Working Day in the jurisdiction in which that Employee is employed, the parties may agree (such agreement not to be unreasonably withheld by any party), that such Relevant Employees (the “Working Day Relevant Employees”) shall remain employees of the Seller or a member of the Seller’s Group until the first Relevant Working Day on or after the Closing Date (the “Working Day Employee Termination Date”). If so agreed, the parties agree that the transfer of employment of the Working Day Relevant Employees to the Purchaser or one of its Affiliates shall take effect on and from the day following the Working Day Employee Termination Date which applies to the relevant Working Day Relevant Employee. The Purchaser acknowledges that it will be responsible for the total amount actually paid by the Seller or its Affiliate for compensation and benefits, including any withholding taxes and payroll taxes paid by the Seller’s Group, to or in respect of the Working Day Relevant Employees in relation to their ordinary course of employment for the period on and from the Effective Time to (and including) the Working Day Employee Termination Date which applies to the relevant Working Day Relevant Employee.

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2.3Where automatic transfer of employment

If the Transfer Regulations do not or are found not to or are alleged not to apply to any person who is a Relevant Employee, and to whom paragraph 2.2 does not apply, the Purchaser agrees that following Closing:

2.3.1in consultation with the Seller, the Purchaser or relevant member of the Purchaser’s Group shall within 10 Business Days of being so requested by the Seller (as long as the request is made no later than 3 months after Closing) (or if the Purchaser so chooses), make such Relevant Employee an offer in writing to employ him or her under a new contract of employment subject to, and to take effect upon, a date agreed between the parties and such employee; and

2.3.2save as otherwise agreed with the Seller (such agreement not to be unreasonably withheld), the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that Relevant Employee immediately prior to the Closing Date.

3.Wrong-pocket arrangements for persons other than Relevant Employees

3.1If the contract of employment of any person other than a Relevant Employee is found or alleged to have effect upon Closing as if originally made with the Purchaser or another member of the Purchaser’s Group as a consequence of this Agreement, the Seller agrees that following Closing:

3.1.1in consultation with the Purchaser, the Seller or relevant member of the Seller’s Group may within 10 Business Days of being so requested by the Purchaser (as long as the request is made no later than 3 months after Closing) (or if the Seller so chooses), make to that person an offer in writing to employ him or her under a new contract of employment subject to, and to take effect upon, the termination referred to below; and

3.1.2the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that person immediately prior to the Closing Date.

3.2After the expiry of the 10 Business Days referred to at paragraph 3.1 above, and provided that the relevant member of the Purchaser’s Group takes such steps as are legally possible to terminate the employment of the person concerned as soon as reasonably practicable after becoming aware of the finding or allegation referred to at paragraph 3.1 above (either by giving notice or transferring the person by agreement to be concluded between the relevant member of the Purchaser’s Group, the person concerned and the relevant member of the Seller’s Group), the Seller shall be responsible for and shall indemnify and keep indemnified the Purchaser (for itself and as trustee for any relevant member of the Purchaser’s Group) against all Losses from time to time made, suffered or incurred by the Purchaser (or any other member of the Purchaser’s Group) as a result of:

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3.2.1the actual or alleged transfer to a member of the Purchaser’s Group and (regardless of whether there has been such a transfer) any employment liabilities relating to such person;

3.2.2employing such person on and from the Closing Date until such termination (up to the time reasonably expected to have achieved such termination in accordance with the terms of the contract of employment and Applicable Law) but subject to a maximum period of 6 months unless prevented by the terms of the contract of employment or Applicable Law; and

3.2.3such termination.

3.3The parties agree to co-operate in good faith to minimise the Losses which are subject to the indemnity referred to in paragraph 3.2 above.

4.Employment liabilities

4.1All wages, salaries, employer’s liabilities in respect of associated Taxes and other periodic outgoings in respect of the Transferred Employees which relate to a period:

4.1.1on and after the Effective Time shall be borne or discharged by the Purchaser or relevant member of the Purchaser’s Group; and

4.1.2before the Effective Time shall be borne or discharged by the Seller or relevant member of the Seller’s Group.

4.2Subject to paragraph 4.1, the Seller shall (for itself and for each member of the Seller’s Group) indemnify and keep indemnified the Purchaser (for itself and as trustee for each other member of the Purchaser’s Group) against all Losses (ignoring any amount in respect of Employee Benefits, as to which see Schedule 9) in respect of:

4.2.1the employment of any Employee at any time prior to the Effective Time (excluding any Transferred Employee Benefit Liabilities (as defined in Schedule 9) which the Purchaser agrees to assume in accordance with Schedule 9);

4.2.2any termination of the employment of any Employees prior to the Effective Time and any termination of the employment of any Employees on and after the Effective Time but prior to the Closing Date which are not otherwise covered by paragraph 4.3.2 including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations (excluding any liability arising directly as a result of any breach of the commitments set out in paragraph 5 or 6 below by the Purchaser or a member of the Purchaser’s Group and any act or omission by the Purchaser or any member of the Purchaser’s Group in relation to any Employee before the Closing Date as a result of which that Employee treats his employment as having been terminated prior to the Closing Date);

4.2.3any amount which becomes payable to any Employee or benefit to which any Employee becomes entitled by reason of this Agreement or the matters it contemplates, including any change of control or other payment or benefit

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(and including any enhancement of severance terms on a subsequent termination of employment but excluding any Losses relating to any share-based incentive schemes, as to which see paragraph 10 below);

4.2.4any failure by the Seller or any other member of the Seller’s Group to comply with any obligation to inform or consult with employee representatives in connection with the matters contemplated by this Agreement (other than as a result of any failure set out in paragraph 4.3.3 below); and

4.2.5any breach by the Seller or any other member of the Seller’s Group of paragraph 4.1.2 above or paragraph 4.4, 4.5 or 9 below.

4.3The Purchaser shall (for itself and for each member of the Purchaser’s Group) indemnify and keep indemnified the Seller (for itself and as trustee for each other member of the Seller’s Group) against all Losses (ignoring any amount in respect of Employee Benefits, as to which see Schedule 9) in respect of:

4.3.1the employment of any of the Transferred Employees on and after the Effective Time (including, without limitation, any changes to terms and conditions of employment by the Purchaser or any other member of the Purchaser’s Group);

4.3.2any termination of the employment of any Transferred Employees on and after the Effective Time and any termination of the employment of any Employees by a member of the Seller’s Group on and after the Effective Time but prior to the Closing Date who would, but for such termination of employment by a member of the Seller’s Group, have been Transferred Employees (save in each case where such termination is in order to facilitate the transfer of any Relevant Employee pursuant to paragraph 2 of this Schedule 8 or is otherwise in connection with any rejection or objection to such transfer in circumstances where paragraph 4.3.5 does not apply) including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations except as contemplated under paragraph 3.2 above;

4.3.3any failure by the Purchaser or any other member of the Purchaser’s Group to provide information and reasonable assistance to the Seller to enable the Seller or any other member of the Seller’s Group to comply with any obligation to inform or consult with employee representatives in connection with the matters contemplated by this Agreement;

4.3.4any breach by the Purchaser or any other member of the Purchaser’s Group of paragraph 4.1.1 above or paragraph 4.4 or 4.5 below; and

4.3.5any act or omission by the Purchaser or any member of the Purchaser’s Group in relation to any Employee before the Closing Date as a result of which that Employee treats his employment as having been terminated prior to the Closing Date.

4.4Any amount payable to or in respect of any Transferred Employee on or after the Closing Date (including without limitation amounts paid under paragraph 4.5 below)

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which (ignoring vesting conditions and any amount payable in respect of Employee Benefits or otherwise in accordance with Schedule 9) is referable to the period prior to the Effective Time is payable by the Seller (for itself or on behalf of the relevant Business Seller).  Responsibility for amounts payable which are only partly referable to the period prior to the Effective Time (again ignoring vesting conditions) is to be shared between the Seller (for itself or on behalf of the relevant Business Seller) and the Purchaser (for itself or on behalf of the relevant member of the Purchaser’s Group) such that the Seller bears S per cent. of the cost and the Purchaser bears P per cent., where S is the percentage of the period by reference to which the amount was earned which fell before the Effective Time and P is the percentage of that period which falls on and after the Effective Time.  Save for the payments described in paragraph 4.5 below, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, pay such amounts when due to the relevant Transferred Employees on or after the Closing Date and shall deduct and/or pay and account for any Tax payable or accountable for by the employer in respect of such amounts.  The Seller covenants to reimburse the Purchaser in respect of any such amount (or S per cent. of it where relevant), including any Tax payable or accountable for by the employer in respect of such amount, within 30 days of receiving notification that it has been paid.  The Seller will provide the Purchaser with all information and documentation reasonably necessary to allow such payments to be made.

4.5Following the Closing Date:

4.5.1the Seller shall, or shall procure that a member of the Seller’s Group shall, pay a pro-rated cash bonus for the current bonus year as at the Effective Time and any unpaid cash bonus for the bonus year which ended before the Effective Time to each Transferred Employee who participated in such annual cash bonus plan within 90 days following  the Closing Date; and

4.5.2where the Seller is able to determine performance, any such bonus payment made to such eligible employees will be based on the Seller’s determination of performance to the Effective Time and (where applicable) pro-rated to the Effective Time; or

4.5.3where the Seller is unable to determine performance (either business or individual), for example, because the Effective Time occurs near the start of the bonus year, the Seller shall calculate any such bonus payment based on a deemed achievement of performance conditions at target level pro-rated to the Effective Time; and

4.5.4as soon as reasonably practicable after the Closing Date, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, provide such information as the Seller requires in order for the Seller to calculate the Tax payable or accountable for by the employer in respect of such bonus payments;

4.5.5if and to the extent permitted by Applicable Law, the Seller shall, or shall procure that such other member of the Seller’s Group shall, deduct and/or account for any Tax payable or accountable for by the employer in respect of such bonus payments; or

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4.5.6if and to the extent paragraph 4.5.5 above is not permitted by Applicable Law, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, pay and/or account for any Tax payable or accountable for by the employer in respect of such bonus payments and the Seller shall reimburse the Purchaser in respect of such amounts so paid and/or accounted for; and

4.5.7where any amount in respect of payments made by the Seller or any other member of the Seller’s Group pursuant to this paragraph 4.5 is reflected in the Closing Statement, the Purchaser shall reimburse the Seller in respect of the amount so reflected. For the avoidance of doubt, no reimbursement by the Purchaser shall be due in respect of any such payment to the extent it is not reflected in the Closing Statement.

4.6If any loan made by a member of the Seller’s Group to a Transferred Employee (an “Employee Loan”) remains outstanding at the Closing Date, then the parties shall co-operate in good faith to procure an outcome such that:

4.6.1the Employee Loan shall be discharged in full within a reasonable period after the Closing Date and the relevant member of the Seller’s Group shall receive all outstanding amounts of principal and interest under the Employee Loan either from the relevant Transferring Employee or from a member of the Purchaser’s Group; and

4.6.2a loan in the same amount and on the same terms as to interest and repayment as the outstanding portion of the Employee Loan shall be made available by the Purchaser to the relevant Transferred Employee.

5.Protection of terms and conditions and termination rights post-Closing

5.1Without prejudice to paragraph 5.4 below, the Purchaser shall procure that for a period of 24 months following the Closing Date:

5.1.1each Transferred Employee will (for so long as such Transferred Employee continues in the same role with any member of the Purchaser’s Group save that the Purchaser shall not seek to demote any Transferred Employee to avoid the application of this provision) continue to receive at least the same basic salary; and

5.1.2each Transferred Employee will continue to receive contractual benefits (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans) which the Purchaser reasonably considers to be substantially comparable, taken as a whole, to the contractual benefits (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans) of such Transferred Employee immediately prior to the Closing Date; and

5.1.3no Transferred Employee will suffer a change to his overall employment terms (whether contractual or otherwise) and including, without limitation, any related to length of service (but excluding Employee Benefits and any share-based incentive schemes or other long-term incentive plans), which, when

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taken as a whole viewed in the round (including to the extent relevant alongside any other changes being made at the same time to that Transferred Employee’s employment terms), would in the Purchaser’s reasonable opinion acting in good faith be regarded as materially detrimental.

5.2The Purchaser confirms that, following the Closing Date and for so long as the Transferred Employees continue in the employment of any member of the Purchaser’s Group, the Transferred Employees will be eligible to participate in those share-based incentive schemes or other long-term incentive plans that are operated by the Purchaser or relevant members of the Purchaser’s Group from time to time for employees of equivalent status, subject always to the rules of such share-based incentive schemes or long-term incentive plans and any qualifying conditions.

5.3The Seller shall provide or shall cause to be provided to any member of the Purchaser’s Group such information reasonably requested in writing by any member of the Purchaser’s Group to enable the Purchaser to comply with its obligations in paragraph 5.1 above.

5.4If the employment of any Transferred Employee is terminated by reason of redundancy within 24 months following the Closing Date, the Purchaser shall procure that there shall be provided to such Transferred Employee benefits which are equivalent to those provided under such redundancy and severance policies and benefits (whether contractual or otherwise and giving due credit to the Transferred Employees for any additional service or earnings from the Closing Date onwards) (but excluding Employee Benefits other than the Agreed UK Restructuring Arrangement) as were applicable in respect of the particular Transferred Employee immediately prior to the Closing Date, to the extent that such policies and benefits are notified in writing to the Purchaser prior to the Closing Date.  If, at any time during the 24 month period immediately following the Closing Date, the Purchaser places any Transferred Employee into a redundancy selection process, the Purchaser undertakes that, in determining such selection, it will or will procure that the relevant member of the Purchaser’s Group will take no account of the costs of dismissal of any person within the relevant selection pool (including such Transferred Employee). For the avoidance of doubt, redundancy payments of the type described in this paragraph 5.4 (whether paid within 24 months of Closing or later) are not intended to be covered by the apportionment mechanism at paragraph 4.4 above.

5.5For the avoidance of doubt, the provisions of this paragraph 5 are without prejudice to the operation of any rule of law in relation to the terms and conditions of employment of the Transferred Employees.

6.Benefits arrangements/service continuity

6.1Each Transferred Employee shall have their service with the Seller’s Group and their respective predecessors recognised under any employee benefit plans or arrangements of the Purchaser’s Group for all purposes of eligibility, vesting and accrual of benefits to the extent past service was recognised for such Transferred Employee under a comparable plan or arrangement immediately prior to the Closing Date.  Notwithstanding the foregoing, nothing in this paragraph 6.1 shall be construed

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to require recognition of service for the purposes of calculation of Employee Benefits or that would result in:

6.1.1any additional liability being assumed by the Purchaser’s Group in respect of Employee Benefits other than subject to and in accordance with the provisions of Schedule 9;

6.1.2duplication of benefit;

6.1.3recognition of service for any purposes under any plan or arrangement for which participation, service and/or benefits accrual is frozen or any post-retirement medical plan; or

6.1.4recognition of service under a newly established plan or arrangement for which prior service is not taken into account for employees of the Purchaser’s Group generally.

6.2Without limiting the foregoing, with respect to the Transferred Employees, the Purchaser shall, or shall cause such other member of the Purchaser’s Group to, be responsible for all paid time off benefits, including vacation pay, sick pay, banked leave, flexitime and other payments for time off of normal work hours accrued by the Transferred Employees up to the Closing Date provided that if the value of such matters (excluding normal accrued but untaken annual leave for the year current as at the Closing Date) would exceed US$7.5 million if accrued for in a balance sheet in accordance with IFRS prior to the Effective Time then the Seller shall compensate the Purchaser for such matters accrued prior to the Effective Time (again excluding normal accrued but untaken annual leave for the year current as at the Closing Date) by paying the Purchaser an amount equal to that value, less any amount actually accrued and transferred to the Purchaser for such matters.

6.3With respect to any welfare plan maintained by the Purchaser or any other member of the Purchaser’s Group in which Transferred Employees are eligible to participate after the Closing Date, the Purchaser shall:

6.3.1waive all limitations as to pre-existing conditions, exclusions, evidence of insurability provisions, waiting periods with respect to such participation and coverage requirements or similar provisions under a Purchaser’s benefit plans that are welfare plans (as defined in section 3(1) of ERISA or any equivalent Applicable Law) applicable to such employees to the extent such conditions, exclusions and waiting periods or other provisions were satisfied or did not apply to such employees under welfare plans maintained by the Seller or other members of the Seller’s Group prior to the Closing Date; and

6.3.2provide each Transferred Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any analogous deductible or out-of-pocket requirements to the extent applicable under any such plan in the year in which Closing occurs, to the extent credited under the welfare plans maintained by the Seller or other members of the Seller’s Group prior to the Closing Date.

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7.US Transferred Employees

With effect on and from the Closing Date, the Purchaser shall, or shall procure that such other members of the Purchaser’s Group shall, assume the responsibility and obligation to provide COBRA continuation coverage to all Transferred Employees who are employed in the United States and/or covered by US Benefit Plans and whose employment is terminated after the Closing Date and their eligible dependents.

8.International Assignees

Where Applicable Law does not provide for the automatic transfer of employment of any International Assignee and/or the other terms governing their international assignment, the Purchaser shall assume and agree to be bound by the individual contract of employment and such other terms governing their international assignment including any tax equalisation agreement entered into between an International Assignee and a member of the Seller’s Group provided that such employee becomes a Transferred Employee and the Seller has disclosed to the Purchaser the template international assignment terms of the Seller’s Group prior to the Closing Date.

9.Liability for retention arrangements

The Seller or any other member of the Seller’s Group has or will put in place certain retention arrangements (in the form of cash) to retain key employees in connection with the matters contemplated by this Agreement. To the extent that details of such retention arrangements are disclosed to the Purchaser prior to the Closing Date, and in respect of arrangements put in place after the date of this Agreement, with the agreement of the Purchaser, the Purchaser shall, or shall procure that such other member of the Purchaser’s Group shall, make the cash retention payments when due to the relevant Transferred Employees on or after Closing and shall deduct and/or pay and account for any Tax payable or accountable for by the employer in respect of such cash payments.  The Seller covenants to reimburse the Purchaser in respect of any cash retention payments, whether or not disclosed (including any Tax payable or accountable for by the employer in respect of such payments), which are put in place prior to the Closing Date.  The Seller acknowledges that the Purchaser may ask the Seller to put in place more generous retention arrangements than those proposed by the Seller (including, where practicable, putting in place retention arrangements which last for a period of at least six months following Closing) and will not unreasonably withhold consent to such arrangements provided that any incremental cost of such arrangements over and above the cost of the Seller’s own proposals will be for the Purchaser’s account.  The Seller will provide the Purchaser with all information and documentation reasonably necessary to allow such payments to be made.

10.Share-based incentive schemes

10.1This paragraph 10 applies notwithstanding any other provision of this Agreement.

10.2The Seller undertakes that share-based awards held by Transferred Employees pursuant to a share-based incentive scheme operated by the Seller or another member of the Seller’s Group (“Relevant Awards”) shall be treated in a manner

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consistent with the “good leaver treatment” pursuant to the default position under those share-based incentive schemes.  Where Relevant Awards are subject to performance (or other) conditions and it is not possible to determine whether or not such conditions have been met at the applicable early vesting date (or within a reasonable period thereafter), the Seller and Purchaser agree that performance shall be deemed “on target”.

For the avoidance of doubt, such “good leaver treatment” provides that:

10.2.1Relevant Awards shall not lapse or be forfeited as a result of Closing except to the extent that they do not vest in accordance with paragraphs 10.2.2 and/or 10.2.3 below;

10.2.2Relevant Awards shall vest early as a result of Closing and shall be time pro-rated to take account of the reduced period of time, as a proportion of the original vesting period, that the relevant Transferred Employee worked within the Seller’s Group (calculated on the basis of the number of years of service as at the Closing Date, where part years of service are rounded up); and

10.2.3Relevant Awards that vest after the Closing Date shall remain subject to any relevant performance (or other) conditions, adjusted as necessary to take account of Closing and measured up to the applicable early vesting date.

For the purposes of this paragraph 10.2, “on target” performance shall not be construed as permitting share-based awards to vest in full.

10.3The Seller agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for any Liabilities borne by the Purchaser’s Group in connection with the Relevant Awards, including any Tax.  The Purchaser agrees to use its best endeavours to seek any applicable Tax relief in respect of the Relevant Awards and to indemnify the Seller in respect of any Tax relief obtained, provided always that the Seller provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner.

10.4Subject to paragraph 10.5, the Seller undertakes to inform the Purchaser of the vesting or exercise (as applicable) of the Relevant Awards and to provide, in a timely manner, details of the Relevant Awards that so vest or are exercised so that the Purchaser’s Group can make any applicable withholdings for Tax and pay any Tax for which the Purchaser’s Group is liable in respect of the Relevant Awards to the relevant Tax Authority within any applicable timescale.

10.5To the extent permitted under the relevant plan rules and any Applicable Law, the Seller undertakes to sell such number of the shares underlying the Relevant Awards as may be necessary for the sale proceeds to satisfy any applicable Tax withholdings and to pay such amounts to the Purchaser in sufficient time for the Purchaser to pay such Tax to the relevant Tax Authority within any applicable timescale, provided always that the Purchaser provides the Seller with any information that the Seller may reasonably request in this respect in a timely manner.

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10.6The Seller undertakes to procure that each relevant member of the Seller’s Group will pay any Tax for which each member is liable in respect of the Relevant Awards to the relevant Tax Authority within any applicable timescale.

10.7The Seller undertakes to complete any relevant Tax Return in respect of the Relevant Awards and to submit any such Tax Return to the relevant Tax Authority within any applicable timescale.

10.8This paragraph shall apply where Relevant Awards lapse or are forfeited (or will lapse or be forfeited) either in whole or in part as a result of Closing.  As soon as practicable following Closing with the intention being, where possible, to grant within 30 days of the Closing Date or the first date after the Closing Date when dealing restrictions do not apply (and, in any event, by the later of 90 days from the Closing Date and 90 days from the first date after the Closing Date when the granting of share-based awards is not prevented by dealing restrictions), subject in both cases to the relevant plan rules and any Applicable Law, the Purchaser (or member of the Purchaser’s Group) shall grant each relevant Transferred Employee a share-based award over shares in the capital of the Purchaser substantially equal in value (valued as at the date of grant) to the value of the portion of their Relevant Awards which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing (valued as at the Closing Date), where relevant disregarding any loss (or expected loss) of Tax-favourable treatment (each a “Compensation Award”).  To the extent that (i) it could reasonably have been expected that any related matching share award and/or free share award would have been granted to a Transferred Employee following Closing in connection with any Relevant Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing (each a “Relevant Matching Award”), and (ii) such Relevant Matching Award has not been granted (or will not be granted) as a result of Closing, on or around the date on which such Relevant Matching Award would, in the ordinary course of business, have been made by the Seller (or member of the Seller’s Group), the Purchaser (or member of the Purchaser’s Group) shall grant each relevant Transferred Employee a share-based award over shares in the capital of the Purchaser substantially equal in value (valued as at the date of grant) to the value of such Relevant Matching Award (valued as at the date of grant of the related Matching Award, defined below), where relevant, disregarding any loss (or expected loss) of Tax-favourable treatment (each a “Matching Award”), subject to the relevant plan rules and any Applicable Law.

Such Compensation Awards and Matching Awards shall be granted pursuant to the rules of whichever share-based incentive plan operated by the Purchaser’s Group at the time of grant the Purchaser considers most closely aligned to the share-based incentive plan operated by the Seller’s Group pursuant to which the related Relevant Award had been granted (or related Relevant Matching Award would have been granted) but will vest according to a vesting schedule substantially similar to the vesting schedule that would have otherwise applied to the related Relevant Award or related Relevant Matching Award if Closing had not occurred.  In such cases:

10.8.1the Purchaser undertakes to seek any applicable Tax relief in respect of the Compensation Awards and Matching Awards and to indemnify the Seller in respect of 50 per cent. of any Tax relief obtained, provided always that the

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Seller provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner;

10.8.2where a Compensation Award or Matching Award is granted in the form of a restricted share award, the Purchaser undertakes to obtain a valid election pursuant to section 431 of the Income Tax (Earnings and Pensions) Act 2003 (or, as applicable, any similar Tax election that is available pursuant to any Applicable Law in another jurisdiction), provided that, if either party makes representations to the other party to waive this obligation in respect of certain Compensation Awards or certain Matching Awards and the other party consents to such waiver (such consent not to be unreasonably withheld), this paragraph 10.8.2 shall not apply in respect of such Compensation Awards or Matching Awards; and

10.8.3the Seller agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for 50 per cent. of any Liabilities borne by the Purchaser’s Group in connection with such Compensation Awards and Matching Awards, including any Tax, provided that:

(i)the Seller shall not indemnify the Purchaser (or relevant member of the Purchaser’s Group) to the extent that the Purchaser (or member of the Purchaser’s Group) compensates Transferred Employees for any loss (or expected loss) of Tax-favourable treatment in respect of Relevant Awards or for any Liabilities to Tax as contemplated in paragraph 10.9 below;

(ii)the Seller only agrees to indemnify the Purchaser (or member of the Purchaser’s Group) to a maximum of 50 per cent. of the total of: (i) the value of the portion of such Relevant Awards that lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing, (ii) the value of the Relevant Matching Awards, and (iii) any related Liabilities, including any Tax; and

(iii)for the avoidance of doubt, the Seller shall not indemnify the Purchaser (or member of the Purchaser’s Group) for any lapse or forfeiture (or expected lapse or forfeiture) due to a failure to meet any applicable performance (or other) conditions.

For these purposes, the compensation in respect of the portion of a Relevant Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing shall not exceed the difference between (i) the value of the Relevant Award which could reasonably have been expected to vest on the normal vesting date but for Closing (subject, where applicable, to performance (or other) conditions), and (ii) the value of the Relevant Award which actually vested (or will vest) as a result of Closing.

For the purposes of this paragraph 10.8:

10.8.4the portion of a Relevant Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing shall be valued on the basis of the average price of an ordinary share in the capital of the Seller over the five trading days immediately prior to Closing;

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10.8.5the value of a Compensation Award to be granted shall be valued on the basis of the average price of an ordinary share in the capital of the Purchaser over the five trading days immediately prior to the date of grant;

10.8.6the value of a Relevant Matching Award shall be valued on the basis of the average price of an ordinary share in the capital of the Seller over the five trading days immediately prior to the date of grant of the related Matching Award;

10.8.7the value of a Matching Award to be granted shall be valued on the basis of the average price of an ordinary share in the capital of the Purchaser over the five trading days immediately prior to the date of grant; and

10.8.8any currency conversion shall be made in accordance with Clause 1.12 of this Agreement.

10.9To the extent that any payment to a Transferred Employee (whether by the Seller’s Group or by the Purchaser’s Group) would trigger Liabilities to Tax under section 280G of the United States Internal Revenue Code (“Section 280G”), the relevant Transferred Employee shall be allowed to choose whether to accept the full payment (and pay any relevant Section 280G Tax) or to receive such lower payment as may be necessary in order to fall below the Section 280G threshold for Tax.  To the extent that any similar Tax would arise pursuant to any Applicable Law in another jurisdiction, this paragraph 10.9 shall apply mutatis mutandis.

10.10This paragraph shall apply where: (i) a Transferred Employee would, in the ordinary course of business, have been granted a share-based award pursuant to a share-based incentive scheme operated by the Seller or another member of the Seller’s Group on the basis of performance criteria linked to the Seller’s Group’s 2014 financial year (which may, for the avoidance of doubt, be business and/or individual performance criteria and assessment) (each a “2014 Performance Award”), and (ii) Closing occurs prior to the grant of such 2014 Performance Award.  As soon as practicable following Closing (and, in any event, by the later of 30 days from the Closing Date and 30 days from the date when the value of each 2014 Performance Award has been determined), the Seller shall notify the Purchaser in writing of the value of each 2014 Performance Award and under which share-based incentive plan operated by the Seller’s Group the related 2014 Performance Award would have been granted.  As soon as practicable following the receipt of such notice (and, in any event, by the later of 30 days from the receipt of such notice and 30 days from the first date following the receipt of such notice when the granting of share-based awards is not prevented by dealing restrictions, subject in both cases to the relevant plan rules and any Applicable Law), the Purchaser (or member of the Purchaser’s Group) shall grant each relevant Transferred Employee a share-based award over shares in the capital of the Purchaser substantially equal in value (valued as at the date of grant) to the value of the 2014 Performance Award which would have been granted but for the occurrence of Closing.  Such 2014 Performance Awards shall be granted pursuant to the rules of whichever share-based incentive plan operated by the Purchaser’s Group at the time of grant the Purchaser considers most closely aligned to the share-based incentive plan operated by the Seller’s Group pursuant to which the related 2014 Performance Award would have been granted.  In such cases:

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10.10.1the Purchaser undertakes to seek any applicable Tax relief in respect of the 2014 Performance Awards and to indemnify the Seller in respect of any Tax relief obtained, provided always that the Seller provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner;

10.10.2where a 2014 Performance Award is granted in the form of a restricted share award, the Purchaser undertakes to obtain a valid election pursuant to section 431 of the Income Tax (Earnings and Pensions) Act 2003 (or, as applicable, any similar Tax election that is available pursuant to any Applicable Law in another jurisdiction), provided that, if either party makes representations to the other party to waive this obligation in respect of certain 2014 Performance Awards and the other party consents to such waiver (such consent not to be unreasonably withheld), this paragraph 10.10.2 shall not apply in respect of such 2014 Performance Awards; and

10.10.3the Seller agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for any Liabilities borne by the Purchaser’s Group in connection with such 2014 Performance Awards, including any Tax.

The grant of a 2014 Performance Award to a Transferred Employee shall be taken into account by the Purchaser when determining the extent to which that Transferred Employee shall participate in incentive arrangements (other than any Compensation Award or Matching Award) operated by the Purchaser’s Group following Closing.

For the purposes of this paragraph 10.10:

10.10.4the value of a 2014 Performance Award to be granted shall: (i) be determined by the Seller acting reasonably and in good faith, (ii) be consistent with past practice, (iii) take into account the relevant business and/or individual performance criteria linked to the Seller’s Group’s 2014 financial year, and (iv) if Closing occurs before 31 December 2014, be time pro-rated to take account of the reduced period of time, as a proportion of the Seller’s Group’s 2014 financial year, that the relevant Transferred Employee worked within the Seller’s Group (calculated on the basis of the number of complete months of service as at the Closing Date);

10.10.5the number of shares to be placed under a 2014 Performance Award shall be valued on the basis of the average price of an ordinary share in the capital of the Purchaser over the five trading days immediately prior to the date of grant; and

10.10.6any currency conversion shall be made in accordance with Clause 1.12 of this Agreement.

11.Clinical Employees

11.1The parties intend and agree that:

11.1.1the employment of the Clinical Employees shall not be transferred by the Seller or another member of the Seller’s Group to a member of the

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Purchaser’s Group on and from the Closing Date but shall transfer on and from the Clinical Employee Transfer Date;

11.1.2notwithstanding the intention at paragraph 11.1.1 above, if the contract of employment of any Clinical Employee is found or alleged to have effect at any time prior to the Clinical Employee Transfer Date as if originally made with the Purchaser or another member of the Purchaser’s Group as a consequence of this Agreement, paragraph 3 shall not apply in relation to that Clinical Employee and as a result the parties shall in good faith seek to agree as soon as reasonably practicable how best to deal with such unintended transfer or allegation of transfer provided that, if the parties are unable to reach such agreement within a reasonable period and if it is agreed that such Clinical Employee’s contract of employment has so transferred, then such Clinical Employee shall be treated from the time he actually became so employed as a “Transferred Employee” (and no longer a Clinical Employee) for the purposes of this Agreement;

11.1.3no provisions in paragraph 2 shall require the Purchaser or another member of the Purchaser’s Group to employ, or make an offer to employ, a Clinical Employee, on and from the Closing Date;

11.1.4paragraph 2.2 shall be amended to the extent required so that it applies to Clinical Employees and, in respect of such Clinical Employees, references to the “Closing Date” shall be replaced with references to the “Clinical Employee Transfer Date”;

11.1.5paragraph 2.3 shall be amended to the extent required so that it applies to Clinical Employees and, in respect of such Clinical Employees, references to the “Closing Date” or “Closing” shall be replaced with references to the “Clinical Employee Transfer Date”; and

11.1.6paragraph 3 shall be amended to the extent required so that it applies on the Clinical Employee Transfer Date in respect of any person who is not at that time a Clinical Employee and any references to the “Closing Date” or “Closing” shall be replaced with references to the “Clinical Employee Transfer Date”.

11.2Notwithstanding the provisions of paragraph 11.1 above, the parties agree that each Clinical Employee shall, with effect from and including the Closing Date, be treated for economic purposes as if he is employed by a member of the Purchaser’s Group, and as a consequence will be deemed to be a “Transferred Employee” (meaning that the Purchaser will be economically responsible for all costs and liabilities relating to his employment on and from the Effective Time or termination of his employment on and from the Effective Time) provided that such treatment shall not result, in relation to any Clinical Employee, in any member of the Purchaser’s Group being liable for any costs and liabilities under this Schedule to the extent that any such costs and liabilities arise from:

11.2.1any failure by the relevant member of the Seller’s Group prior to the Clinical Employee Transfer Date, without good reason, to comply with any instruction

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from the Purchaser or a member of the Purchaser’s Group in relation to that Clinical Employee; or

11.2.2any failure by the relevant member of the Seller’s Group prior to the Clinical Employee Transfer Date to supervise the Clinical Employees in accordance with standard industry practice; or

11.2.3any claim by a Clinical Employee as a result of any breach of contract or Applicable Law by the Seller (other than in express compliance with any instruction from the Purchaser or a member of the Purchaser’s Group or as otherwise expressly agreed in writing by the Purchaser) in respect of such Clinical Employee.

For the avoidance of doubt, no provision of this paragraph 11.2 shall entitle any member of the Seller’s Group to recover any amount in respect of any Clinical Employee if that would entitle the Seller’s Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement.

11.3For the purposes of paragraphs 10.2 and 10.8 above, in relation to Clinical Employees only, references to “Closing” and the “Closing Date” shall be construed as references to the Clinical Employee Transfer Date.

11.4The parties intend and agree that, if any Relevant Employee is at Closing determined to be both a Clinical Employee and a Delayed Employee (as defined in paragraph 12 below):

11.4.1such Relevant Employee shall be treated for the purposes of this Agreement as a Clinical Employee until such time immediately prior to the Clinical Employee Transfer Date and thereafter as a Delayed Employee in accordance with the terms of paragraph 12 below; and

11.4.2the employment of such Relevant Employee shall not be transferred by the Seller or another member of the Seller’s Group to a member of the Purchaser’s Group on and from the Clinical Employee Transfer Date but shall transfer in accordance with the terms of paragraph 12 below.

12.Delayed Employees

12.1The parties intend and agree that:

12.1.1the employment of the Delayed Employees shall not be transferred by the Seller or another member of the Seller’s Group to a member of the Purchaser’s Group on and from the Closing Date but shall transfer on and from the Delayed Closing Date which relates to the Delayed Business associated with that Delayed Employee;

12.1.2notwithstanding the intention at paragraph 12.1.1 above, if the contract of employment of any Delayed Employee is found or alleged to have effect at any time prior to the Delayed Closing Date as if originally made with the Purchaser or another member of the Purchaser’s Group as a consequence of this Agreement, paragraph 3 shall not apply in relation to that Delayed Employee and as a result the parties shall in good faith seek to agree as

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soon as reasonably practicable how best to deal with such unintended transfer or allegation of transfer having regard to the reason why the individual’s transfer to the Purchaser or another member of the Purchaser’s Group was delayed but provided that, if the parties are unable to reach such agreement within a reasonable period and if it is agreed that such Delayed Employee’s contract of employment has so transferred, then such Delayed Employee shall be treated from the time he actually became so employed as a “Transferred Employee” (and no longer a Delayed Employee) for the purposes of this Agreement;

12.1.3no provisions in paragraph 2 shall require the Purchaser or another member of the Purchaser’s Group to employ, or make an offer to employ, a Delayed Employee, on and from the Closing Date;

12.1.4paragraph 2.2 shall be amended to the extent required so that it applies to Delayed Employees and, in respect of such Delayed Employees, references to the “Closing Date” shall be replaced with references to the “Delayed Closing Date which relates to the Delayed Business associated with that Delayed Employee”;

12.1.5paragraph 2.3 shall be amended to the extent required so that it applies to Delayed Employees and, in respect of such Delayed Employees, references to the “Closing Date” or “Closing” shall be replaced with references to the “Delayed Closing Date which relates to the Delayed Business associated with that Delayed Employee”; and

12.1.6paragraph 3 shall be amended to the extent required so that it applies on each Delayed Closing Date in respect of any person who is not at that time a Delayed Employee and any references to the “Closing Date” or “Closing” shall be replaced with references to that “Delayed Closing Date”.

12.2Notwithstanding the provisions of paragraph 12.1 above, the parties agree that each Delayed Employee shall, with effect from and including the Closing Date, be treated for economic purposes as if he is employed by a member of the Purchaser’s Group, and as a consequence will be deemed to be a “Transferred Employee” (meaning that the Purchaser will be economically responsible for all costs and liabilities relating to his employment on and from the Effective Time or termination of his employment on and from the Effective Time) provided that such treatment shall not result, in relation to any Delayed Employee, in any member of the Purchaser’s Group being liable for any costs and liabilities under this Schedule to the extent that any such costs and liabilities arise from: (i) any failure by the relevant member of the Seller’s Group prior to a Delayed Employee’s Delayed Closing Date, without good reason, to comply with any Controlled Business Instruction or Seller Involvement Instruction in relation to that Delayed Employee; or (ii) any claim by a Delayed Employee as a result of any breach of contract or Applicable Law by the relevant member of the Seller’s Group (other than in express compliance with any Controlled Business Instruction or Seller Involvement Instruction or as otherwise expressly agreed in writing by the Purchaser) in respect of such Delayed Employee. Any amounts payable pursuant to this paragraph 12.2 shall be paid in accordance with paragraph 4 of Schedule 25. For the avoidance of doubt, no provision of this paragraph 12.2 shall entitle the Seller or any

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member of the Seller’s Group to recover any amount in respect of any Delayed Employee if that would entitle the Seller or member of the Seller’s Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement.

12.3For the purposes of paragraphs 10.2 and 10.8 above, references to “Closing” and the “Closing Date” shall be construed as references to the relevant Closing, Closing Date or Delayed Closing Date which applies to each of the relevant Transferred Employees.

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Schedule 9
Employee Benefits
(Clause 2.4.2)

In this Schedule 9:

“Delayed Employees” has the meaning given in Schedule 8;

“Employee Benefits” means benefits to or in respect of any current or former employee, including without limitation, any pension, early retirement, disability, death benefit, long service awards, termination indemnity (such as Italian TFR) or post-retirement medical benefits or deferred compensation linked to retirement, disability or death benefits or old age part-time benefits (such as German ATZ) and jubilee payments;

“Employee Benefit Liabilities” means liabilities and obligations (whether funded or unfunded) in respect of any employee benefit promise, scheme, plan, fund, program, policy, practice or other individual or collective arrangement providing Employee Benefits;

“Purchaser Funding Assumptions” means, in relation to any Transferred Employee Benefits, where a member of the Purchaser’s Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc), and there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund those similar or comparable benefits to a funding target which is determined by reference to a method and assumptions other than IFRS (such as would, for example, be the case in relation to UK HMRC-registered defined benefit pension obligations), then that method and those assumptions as in force in relation to those similar or comparable benefits immediately prior to the date of this Agreement (so, taking the example of UK defined benefit obligations, this would be the method and assumptions used to determine the relevant plan’s technical provisions as at the date of this Agreement — regardless of whether the plan is in fact fully funded on that basis at any relevant time);

“Purchaser IFRS Assumptions” means, in relation to any Transferred Employee Benefits, where a member of the Purchaser’s Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc), the method and assumptions used most recently prior to the date of this Agreement to value those similar or comparable benefits by the Purchaser’s Group (or any relevant member thereof) for IFRS accounting purposes;

“Seller Funding Assumptions” means, in relation to any Transferred Employee Benefits, if there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund those Transferred Employee Benefits to a funding target which is determined by reference to a method and assumptions other than IFRS (such as would, for example, be the case in relation to UK HMRC-registered defined benefit pension obligations), then that method and those assumptions as in force in relation to those Transferred Employee Benefits immediately prior to the date of this Agreement (so, taking the example of UK defined benefit obligations, this would be the method and assumptions used to determine the relevant plan’s technical provisions as at the date of this Agreement — regardless of whether the plan is in fact fully funded on that basis at any relevant time);

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“Seller IFRS Assumptions” means, in relation to any Transferred Employee Benefits, the method and assumptions used by the Seller’s Group (or the most relevant member thereof) most recently prior to the date of this Agreement to value those Transferred Employee Benefits for IFRS accounting purposes;

“Swiss Actuary” means an actuary: (a) who can reasonably be viewed: (i) as independent of both the Purchaser and the Seller; and (ii) as familiar with Swiss pension issues; and (b) whom the Purchaser and the Seller have agreed should be jointly appointed by them for the purposes of determining the Swiss Assumptions or who in default of such agreement has been appointed by the Swiss Association of Actuaries or other industry body of actuaries in Switzerland as agreed by the Seller and the Purchaser;

“Swiss Assumptions” means, in relation to any Transferred Employee Benefits in Switzerland, the Seller IFRS Assumptions adjusted:

(a)by replacing any assumed “cash balance” annuity conversion rate in the Seller IFRS Assumptions with a conversion rate which the Swiss Actuary certifies to the Purchaser and the Seller as representing a reasonable estimate of the likely effective overall blended conversion rate which will apply in relation to the Transferred Employee Benefits in question, having regard to the changes to the rate which can (having regard to longevity projections, legal and governance constraints around Swiss pension structures and such other matters as the Swiss Actuary considers relevant) in the Swiss Actuary’s opinion reasonably be expected to occur during the expected service lives of the Transferred Employees to whom the Transferred Employee Benefits relate, and weighting the impact of those changes by reference to the ages of the relevant employees (and so the extent to which the changes will in fact operate to reduce the effective liability on the Purchaser); and

(b)by removing any reserve for death or disability benefits to the extent that the Swiss Actuary certifies to the Purchaser and the Seller that it constitutes a reserve for liabilities to and in respect of the relevant Transferred Employees which could reasonably be externally insured by the Purchaser without introducing a new ongoing cost on the Purchaser which was not reflected in the Seller’s ongoing cost base prior to the date of this Agreement;

“Temporary Participation Plan” means any plan or arrangement (whether funded or unfunded) for the provision of Employee Benefits in which Transferred Employees participate prior to Closing and continue (for any reason, whether by special arrangement or because they are Delayed Employees, or otherwise) to participate for a temporary period after Closing;

“Temporary Participation Cessation Date” means, in relation to any Temporary Participation Plan, the date on which Transferred Employees cease to participate in the relevant plan or arrangement; and

“Vaccines Funding Assumptions” means in relation to any Transferred Employee Benefits which are similar or comparable to benefits in the same country which are Transferred Employee Benefits under the Vaccines Sale and Purchase Agreement (the “Equivalent Vaccines Benefits”), the method and assumptions used under the Vaccines Sale and Purchase Agreement to value those Equivalent Vaccines Benefits. For avoidance of doubt, the Vaccines Funding Assumptions are only available in respect of Transferred Employee Benefits for which there are Equivalent Vaccines Benefits.

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For the purposes of each of the Purchaser Funding Assumptions, the Purchaser IFRS Assumptions, the Seller Funding Assumptions, the Seller IFRS Assumptions, the Swiss Assumptions (and, for the avoidance of doubt, the Vaccines Funding Assumptions), any economic and financial assumptions which are based (whether expressly or implicitly) on yields, rates or indices shall be updated for the purposes of such definitions to take account of those yields, rates or indices as at the Effective Time (or the latest practicable time prior to the Effective Time).

1.Except to the extent otherwise requested by the Seller and expressly agreed by the Purchaser before Closing (such Purchaser agreement not to be unreasonably withheld to the extent that it is not reasonably possible for the Seller or its Affiliates to retain the relevant Employee Benefit Liabilities — for example, where liability unavoidably transfers by operation of law under European Council Directive 2001/23/EC or its local implementing legislation), any Employee Benefit Liabilities in respect of service in the Business or with any member of the Seller’s Group  or in any plan or arrangement in which any member of the Seller’s Group participates or has participated:

(a)(in the case of a Transferred Employee) prior to Closing; or

(b)(in the case of any other person) at any time,

(together, “Pre-Closing EB Liabilities”) will stay with or be assumed by the Seller or its Affiliates and the Seller shall fully indemnify the Purchaser and its Affiliates against any such Employee Benefit Liabilities and against any liabilities and obligations to or in respect of any plan or arrangement for the provision of Employee Benefits in which any member of the Seller’s Group participates or participated prior to Closing.  For the avoidance of doubt, the Purchaser’s agreement under this paragraph 1 may, if the Purchaser so determines, relate only to certain specified categories or tranches of Pre-Closing EB Liabilities under a particular benefit programme (in other words, it does not need to be “all or nothing”), in which case it is only those specified Pre-Closing EB Liabilities which are excluded from the scope of the Purchaser’s indemnity entitlement  hereunder.

2.Where and to the extent that the Purchaser agrees under paragraph 1 that any Pre-Closing EB Liabilities may transfer to or remain with the Purchaser and/or its Affiliates (such Pre-Closing EB Liabilities being the “Transferred Employee Benefit Liabilities” and the benefits to which they relate being the “Transferred Employee Benefits”), the Purchaser will be compensated in respect of such Transferred Employee Benefit Liabilities as set out in the rest of this Schedule 9. Subject to being so compensated but without prejudice to paragraphs 9 and 11, the Purchaser shall, or shall procure that its relevant Affiliate shall, assume, with a full discharge for the Seller and its Affiliates, the Transferred Employee Benefit Liabilities. The Purchaser acknowledges its agreement to the principle that the post-retirement medical healthcare plan to which it admits US Transferred Employees who immediately before Closing were members of such a plan will take account of periods of employment with the Seller’s Group to the extent previously recognised under the equivalent Seller’s Group plan for the purposes of determining eligibility, contributions, and vesting; again, therefore, subject to appropriate identification during the period before Closing of such liabilities and to the operation of the compensation mechanism set out in this Schedule 9, they will become Transferred Employee Benefit Liabilities.

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2AThis paragraph 2A applies where there are Transferred Employee Benefits in a Temporary Participation Plan. In such a case, notwithstanding that the Transferred Employee Benefit Liabilities may (subject to the Purchaser’s agreement as per 1 above) include liabilities in respect of service after the Effective Time, the Transferred Employee Benefit Liabilities which are included in the calculation of the Employee Benefit Indemnification Amount as per paragraph 3 below shall (unless the Seller and the Purchaser agree otherwise in any particular case) comprise only those liabilities attributable to service before the Effective Time. Conversely, although the Transferred Employee Benefit Liabilities will not for the purposes of paragraphs 1 and 2 above include Liabilities in respect of Transferred Employees or other individuals who leave employment or crystallise benefits before the Temporary Participation Cessation Date in relation to the relevant Temporary Participation Plan (unless the Seller and the Purchaser agree otherwise in any particular case and without prejudice to the Purchaser or its Affiliates’ obligation to comply with any requirements in relation to such individuals before they leave employment or crystallise benefits), the parties agree that the calculation of the Employee Benefit Indemnification Amount under paragraph 3 below in relation to any Temporary Participation Plan shall be carried out on the basis of a conclusive presumption (regardless of any actual knowledge to the contrary) that:

2A.1any individual who is a Delayed Employee on the day after the Closing Date is or will become a Transferred Employee, and

2A.2no Contingent Individual will leave employment or crystallise benefits before the relevant Temporary Participation Cessation Date. For these purposes a “Contingent Individual” is a Transferred Employee or other individual who on the day after the Closing Date has not left employment or crystallised benefits and in respect of whom liabilities: (a) would become Transferred Employee Benefit Liabilities if he does not leave employment or crystallise benefits before the relevant Temporary Participation Cessation Date; but (b) would not otherwise become Transferred Employee Benefit Liabilities.

3.The value of the Transferred Employee Benefit Liabilities shall be determined on employee census data and plan provision as at the Effective Time (and making the conclusive presumptions at 2A.1 and 2A.2 above) on the Vaccines Funding Assumptions if available, but if not available then on:

3.1in relation to any Transferred Employee Benefits in Switzerland, the Swiss Assumptions; and

3.2in relation to any other Transferred Employee Benefits, the Seller IFRS Assumptions, PROVIDED that if any of the following values is available and is greater than the value derived using the Seller IFRS Assumptions then that value will be used instead (and if more than one of these values is available then the one which would place the greatest value on the relevant Transferred Employee Benefit Liabilities will be used):

3.2.1if a member of the Purchaser’s Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc), the value which is midway between the value based on the Seller IFRS Assumptions and the Purchaser IFRS Assumptions;

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3.2.2if there is a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund the Transferred Employee Benefits to a funding target which is determined by reference to a method and assumptions other than IFRS, the value derived using the Seller Funding Assumptions; and

3.2.3if there is both: (i) a local obligation or practice prior to the date of this Agreement to pre-fund or externally fund the Transferred Employee Benefits to a funding target which is determined by reference to a method and assumptions other than IFRS; and (ii) a member of the Purchaser’s Group provides, in the same country, a similar or comparable benefit programme to the programme to which the Transferred Employee Benefits relate (regardless of differences in the terms of entitlement of accrual etc), the value which is midway between the value based on the Seller Funding Assumptions and the Purchaser Funding Assumptions.

Where there are any Transferred Employee Benefit Liabilities which prior to Closing were externally funded by assets held in a trust or other vehicle established for the purposes of meeting such Transferred Employee Benefit Liabilities, and the actuary chosen by the Seller and the actuary chosen by the Purchaser agree under paragraph 4 (or it is otherwise determined under paragraph 5) that having regard to all relevant matters as they subsisted immediately after Closing it would be reasonable to expect all or part of such assets to be  or remain available to the Purchaser or its Affiliates to meet the cost of such Transferred Employee Benefit Liabilities (whether by transfer out to another vehicle or because the Purchaser and/or any Affiliate is expected to remain affiliated to the vehicle on more than a merely temporary basis), then the value as at the Effective Time of the assets which ignoring matters arising after Closing they would expect to be made or remain so available (the “Available Assets) (including for the avoidance of doubt, in the case of Switzerland, the Swiss Assets to the extent that they are so agreed or determined) as agreed under paragraph 4 or determined under paragraph 5 will be deducted from the value of the Transferred Employee Benefit Liabilities,  and the remaining value of the Transferred Employee Benefit Liabilities (if any) is the “Employee Benefit Indemnification Amount”. The determination of the Employee Benefit Indemnification Amounts shall be carried out on a country-by-country basis and, where necessary, on a plan-by-plan basis. If any Employee Benefit Indemnification Amount is greater than the amount paid in respect of it via the Estimated Employee Benefit Adjustment (or, where no such estimate was made, greater than zero), the Seller shall pay or procure payment, by way of a reduction in the Share Consideration, an amount equal to the difference (or, where no such payment was made, such amount) to the Purchaser, or at the request of the Purchaser to an Affiliate of the Purchaser, as compensation for the Transferred Employee Benefit Liabilities. If any Employee Benefit Indemnification Amount is less than the amount paid in respect of it via the Estimated Employee Benefit Adjustment (if any), the Purchaser shall pay an amount equal to the difference to the Seller.

4.The Seller and its Affiliates shall, within 45 days after Closing, provide its actuary, the Swiss Actuary (if relevant) and the actuary chosen by the Purchaser with all relevant plan, asset, assumptions and employee census information needed to calculate the Employee Benefit Indemnification Amounts in respect of any Transferred Employees or Delayed Employees to the extent not otherwise within the control of the Purchaser or its Affiliates. The actuary chosen by the Seller shall provide the actuary chosen by

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the Purchaser with its calculation of the Employee Benefit Indemnification Amounts (including, but not limited to, any supporting documentation on which it relied as well as the methodologies it employed in calculating the Employee Benefit Indemnification Amounts), on a plan-by-plan basis, within 90 days following Closing. The actuary chosen by the Purchaser shall review the calculation of the Employee Benefit Indemnification Amounts of the Seller’s actuary within 120 days following Closing. The Employee Benefit Indemnification Amounts shall be determined, on a plan-by-plan basis, by mutual agreement between the parties within 180 days following the Closing Date.

5.If the parties cannot agree on any Employee Benefit Indemnification Amount within the 180-day period referred to in paragraph 4, the parties shall appoint within 5 days an independent actuary acceptable to both parties, or such actuary shall be selected by the President of the Institute and Faculty of Actuaries in the UK if they cannot agree, and the independent actuary thus appointed shall review their calculations and, within 75 days after appointment, render a final and binding decision on the amount of that Employee Benefit Indemnification Amount, and, in making such decision, shall be limited to adopting the position taken by either one of the parties. The cost of any independent actuary shall be borne jointly by the parties.

6.In connection with the procedures referred to in this Schedule 9, the parties shall provide each other and the actuaries referred to in this Schedule 9 with access to the relevant business records and other relevant documents and information as may reasonably be requested. All documents, records and information provided for the purposes of this Schedule 9 must be accurate and complete in all material respects.

7.Each payment in respect of an Employee Benefit Indemnification Amount shall be made by the Seller (by way of a reduction in the Share Consideration) within 14 days following its final determination. The Seller may make an accelerated or advance  payment at its own discretion (which, for the avoidance of doubt, includes in relation to each Employee Benefit Indemnification Amount so much (if any) of the Estimated Employee Benefit Adjustment as the Seller notified pursuant to Clause 6.4 was intended to relate to that Employee Benefit Indemnification Amount). Each Employee Benefit Indemnification Amount shall include interest calculated from  the Effective Time to (and including) the date of payment at a rate per annum of LIBOR (but where amounts are prepaid or paid in stages or treated as paid via inclusion in the Estimated Employee Benefit Adjustment then the interest will cease to accrue on so much of the Employee Benefit Indemnification Amount as has been paid). Such interest shall accrue from day to day. Any such payment shall be made in US dollars (and any underlying values shall be expressed in US dollars) and any currency other than US dollars shall be converted into US dollars at the exchange rates determined in accordance with Clause 1.13 of this Agreement on the Closing Date.

8.To the extent (if any) that there are any Transferred Employee Benefit Liabilities which prior to Closing were externally funded by assets held in a trust or other vehicle established for the purposes of meeting such Transferred Employee Benefit Liabilities, the Purchaser will, if requested by the Seller before Closing (or the relevant Temporary Participation Cessation Date) and unless it is not reasonably practicable to do so, establish or nominate a trust or other vehicle which is capable of receiving a transfer of assets from the pre-Closing trust or other vehicle to the extent that such assets relate to the Transferred Employee Benefit Liabilities.

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9.If, within one year of Closing, the Seller or the Purchaser notifies the other that the membership or other benefit data (the “Data”) used for calculating any Employee Benefit Indemnification Amount may be inaccurate, other than by reason of an Excluded Matter, then a “Data Dispute” has arisen and the following provisions shall apply:

9.1On such notification, the Seller shall procure that its actuary and the Purchaser shall procure that its actuary consult each other with a view to agreeing whether the Data is inaccurate and if so, what the accurate Data should be.  If the Seller’s actuary and the Purchaser’s actuary agree that the Data is inaccurate, they will jointly certify this to be the case and advise on what the accurate Data should be.  The notification is deemed to have occurred on the date of the certification.

9.2If the Seller’s actuary and the Purchaser’s actuary fail to agree whether the Data is inaccurate within 60 days of the notification by one party to the other that the Data may be inaccurate, paragraph 5 shall apply mutatis mutandis.  The notification is deemed to have occurred when the independent actuary advises that the Data is inaccurate and what the accurate Data should be.

9.3On the occurrence of the Data Dispute, the Seller and the Purchaser shall respectively procure that a valuation of the relevant Employee Benefit Indemnification Amount is carried out in accordance with paragraphs 3 and 4 (mutatis mutandis) but on the basis of the accurate Data as agreed under paragraph 9.1 or determined under paragraph 9.2.

9.4If as a consequence of paragraph 9.3, the Seller has paid to the Purchaser an amount which on the basis of the further valuation is not payable, such amount (the “Overpayment”) shall be repaid within 21 days of the amount of the Overpayment being agreed or determined. Any such payment shall bear interest calculated from (and including) the date the Overpayment was made to (and including) the date the payment is made in full in accordance with this paragraph 9.4 at a rate per annum of LIBOR. Such interest shall accrue from day to day.

9.5If as a consequence of paragraph 9.3, the Seller has not paid to the Purchaser an amount which on the basis of the further valuation is payable, such amount (the “Outstanding Amount”) shall be paid within 21 days of the amount of the Outstanding Amount being agreed or determined. Any such payment shall bear interest calculated from (and including) the Closing Date to (and including) the date the payment is made in full in accordance with this paragraph 9.5 at a rate per annum of LIBOR. Such interest shall accrue from day to day.

For the purposes of this paragraph 9, the “Excluded Matters” are:

·assets which were assumed to be Available Assets ultimately turning out not to be available to the Purchaser or its Affiliates to meet the cost of the Transferred Employee Benefit Liabilities to which they related, and

·liabilities in respect of individuals being assumed to be Transferred Employee Benefit Liabilities but turning out not to be because the individuals leave service or crystallise benefits before the date liabilities are transferred.

10.Except as otherwise agreed by the Seller, the Purchaser shall where a trust or other vehicle has been established under paragraph 8, procure that all of the assets

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transferred as envisaged by paragraph 8 are paid into such trust or other vehicle. If, after such payment or transfer, or after payment of an Employee Benefit Indemnification Amount or after making an Estimated Employee Benefit Adjustment, the Purchaser and/or its Affiliates achieves a reduction in its liability to any Tax in respect of or in connection with the payment or transfer, the Purchaser shall pay to Seller (for itself or on behalf of the relevant Share Seller or Business Seller as applicable), within 30 days after the Purchaser would otherwise have been liable to pay the saved Tax, a sum equal to the amount of that Tax reduction by way of an increase in the Share Consideration.  This paragraph 10 applies for a period of four years following the later of the date on which a transfer of assets is made, or payment of any Employee Benefit Indemnification Amount or Estimated Employee Benefit Adjustment is made to the Purchaser.

11.The Seller covenants with the Purchaser to pay to the Purchaser an amount equal to any cost, claim or liability incurred by any member of the Purchaser’s Group which it is or becomes liable to make on or at any time after Closing by reason of any change or purported change made to the terms of any Transferred Employee Benefits prior to Closing proving to be or have been legally ineffective or by reason of such terms and/or benefits failing to comply with any mandatory legal requirements (excluding any obligation to equalise guaranteed minimum pensions in the United Kingdom). The Seller shall not be liable under this paragraph 11 in respect of any individual claim (or a series of claims arising from similar or identical facts or circumstances) unless the liability in respect of such claim or series of claims exceeds US$100,000. If the Purchaser becomes aware of any fact, matter or circumstance that may give rise to a claim against the Seller under this paragraph 11, the Purchaser shall as soon as reasonably practicable give notice in writing to the Seller of such facts, matters or circumstances as are then available regarding the potential claim. Failure to give such notice within such period shall not affect the rights of the Purchaser to make a relevant claim under this paragraph 11, except that the Seller shall not be liable for any increase in the amount of such claim arising from such failure. The latest date on which the Purchaser may give notice of a claim under this paragraph 11 is the fourth anniversary of the Closing Date.

12.Notwithstanding any general provision to the contrary in Schedule 8 and subject to being compensated in accordance with this Schedule 9, the Purchaser shall admit Transferred Employees in the United States who participated in a post-retirement medical plan immediately prior to Closing to its own post-retirement medical plan. Subject to being compensated in accordance with this Schedule 9, periods of employment with the Seller’s Group (including, without limitation, any current or former Affiliate of the Seller, to the extent previously recognised under the applicable benefit plan arrangement provided by the Seller’s Group), shall be taken into account for the purposes of determining, as applicable, the eligibility for participation, contributions, and vesting for any employee under such post-retirement medical plan.

13.Notwithstanding any general provision to the contrary in Schedule 8, the US Transferred Employees shall, as of the Closing Date, become eligible to participate in a US tax-qualified defined contribution plan to the extent such plan is sponsored by the Purchaser or a relevant member of the Purchaser’s Group. The Purchaser agrees that it will use commercially reasonable efforts to cause such plan to accept rollovers of the account balances of the US Transferred Employees (including participant loan

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promissory notes) from the relevant employer’s tax-qualified retirement plans; provided that (i) the Purchaser will not be required to accept any such rollovers that might result in material liability to the Purchaser or may otherwise cause the relevant plan to cease to qualify under Section 401(a) of the Code and (ii) the Purchaser will not be required to amend any plan to permit participant loans.

14.By way of exception to the general principle at paragraph 1, where a UK Transferred Employee who had joined service with the Seller’s Group before 1 April 2005 is made redundant within 24 months of Closing, then the Purchaser shall pay the Seller an amount equal to the cost of applying the Agreed UK Restructuring Arrangement to an employee of the employee’s actual age at the date he is made redundant, but only to so much of the employee’s benefits in a Seller’s Group plan as were accrued prior to Closing; and provided further that the Purchaser’s aggregate liability under this paragraph in respect of all such UK Transferred Employees who are so made redundant is capped at £1 million. This cost shall be calculated on a basis consistent with that which is used across the Seller’s Group retained business for internal cost-charging purposes in relation to the Agreed UK Restructuring Arrangement, and the Seller shall supply the Purchaser with such evidence as the Purchaser may reasonably require to verify that. Subject to receipt of such payment, the Seller shall apply the Agreed UK Restructuring Arrangement to the relevant employee’s Seller’s Group plan benefits. This provision shall cease to apply 24 months after Closing, whereafter the Purchaser shall procure that neither it nor its Affiliates offers or indicates the availability of the Agreed UK Restructuring Arrangement to any Transferred Employee.

15.The parties agree that where any Transferred Employee has accrued defined contribution benefits prior to Closing in a Seller’s Group arrangement then:

15.1the Seller shall use commercially reasonable efforts to procure the vesting of those benefits (if they would otherwise lapse as a result of Closing);

15.2the parties shall, provided this will not impose unreasonable administrative burdens on the Purchaser’s Group, co-operate in good faith to procure a transfer of the account balances of such Transferred Employee from the Seller’s Group arrangement to a Purchaser’s Group arrangement; and

15.3for the avoidance of doubt, the Purchaser will comply with the provisions of paragraph 6.1 of Schedule 8.

Temporary periods of participation

16.The Seller and Purchaser may agree that an employing entity in the Purchaser’s Group shall be admitted to participate, for a temporary period with effect from Closing, in one or more Employee Benefit plans operated by a member of the Seller’s Group, or in which a member of the Seller’s Group participates.

17.In such event, the Seller and Purchaser shall use all reasonable endeavours to enter into an agreement with the provider or board of trustees of the relevant Employee Benefit plan on such terms as the provider or board of trustees may reasonably require.

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Jubilee payments

18.For the purposes of calculating the amount of jubilee payments and long service awards falling within the definition of “Transferred Employee Benefit Liabilities” the following principles shall apply:

18.1in relation to Employees in respect of whom each of the following applies:

(a)liabilities to make jubilee payments or grant long service awards transfer to a member of the Purchaser’s Group by operation of law; and

(b)the relevant member of the Purchaser’s Group replicates or will replicate the benefits which applied while they were employees of the Seller’s Group,

liabilities to make jubilee payments or grant long service awards will be treated as falling within the Transferred Employee Benefit Liabilities and shall be calculated on the basis of the benefit scales which applied while the Employees were employees of the Seller’s Group;

18.2in relation to Employees for whom either:

(i)liabilities to make jubilee payments or grant long service awards do not transfer by operation of law but the relevant member of the Purchaser’s Group provides or will provide replacement benefits which replicate the benefits provided by the Seller’s Group); or

(ii)the relevant member of the Purchaser’s Group provides or will provide replacement jubilee or long service benefits but does not or will not replicate the benefits which applied while they were employees of the Seller’s Group,

liabilities to make jubilee payments or grant long service awards will be treated as falling within the Transferred Employee Benefit Liabilities and shall be calculated on the basis of the benefit scales which applied while the Employees were employees of the Seller’s Group or, if less, the value of the actual benefit to be provided by the relevant members of the Purchaser’s Group.

18.3for the avoidance of doubt, no amount will be included within “Transferred Employee Benefit Liabilities” in respect of jubilee payments or long service awards in relation to Employees for whom liabilities to make such payments or grant such awards do not transfer by operation of law and no replacement benefits are provided by any member of the Purchaser’s Group;

18.4the Purchaser and the Seller will negotiate in good faith with a view to agreeing an appropriate and simple method in each jurisdiction for valuing jubilee payments and long service awards which are not disproportionate to the amounts of such payments but which is suitably even-handed as between the parties.  Any such agreement will override the foregoing provisions of this paragraph 18 to the extent there is any inconsistency.

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Schedule 10
Allocation
(Clause 3.2)

1.The Seller and the Purchaser agree that to the extent it is necessary for Tax purposes to allocate any amount as between:

1.1all of the Products, such amount shall be allocated for those Tax purposes as between the Products in proportions reflected as whole number percentages, to be agreed in accordance with the remaining paragraphs of this Schedule 10; or

1.2some but not all of the Products, such amount shall be allocated for those Tax purposes as between those particular Products in accordance with the relative proportions reflected in the whole number percentages agreed in accordance with the remaining paragraphs of this Schedule 10.

2.The Seller shall prepare, or procure the preparation of, a draft of the Allocation Statement, which shall be delivered to the Purchaser within 105 Business Days of the date of this Agreement (the “Draft Allocation Statement”).

3.The Purchaser shall have a period of 20 Business Days (the “Review Period”) after the delivery to it of the Draft Allocation Statement to review the Draft Allocation Statement and may at any time during the Review Period request (in writing to the Seller) an adjustment to be made to any amount set out therein (an “Adjustment Request”).

4.If no Adjustment Request is presented to the Seller within the Review Period, the Draft Allocation Statement shall be deemed to have been agreed and approved by the Seller and the Purchaser, shall be final and binding upon them and shall constitute the “Allocation Statement” for the purposes of this Agreement.

5.If an Adjustment Request is presented to the Seller within the Review Period:

5.1the Purchaser and the Seller shall attempt to resolve the matter in dispute between them in good faith negotiations and before the date falling 20 Business Days before Closing; and

5.2in the event that the Purchaser and the Seller fail to agree the matter in dispute between them within 10 Business Days following delivery to the Seller of the Adjustment Request, and unless the Seller and the Purchaser agree in writing to extend the period in which they may agree such allocation (subject to such extension not falling past Closing), the matter will be referred to the Reporting Accountants, to be instructed jointly by the Purchaser and the Seller to determine the relevant allocation as soon as practicable and in any case before the date falling five Business Days before Closing.

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6.If following agreement or determination of the Allocation Statement in accordance with paragraphs 4 and 5, the consideration payable by the Purchaser under this Agreement is adjusted in accordance with any provision of this Agreement or any Ancillary Agreement:

6.1if the adjustment of the consideration payable by the Purchaser relates specifically to one or more, but not all, of the Products, or relates to all of the Products but to some more than others, the Purchaser and the Seller shall discuss in good faith the extent to which the percentage proportion allocated to the Products shall be adjusted and the Allocation Statement shall be amended to reflect the outcome of those discussions (unless no agreement is reached, in which case paragraph 5.2 shall apply mutatis mutandis).

7.The agreed or determined allocation set out in the Allocation Statement (as adjusted, where applicable) at Closing shall be binding on the parties and the Purchaser and the Seller, or as the case may be, the Company, the Share Seller, the relevant Business Seller and the Purchaser, shall:

7.1not in any Tax Return, or other document or filing, or in any Tax proceeding, take a position in relation to any of the allocation set out therein which is inconsistent with the agreed or determined allocation; and

7.2where reasonably necessary, make joint elections or otherwise cooperate in good faith to have the agreed or determined allocation respected for applicable Tax purposes by any relevant Tax Authority.

8.For the avoidance of doubt, it is understood and agreed by the parties that any valuation of the Products used in order to determine the allocation pursuant to this Schedule 10 is not intended to be, and shall not be interpreted as, any assurance by any party as to the value of the Products (including the related assets and liabilities) being transferred.

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Schedule 11
VAT

1.VAT: Records

1.1The Seller, the Share Seller or any Business Seller may, on or before the Closing Date, obtain a direction from the relevant Tax Authority for the retention and preservation by it of any VAT records relating to its period of ownership of the Business or the Share (as the case may be) and, where any such direction is obtained, the Seller undertakes to, or to procure that the relevant Business Seller or the Share Seller (as the case may be) will:

1.1.1preserve the records to which that direction relates in such a manner and for such period as may be required by the direction or by Applicable Law; and

1.1.2allow the Purchaser, upon the Purchaser giving reasonable notice, reasonable access to and copies of such records where reasonably required by the Purchaser for its Tax purposes.

1.2If no such direction as is referred to in paragraph 1.1 above is obtained before the Closing Date and any documents in the possession or control of a member of the Seller’s Group are required by law to be preserved by the Purchaser, the Seller shall, as soon as reasonably practicable after Closing, deliver such documents to the Purchaser.

2.VAT: Going Concern - EU Member States

2.1The Seller and the Purchaser shall use reasonable endeavours (including, for the avoidance of doubt, the making of an election or application in respect of VAT to any Tax Authority or entering into a written agreement) to secure that, to the extent reasonably possible, the sale of all or any part of the Business, so far as carried on in the European Union, is treated as neither a supply of goods nor a supply of services for the purposes of the laws governing VAT in each relevant member state.

2.2Each Business Seller shall have the right to seek a ruling from the relevant Tax Authority as to whether the sale of all or part of the Business, so far as carried on in the relevant member state, should be treated as neither a supply of goods nor a supply of services for the purposes of the laws governing VAT in that member state and to account for VAT (and accordingly to seek an additional payment from the Purchaser under Clause 3.3.3) in accordance with that ruling.  The Seller shall not be obliged to challenge (or to procure that any relevant Business Seller challenges) that ruling unless required to do so by the Purchaser.  If the Purchaser wishes to challenge, or to require the relevant Business Seller to challenge, any such ruling it may do so, provided that it bears the full cost of, and agrees to indemnify the relevant Business Seller in respect of any loss arising from or in connection with, that challenge and that such challenge shall not affect the date on which VAT must be paid to the Seller under paragraph 4 below.

2.3Insofar as no ruling has been obtained from a relevant Tax Authority prior to Closing, the Seller shall determine in good faith if (or the extent to which) VAT is payable in

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respect of the sale of the Business and shall be entitled to charge (or not to charge) VAT to the Purchaser in accordance with such determination.

3.VAT: Going Concern - non-EU Jurisdictions

3.1To the extent that any state outside the European Union provides for relief or exemption from VAT on the transfer of a business or a company or treats such a transaction as being non-taxable for VAT purposes, the Seller and the Purchaser shall use reasonable endeavours (including, for the avoidance of doubt, the making of an election or application in respect of VAT to any Tax Authority or entering into a written agreement) to secure such relief, exemption or treatment, to the extent reasonably possible, as regards the sale of all or part of the Business (insofar as carried on in the relevant state) under this Agreement.

3.2The relevant Business Seller shall have the right to seek a ruling from the relevant Tax Authority as to whether the sale of all or part of the Business, so far as carried on in the relevant state, is eligible for a relief or exemption or is otherwise eligible to be treated as non-taxable for the purposes of the laws governing VAT in that state and to account for VAT (and accordingly seek an additional payment from the Purchaser under Clause 3.3.3 in accordance with that ruling).  The Seller shall not be obliged to challenge (or to procure then the relevant Business Seller challenges) that ruling unless required to do so by the Purchaser.  If the Purchaser wishes to challenge, or to require the relevant Business Seller to challenge, any ruling it may do so, provided that it bears the full cost of, and agrees to indemnify the relevant Business Seller in respect of any loss arising from or in connection with, that challenge and that such challenge shall not affect the date on which VAT must be paid to the Seller under paragraph 4 below.  Insofar as no ruling has been obtained from a relevant Tax Authority prior to Closing, the Seller shall determine in good faith if (or the extent to which) VAT is payable in respect of the sale of the Business and shall be entitled to charge (or not to charge) VAT to the Purchaser in accordance with such determination.

4.VAT: Time, Manner and Currency of Payment

4.1Any amounts which the Purchaser is obliged to pay to the Seller under this Agreement in respect of VAT shall be paid by the Purchaser, on its own account or on behalf of another member of the Purchaser’s Group, to the Seller or to such member of the Seller’s Group as the Seller may direct.  Such amounts shall be paid in the currency in which the VAT in question must be accounted for to the relevant Tax Authority.

4.2Subject to any provision or express agreement to the contrary, any amounts in respect of VAT payable in any jurisdiction in respect of the transfer at Closing of any of the Business shall be paid in accordance with paragraph 4.1 above at Closing against production of a valid VAT invoice (or equivalent, if any).

4.3Notwithstanding any other provision of this Agreement, the Purchaser shall not be liable to account to the Seller or any member of the Seller’s Group for or in respect of penalties or interest arising solely from the failure of the Seller or any other member of the Seller’s Group to account promptly for VAT to the relevant Tax Authority

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following the Seller having been placed in the appropriate amount of funds for that purpose by the Purchaser.

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Schedule 12
Closing Obligations

1.General Obligations

1.1The Seller’s Obligations

On Closing, the Seller shall deliver or make available to the Purchaser the following:

1.1.1the Ancillary Agreements (other than the France SPA and the Netherlands APA and any other Ancillary Agreements that have not been agreed and are subject to Clause 5.3.2) duly executed by the relevant members of the Seller’s Group;

1.1.2a valid power of attorney or such other evidence reasonably satisfactory to the Purchaser that the Seller, and each of its relevant Affiliates, are authorised to execute this Agreement, the Ancillary Agreements and the Local Transfer Documents (including, where relevant, any notarial deeds referred to in this Schedule 12), in each case to the extent that they are parties thereto;

1.1.3the Certificate duly executed by the Seller;

1.1.4a duly executed transfer in respect of the Share in favour of the Purchaser (or its Affiliate or its nominee);

1.1.5a (i) power of attorney in the terms agreed between the Seller and the Purchaser to allow the Purchaser (or its Affiliate or its nominee) to vote the Share and (ii) letter of direction in the terms agreed between the Seller and the Purchaser to allow the Purchaser (or its Affiliate or nominee) to receive all dividends, distributions and other benefits attaching to the Share from Closing;

1.1.6the statutory books of the Company (which shall be written up to but not including the Closing Date), the certificate of incorporation of the Company and share certificate in respect of all the issued share capital of the Company; and

1.1.7the interim accounts of the Company as at the Closing Date (immediately prior to Closing) which reflect the Company Intra-Group Debt.

1.2In addition, the Seller shall procure:

1.2.1any then present directors and officers (if any) of the Company resign their offices to take effect at Closing as such and to relinquish any rights which they may have under any contract with the Company or under any statutory provisions (including any right to damages or compensation for breach of contract, loss of office, redundancy or unfair dismissal or on any other account whatsoever) and to confirm that no agreement or arrangement is outstanding under which the Company has or could have any obligation to any of them including in respect of remuneration or expenses; and

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1.2.2a board meeting of the Company is held, or written resolutions of the board are passed, at or by which:

(i)it shall be resolved that the transfer relating to the Share shall, so far as possible, be approved for registration; and

(ii)any person nominated by the Purchaser shall be appointed director, such appointments to take effect on Closing.

1.3The Purchaser’s Obligations

On Closing, the Purchaser shall deliver or make available to the Seller the following:

1.3.1the Ancillary Agreements (other than the France SPA and the Netherlands APA and any other Ancillary Agreements that have not been agreed and are subject to Clause 5.3.2) duly executed by the relevant members of the Purchaser’s Group; and

1.3.2a valid power of attorney or such other evidence reasonably satisfactory to the Seller that the Purchaser, and each of its relevant Affiliates, are authorised to execute this Agreement and the Ancillary Agreements (as appropriate), in each case to the extent that they are parties thereto.

1.4Discharge of the Company Intra-Group Debt

Immediately following the above, the amount held by the Seller as a result of the payment by the Purchaser pursuant to Clause 6.3.1(ii) shall be applied to the settlement by the Purchaser (as agent for the Company) of the Company Intra-Group Debt.

2.Transfer of the Assets

2.1General Transfer Obligations

On Closing or such other date as agreed between the parties, the Seller shall procure that the Business Sellers shall, and the Purchaser shall, take such steps as are required to transfer the Assets (save for the OBM Transferred Rights) and Assumed Liabilities not held by the Company in accordance with this Agreement. The Seller shall procure that the Business Sellers shall, and the Purchaser shall, take such steps as are required to transfer the OBM Transferred Rights at the OBM Transfer Date, provided that nothing in this Agreement shall affect each Party’s right to possess a share of the Ofatumumab Biological Materials in accordance with the terms of the Manufacturing and Supply Agreement.

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Schedule 13
Not Used

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Schedule 14
Warranties given under Clause 9.1

1.Authority and Capacity

1.1Incorporation

1.1.1The Seller and each Business Seller is validly existing and is a company duly incorporated and registered under the law of its jurisdiction of incorporation.

1.1.2The Company is duly incorporated, validly existing and in good standing, under the laws of its jurisdiction of organisation.

1.2Authority to enter into Agreement

1.2.1The Seller has the legal right and full power and authority to enter into and perform this Agreement and the Seller, the Share Seller, each Business Seller and the Company has the legal right and full power and authority to enter into and perform any other documents to be executed by it pursuant to or in connection with this Agreement.

1.2.2The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Seller, the Share Seller, each Business Seller and the Company in accordance with their respective terms.

1.2.3Except as referred to in this Agreement the Seller:

(i)is not required to make any announcement, consultation, notice, report or filing; and

(ii)does not require any consent, approval, registration, authorisation or permit, in each case in connection with the performance of this Agreement or any other document referred to in paragraph 1.2.1.

1.2.4The execution and delivery of the documents referred to in paragraph 1.2.1 and the performance by the Seller, the Share Seller, each Business Seller and the Company of their respective obligations under them, will not:

(i)result in a breach of any provision of the memorandum or articles of association or by laws or equivalent constitutional document of the relevant member of the Seller’s Group;

(ii)result in a breach of, or constitute a default under, any instrument or contract to which the relevant member of the Seller’s Group is party or by which the relevant member of the Seller’s Group is bound where such breach is material to their ability to perform their obligations under such documents;

(iii)result in a breach of any existing order, judgment or decree of any court, Governmental Entity by which the relevant member of the Seller’s Group is bound and where such breach is material to their ability to perform their obligations under such documents.

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1.3Authorisation

The Seller, the Share Seller, each Business Seller and the Company has taken, or will have taken by Closing, all corporate action required by it to authorise it to enter into and to perform this Agreement, any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Ancillary Agreement.

2.Warranties relating to the Business

2.1Organisation and Standing of the Assets

2.1.1Schedule 1 sets out a complete and accurate list of each of the Products, together with details of each Product Expansion which is a combination study and which is the subject of a phase II or later clinical trial.

2.1.2The summary details relating to the Products set out in Schedule 1 are true and accurate.

2.2The Assets and the Share

2.2.1Save in relation to the Transferred Product Intellectual Property Rights either the Seller or one of the Business Sellers has good and valid title to the Assets, free and clear of all Encumbrances other than Permitted Encumbrances.

2.2.2GGL is the legal and beneficial owner of the Share.

2.2.3There is no option, right to acquire, mortgage, charge, pledge, lien or other form of security or Encumbrance or equity on, over or affecting the Share and there is no agreement or commitment to give or create any.

2.2.4The Share has been duly authorised and validly issued and is fully paid and non-assessable. There are no options, warrants, rights, convertible, exercisable or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which any member of the Seller Group is a party or by which it is bound obligating any member of the Seller Group to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible into, or exercisable or exchangeable for, any capital stock of, or other equity interest in, the Company.

2.2.5There are no outstanding Contracts to which any member of the Seller Group is a party or is otherwise bound to repurchase, redeem or otherwise acquire any shares, capital stock or other equity interest of the Company.

2.2.6The Share is not subject to and was not issued in violation of any purchase option, call option, right of first refusal, pre-emptive right, subscription right or similar right or any provision of Applicable Law or the constitutional documents of the Company.

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2.3Key Financial Information

2.3.1The Key Financial Information has been prepared by the Seller:

(i)in good faith and with all due care and attention;

(ii)in a manner applying the accounting policies and practices of the Seller’s Group on a consistent basis;

(iii)in accordance with International Financial Reporting Standards as adopted by the European Union;

(iv)is based on information properly extracted from the Seller’s Group accounting records without adjustment; and

(v)having regard to the purpose for which they were prepared, the Key Financial Information presents fairly, in all material respects, the gross profit and revenue in respect of each of the Key Products.

2.4Changes Since 31 December 2013

Except as a result of the execution and delivery of this Agreement from 31 December 2013 to the date of this Agreement:

2.4.1the Business has been conducted in all material respects in the ordinary and usual course;

2.4.2no member of the Seller’s Group has entered into any material contract or commitment outside the ordinary course of business in respect of the Business as conducted prior to 31 December 2013; and

2.4.3to the Seller’s knowledge, there has been no event or circumstance arising which is reasonably likely to have had a Material Adverse Effect (as if reference in the definition of “Material Adverse Effect” to the date of this Agreement were to 31 December 2013).

3.Intellectual Property

3.1Part 1 of Schedule 2 sets out a complete and accurate list of each item of Registered Business Product Intellectual Property Rights, including for each such item, as applicable, (i) the identity of the record owner, (ii) the registration or application number, and (iii) the jurisdiction of issuance or registration.  To the Seller’s Knowledge, all Patents forming part of Registered Business Product Intellectual Property Rights for the Key Products and all Patents forming part of Registered Licensed Product Intellectual Property Rights for the Key Products are subsisting, valid and enforceable and have not lapsed or been abandoned.

3.2All documents and instruments necessary to maintain and preserve any extension of patent terms (including any Patent Term Extensions and Patent Term Adjustments) in relation to (i) Registered Business Product Intellectual Property Rights with respect to the Key Products; and (ii) Registered Licensed Product Intellectual Property Rights with respect to the Key Products where the Seller or its Affiliates controls prosecution and maintenance; and in each case, where such applications have a reasonable

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prospect of success, have been validly executed, delivered, and filed in a timely manner with the appropriate Governmental Entity.  For the purposes of this warranty, the Patent Term Extension application relating to patent number US7378423 shall be deemed to have a reasonable prospect of success.

3.3Each of the patents and patent applications included in the Registered Business Product Intellectual Property Rights for the Key Products and, to the Seller’s Knowledge, in the Registered Licensed Product Intellectual Property Rights for the Key Products, correctly identifies by name each inventor thereof as determined in accordance with the Applicable Law of each jurisdiction in which such patent issued and/or patent application is pending.

3.4All renewal, application and registry fees required for the maintenance, prosecution and enforcement of the Business Product Intellectual Property Rights relating to the Key Products have been paid.

3.5Part 2 of Schedule 2 sets out a complete and accurate list of each material Transferred Intellectual Property Contract (excluding the OBM Intellectual Property Contracts).  No member of the Seller’s Group is in default under any such Transferred Intellectual Property Contract and, to the Seller’s Knowledge, no third party is in default under any such material Transferred Intellectual Property Contract nor has the Seller nor any of its Affiliates given, or received, written notice to terminate any such Transferred Intellectual Property Contract.

3.6The Seller and its Affiliates between them own all Business Product Intellectual Property Rights free of all Encumbrances except Permitted Encumbrances.

3.7To the Seller’s Knowledge, the manufacture, use, research, development, marketing, distribution, and sale of the Products does not infringe or misappropriate any Intellectual Property Rights of any third party and neither the Seller nor any of its Affiliates is a party to any Proceeding (public or private) in relation to such infringement or misappropriation under which the same is alleged.  Neither the Seller nor any of its Affiliates has received any written notice of such infringement or misappropriation.

3.8To the Seller’s Knowledge, no person (including any employees and former employees of the Seller or its Affiliates) is infringing or misappropriating any Business Product Intellectual Property Rights, Registered Licensed Product Intellectual Property Rights under the Genmab Agreement, Registered Licensed Product Intellectual Property Rights under the JTI Agreement or Proprietary Information, and neither Seller nor any of its Affiliates have made any such claims against any such person nor, to the Seller’s Knowledge, is there any basis for such a claim.

3.9The Business Product Intellectual Property Rights, the Shared Product Intellectual Property Rights and the Licensed Product Intellectual Property Rights constitute all the material Intellectual Property Rights used in the manufacture, use, research, development, marketing, distribution and sale of the Products as currently conducted by the Seller and its Affiliates on a worldwide basis, provided however that the foregoing is not a representation of non-infringement, non-misappropriation or any

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other non-violation of Intellectual Property Rights of any third party, which representation is solely set out in paragraph 3.7 above.

3.10Each of the Seller and its Affiliates has taken reasonable steps to protect the confidentiality of Proprietary Information and Know-How relating to the Products.

3.11Except to the extent the Seller is prohibited from doing so under Applicable Law, all material information relating to the COMBI-D trial has been disclosed to the Purchaser and there are no material omissions or inaccuracies in such material.

3.12In relation to each Seller’s Intra-Group Licence Agreement being assigned under an Intellectual Property Assignment (if any), each relevant Assignor hereby represents and warrants that immediately following:

3.12.1the Delayed Closing Date in respect of the Ukraine Business, all sub-licences of the rights granted by the licensee(s) under any such Seller’s Intra-Group Licence Agreement in respect of any Transferred Product Intellectual Property Rights that are registered or held exclusively for use in Ukraine (“Ukrainian IP Rights” for the purposes of this paragraph 3.12) shall terminate insofar as they relate to such Ukrainian IP Rights; and

3.12.2Closing, all sub-licences of the rights granted by the licensee(s) under any such Seller’s Intra-Group Licence Agreement in respect of any Transferred Product Intellectual Property Rights other than Ukrainian IP Rights shall terminate insofar as they relate to such Transferred Product Intellectual Property Rights.

4.Contracts

4.1No Business Seller nor the Company is a party to or subject to any contract, transaction, arrangement, understanding or obligation (other than in relation to any property, lease, contract of employment, Information Technology or Intellectual Property Right) which is material to the manufacture, use, research, development, marketing, distribution and sale of the Products and which:

4.1.1is not in the ordinary course of business or is unduly onerous;

4.1.2is not on an arm’s length basis;

4.1.3has an unexpired term or likely duration of 5 years or more;

4.1.4restricts its freedom to carry on its business in any part of the world in such manner as it thinks fit;

4.1.5involves an aggregate outstanding expenditure by it of more than US$50 million, exclusive of VAT; or

4.1.6involves the sale of goods and services, the aggregate sales value of which (exclusive of VAT) will be more than 5 per cent of turnover of the Business (exclusive of VAT) for the preceding financial year.

4.2Save in relation to a Transferred Intellectual Property Contract, no member of the Seller’s Group is in material default under any material Contract which is relevant to

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the Business and to which it is party, and no third party is in material default under any material Contract which is relevant to the Business to which a member of the Seller’s Group is a party, and to the Seller’s Knowledge, there are no circumstances in either case likely to give rise to such a default.

4.3Other than the Contracts entered into by the Company pursuant to the Pre-Closing Product Reorganisation, Transferred Contracts, Transferred Intellectual Property Contracts and Shared Business Contracts there are no other Contracts which are material to the Business.

5.Agreements with Connected Parties

5.1There are no existing contracts or arrangements material to the Business between, on the one hand, any Business Seller or the Company and, on the other hand, the Seller or any member of the Seller’s Group other than on normal commercial terms in the ordinary course of business.

6.Sufficiency of Assets

6.1Each of the Assets and the Owned Product Intellectual Property Rights is owned both legally and beneficially by a Business Seller or the Company and each of those Assets and the Owned Product Intellectual Property Rights capable of possession is, save where in the possession of third parties in the ordinary course of business, in the possession of a Business Seller or the Company.

6.2Save for Permitted Encumbrances, no option, right to acquire, mortgage, charge, pledge, lien or other form of security or Encumbrance (excluding licences of Intellectual Property or Know-How) or equity on, over or affecting the whole or any part of the Assets or the Owned Product Intellectual Property Rights is outstanding and, save in relation to Permitted Encumbrances, there is no agreement or commitment entered into by any member of the Seller’s Group to give or create any and no claim has been made against any member of the Seller’s Group by any person entitled to any.

6.3The Assets and the Owned Product Intellectual Property Rights, when taken together with the rights and services under the Ancillary Agreements and for the respective terms thereof:

6.3.1comprise all of the assets required to carry out the Business in substantially the same manner as it has been during the twelve months prior to the date of this Agreement; and

6.3.2are sufficient in all material respects to carry out the Business after Closing substantially as conducted by the Seller and its Affiliates as of the date of this Agreement,

provided however, that the foregoing is not a warranty of non-infringement, non-misappropriation or any other non-violation of Intellectual Property Rights of any third party, which warranty is solely set out in paragraph 3.7.

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7.Compliance with Laws, Permits and Anti-Bribery

7.1Neither the Seller nor any of its Affiliates is in breach of any Applicable Law where such breach is reasonably likely to be material to the Business.

7.2Neither the Seller nor any of its Affiliates has received any written notice from any Governmental Entity that it is not in compliance (or any warning letter that it may not be in compliance) with any Applicable Law or is not in possession of any permits, licences, certificates or other authorisations or consents of a Governmental Entity in each case as is necessary for the conduct of the Business in all material respects as presently conducted (each a “Permit” and, collectively, the “Permits”), except where such non-compliance or non-possession does not remain outstanding or uncured as of Closing or would not reasonably be expected to have a material effect on the Business.

7.3With respect to the Business, since 1 January 2009, neither the Seller nor any of its Affiliates, nor any of their respective directors, officers or employees and, to the Seller’s Knowledge, no Seller Partner has, directly or indirectly: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity or to influence official action; (ii) made or offered to make any unlawful payment to any foreign or domestic government official or employee, or agent, political party or any official of such party, or political candidate from corporate funds; (iii) made or offered to make any bribe, rebate, payoff, influence payment, money laundering, kickback or other unlawful payment; or (iv) violated or is in violation of any provision of any applicable Anti-Bribery Law; and with respect to the Business, the Seller and its relevant Affiliates have instituted and maintain policies and procedures reasonably designed to ensure compliance with applicable Anti-Bribery Law.

7.4With respect to the Business, neither the Seller nor any of its Affiliates, nor any of their respective directors, officers or employees and, to the Seller’s Knowledge, no Seller Partner: (i) is currently the subject of, nor has it been since 1 January 2009, the subject of, any action alleging a violation, or possible violation, of any Anti-Bribery Law, or been since 1 January 2009, the recipient of a subpoena, letter of investigation or other document alleging a violation, or possible violation, of any Anti-Bribery Law, or (ii) has, since 1 January 2009, improperly or inaccurately recorded in any books and records (A) any payments, cash, contributions, gifts, hospitalities or entertainment to a foreign or domestic government official, employee of an enterprise owned or controlled in whole or in part by any foreign government, official of a foreign or domestic political party or campaign, or a foreign or domestic candidate for political office; or (B) other expenses related to political activity or lobbying.

7.5With respect to the Business, since 1 January 2009, neither the Seller nor any of its Affiliates, nor any of their respective directors or officers, and, to the Seller’s Knowledge, none of their respective employees has received notice that any such person is or has been alleged to be in violation of any sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or by the U.S. Department of State or equivalent measures of the United Kingdom, European Union, or the United Nations (the “Sanctions Law”).  With respect to the Business, neither the Seller nor any of its Affiliates, nor any of their respective directors or

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officers, and, to the Seller’s Knowledge, none of their respective employees has conducted any of their business activities whatsoever with, or for the benefit of, a government, national or legal entity to the extent such actions would violate any Sanctions Law.  None of the execution, delivery and performance of this Agreement and the direct or indirect use of proceeds from any transaction contemplated hereby or the fulfilment of the terms hereof will result in a violation by any person of any Sanctions Law.

7.6Each member of the Seller’s Group, in connection with the Products, the Product Approvals, the Transferred Contracts, the Shared Business Contracts and the Transferred Intellectual Property Contracts requires its Service Providers to act in accordance with the requirements of applicable Anti-Bribery Law and uses all reasonable endeavours to procure that they do so.  Each such Service Provider has in place policies, systems, controls and procedures designed to prevent, and which are reasonably expected to continue to prevent, it and its Associated Persons from violating applicable Anti-Bribery Law.

8.Product Approvals

8.1The Seller or one of its Affiliates is the registered holder of each of the Product Approvals.  All material Product Approvals held by Seller or its Affiliates are in full force and effect.  No material deficiencies have been asserted by any applicable Government Entity with respect to any Product Approval or Product Filing, nor, to the Seller’s knowledge, are there any facts or circumstances that would be likely to lead to such assertions being made.

8.2Each Product was and is being researched, developed, manufactured, marketed or sold in all material respects in accordance with the specifications and standards contained in the relevant Product Approval and the related Marketing Authorisation Data and in accordance with Applicable Law.

8.3Neither the Seller or any of its Affiliates has received any written notice that any Governmental Entity with jurisdiction over the Products has commenced or will commence any action: (i) to withdraw the approval of any Product or otherwise revoke or materially amend any Product Approval or Marketing Authorisation Data or (ii) enjoin production, marketing or sale of any Product and, to the Seller’s knowledge, no such action has been threatened.

8.4All application and renewal fees due and payable with respect to all material Product Approvals have been paid.

8.5All preclinical and clinical investigations with respect to the Products are being and have been conducted in compliance with Applicable Law in all material respects.  The Seller and its Affiliates have not, and to the Seller’s Knowledge, none of its Product Partners or any other third party under any Licensed Intellectual Property Contract has received since 1 January 2009, any written notices or other correspondence from any Governmental Entity with respect to any on-going clinical or pre-clinical studies or tests of any Product requiring the termination, suspension or material modification of such studies or tests.

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8.6None of the Seller or its Affiliates or, to the Seller’s Knowledge, any Product Partner or any other third parties pursuant to any Licensed Intellectual Property Contract, has any knowledge of any adverse event, arising since the date three years prior to the date of this Agreement, reportable with respect to the safety or efficacy of any Product which is or would reasonably be expected to be material.

9.Product Recall

No Product (or any component thereof) has been recalled, suspended, withdrawn, seized, discontinued or the subject of a refusal to file, clinical hold, deficiency or similar action letter (including any correspondence questioning data integrity) as a result of any action by any Governmental Entity, by the Seller or any of its Affiliates; nor are any such actions pending or under consideration (or any facts, conditions, or circumstance known) by the Seller or any of its Affiliates, or, to the Seller’s Knowledge, by any Governmental Entity.  There is not, to the Seller’s Knowledge, pending or threatened litigation anywhere in the world seeking the recall, withdrawal, suspension, seizure or discontinuance of any of the Products.

10.Product Liability

The Products sold by the Business during the Relevant Period have complied in all material respects with all applicable product specifications and have been Manufactured in all material respects in accordance with applicable requirements of then current GMP and any Applicable Law, except for any such non-compliance that is not, and would not reasonably be expected to have, a materially adverse impact on the relevant Product.

11.Taxes

11.1The Company, each Business Seller and (in either case) each Tax Group to which it belongs has, and every member of the Seller’s Group with an interest in the Business has in respect of the Business, duly, and within any appropriate time limits, filed all Tax Returns required to be filed and has maintained all records required to be maintained for tax purposes in relation to the assets comprised in the Business; all such information was and remains complete and accurate in all material respects and all such Tax Returns were complete and accurate in all material respects and were made on the proper basis.

11.2There are no Tax liens on the Share, any Asset or any Owned Product Intellectual Property Rights comprised in the Business (other than Permitted Encumbrances).

11.3No member of the Seller’s Group with an interest in the Business (including the Company) has received notice from a Tax Authority of, and so far as the Seller is aware, there is not any dispute or disagreement outstanding at the date of this Agreement with any Tax Authority regarding the proper method of computing the profits of the Business (or any part of it) or of the Company for Tax purposes or the proper treatment for VAT purposes of any supplies of goods or services made (or treated as made) in the course of the Business or by the Company and, so far as the Seller is aware, there are no circumstances which make it likely that any such dispute or disagreement will commence.

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11.4So far as the Seller is aware, no Tax Authority has within the past three years operated or agreed to operate any special arrangement (being an arrangement which is not based on relevant legislation or any published practice) in relation to any Assets or Owned Product Intellectual Property Rights comprised in the Business or in relation to the Company or the Share.

11.5In respect of all documents which establish or are necessary to establish the title of the relevant member of the Seller’s Group to the Share and to each material asset comprised in the Business, or by virtue of which the relevant member of the Seller’s Group has any right in respect of each such asset, all applicable stamp duties, transfer taxes, registration charges or similar duties or charges have been duly paid.

12.Employees

12.1The Disclosure Letter contains a true, complete and correct list of the following information in respect of each Employee as of 31 March 2014 (organised by country): (A) employee identification details; (B) date of birth; (C) employment status (part-time or full-time); (D) employment start date; (E) base salary; (F) target annual incentive for 2014 (and actual bonus for 2013); and (G) target long-term incentive for 2014 (and actual long-term incentive for 2013).

12.2In each of the Material Employee Jurisdictions except as would not be reasonably expected to have a Material Adverse Effect:

12.2.1as of the date of this Agreement there is not, and in the two years prior to the date of this Agreement there has not been, nor to the Seller’s Knowledge is there pending or threatened, any labour strike, dispute, work stoppage or lockout by any group of Employees;

12.2.2no trade union or works council is recognised in any way for bargaining, information or consultation purposes in relation to any of the Employees and no collective bargaining negotiations, whether voluntary or mandatory, are currently taking place with respect to any of the Employees and, as of the date of this Agreement, no Business Seller is a party to any agreement (whether legally binding or not) with any trade union or works council affecting any Employee and there is no existing dispute with any such representative body (or, to the Seller’s Knowledge, pending or threatened) in relation to the Business;

12.2.3there is no material litigation, claim or other dispute existing, nor, to the Seller’s Knowledge, pending or threatened by or in respect of any Employees in respect of their employment or any matter arising from their employment; and

12.2.4no Business Seller has, within the 2 years prior to the date of this Agreement, closed any plant or facility, effectuated any layoffs of employees or implemented any early retirement, separation or similar programme in each case in violation of the WARN Act, nor has any Business Seller announced any such action or programme for the future.

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12.3No Key Personnel has given notice terminating his or her contract of employment, nor is under notice of dismissal.

12.4The severance costs disclosed in the Data Room at document 2.2.1.11 represent the Seller’s estimation, calculated in good faith, of the indicative severance cost for a full-time employee at middle-management level in each of the countries listed therein.

12.5Since 31 December 2013, no material change has been made, announced or proposed to the emoluments or other terms of employment of any Employee, and no such change, and no negotiation or request for such a change, is due or expected within 12 months from the date of this Agreement, and the employing company is under no obligation to make such a change (with or without retrospective operation) other than any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 10 of Schedule 8.

12.6The Company has no employees and has never had any, and nor has it ever entered into any service contract or similar arrangements (whether formal or otherwise) with any person.

13.Employee Benefits

13.1The Disclosure Letter contains a true, complete and correct list of all bonus, staff incentives (including any share-based incentive schemes), redundancy or other benefits payable on termination of employment (whether voluntary or involuntary but excluding arrangements required in accordance with Applicable Law), ill-health, Employee Benefits or other benefits which are the material benefits available to the Employees in the Material Employee Jurisdictions.  To the Seller’s Knowledge, other than any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 10 of Schedule 8, no Business Seller has made any promises or commitments to make available any additional benefits to the Employees in the Material Employee Jurisdictions, or to modify or change in any material way any existing benefits in the Material Employee Jurisdictions, or to continue or maintain the level of any existing benefits generally for any period, which in each case could reasonably be expected to have a Material Adverse Effect.

13.2The Disclosure Letter contains true and complete copies of all documents of any written benefit schemes, plans or arrangements referred to in paragraph 13.1 above applicable to Employees in the Material Employee Jurisdictions containing material terms (including governing documents, and for benefit plans that are not share-based incentive schemes, related trust agreements or other funding documents) and a true, complete and correct summary of the material terms of any unwritten benefit schemes, plans or arrangements referred to in paragraph 13.1 above.

13.3Benefit Plans

13.3.1In the Material Employee Jurisdictions, all benefit and compensation schemes, plans, funds, contracts, policies, agreements or arrangements (other than the US Benefit Plans and any schemes, plans, funds, contracts, policies, agreements or arrangements operated by any Governmental Entity) (A) operated by or on behalf of a Business Seller, with respect to Employees, (B) in respect of which any Business Seller, with respect to Employees, the

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Seller or any member of the Seller’s Group contributes or has contributed or (C) in respect of which any Business Seller, with respect to Employees, has any liability (whether actual or contingent), including, but not limited to, plans providing Employee Benefits or during periods of sickness or disablement, or any deferred or incentive compensation, welfare, healthcare, medical, stock or stock-related award plans, including individual pension commitments, “jubilee” pension benefits and retirement and termination indemnity arrangements, and in relation to Switzerland, all plans, funds, contracts, policies, agreements or arrangements providing pension or other benefits on retirement (such schemes, plans, funds, contracts, policies, agreements and arrangements hereinafter being referred to as “Non-US Benefit Plans”) and the US Benefit Plans have been administered in accordance with their terms and are in compliance with Applicable Law, except for any failures to so administer or be in compliance that, individually and in the aggregate, would not reasonably be expected to have a Material Adverse Effect.  All required filings for all Benefit Plans have been made on time and with the appropriate Governmental Entity, except for any failures to timely file that, individually and in the aggregate, would not reasonably be expected to have a Material Adverse Effect.  As of the date of this Agreement there is no existing, pending or, to the Seller’s Knowledge, threatened material litigation, claim or other dispute relating to Benefit Plans.

13.3.2The Business Sellers, with respect to Employees in each Material Employee Jurisdiction, (A) are in material compliance with all Applicable Law respecting employment, employment practices, terms and conditions of employment, occupational health, safety, wages and hours, (B) have withheld all amounts required by Applicable Law, collective bargaining agreements or the Benefit Plans to be withheld from the wages, salaries or other payments to the Employees, (C) in respect of the Employees, are not liable under any applicable provisions of the Benefit Plans and any Applicable Law for any arrears, wages, Taxes, other than payments not yet due, or any penalty for failure to comply with the foregoing and (D) are not liable under any applicable provisions of the Benefit Plans and any Applicable Law for any payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation benefits, workers compensation, social security or other benefits for Employees, other than payments not yet due, except, in each case, for any failures to comply, failures to withhold or liabilities that, individually and in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

13.3.3All material contributions that the Business Sellers, with respect to Employees in a Material Employee Jurisdiction, and Switzerland, are required to make to any Benefit Plan in respect of the period on or before the date of this Agreement have been fully and timely paid when due.

13.4The Company has never established, sponsored, participated in or contributed to any arrangement or agreed to do so for providing pensions or other benefits on, or in anticipation of, the retirement, death, accident or sickness of any current or former director or employee of any company.

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14.Litigation

14.1No Business Seller nor the Company is involved whether as claimant or defendant or other party in any claim or Proceeding (other than as claimant in the collection of debts arising in the ordinary course of its business none of which exceeds US$5 million) which is material to the Business or a Key Product.

14.2To the Seller’s Knowledge, no such claim or Proceeding of material importance is pending or threatened by or against any Business Seller or the Company.

15.Insolvency

15.1No order has been made and no resolution has been passed for the winding up of any Business Seller, the Share Seller or the Company or for the appointment of any administrator, receiver (including administrative receiver) or liquidator (provisional or otherwise) over the whole or any part of the property, assets and/or undertaking of any Business Seller, the Share Seller or the Company.

15.2No petition has been presented or meeting convened for the purpose of considering a resolution or resolution circulated for the winding up of any Business Seller, the  Share Seller or the Company, or for the appointment of any administrator, receiver (including administrative receiver) or liquidator (provisional or otherwise) over the whole or any part of the property, assets and/or undertaking of any Business Seller,  the Share Seller or the Company.

15.3Each of the Business Sellers, the Share Seller and the Company has not stopped payment or suspended payment of its debts generally, is not insolvent or deemed unable to pay its debts as they fall due.

16.Insurance

All material insurance policies relating to the Business are in full force and effect and, to the Seller’s Knowledge, no notice of cancellation, termination or default has been received with respect to any such insurance policy.  All premiums due and payable on such policies covering periods up to Closing have been paid in full or accrued.

17.Consents and Licences

17.1All governmental and quasi-governmental licences, consents, permissions, waivers, exceptions and approvals required for carrying on the Business, the absence of which, individually or in the aggregate, would be material to the Business, are in force and, to the Seller’s Knowledge, no written notice has been received by the Seller or any member of the Seller’s Group which indicates that any such licence, consent, permission, waiver, exception or approval is likely to be revoked or which may confer a right of revocation.

18.Delinquent and Wrongful Acts

18.1To the Seller’s Knowledge, no member of the Seller’s Group has, during the Relevant Period, committed any criminal or illegal act which relates to the Business.

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18.2No member of the Seller’s Group has, during the Relevant Period, received notification that any investigation or inquiry is being or has been conducted by any supranational, national or local authority or governmental agency specifically related to the Business, which is material in respect of the Business.

19.Compliance

19.1No member of the Seller’s Group has received in the Relevant Period any written notification or written claim (in each case, which remains outstanding) that it has conducted the Business with respect to the research, development, manufacturing, distribution and sale of the Products in a manner which does not in any respect comply with all Applicable Law, or which in any respect is defective or dangerous, where the pursuit of any such notification or claim is, or would reasonably be expected to be, material in respect of the Business or any of the Key Products.

19.2So far as the Seller is aware, the Business has, and has during the Relevant Period been, operated in all material respects in compliance with all Applicable Law or standards and to the Seller’s Knowledge there are no circumstances that could involve or lead to a material violation of any material Applicable Laws or standards.

20.Pipeline Products

20.1The information set out in Schedule 1 with respect to the Product Expansions is true and accurate.

20.2The Seller or one of its Affiliates is the registered holder of each of the Product Expansion Applications, and each Product Expansion Application can be transferred to the Purchaser (or another member of the Purchaser’s Group) regardless as to whether such transfer occurs directly (whether by way of transfer, reissuance or any other equivalent mechanism under Applicable Law of the relevant jurisdiction) or indirectly (through the transfer to a member of the Purchaser Group).

20.3All development activities in relation to the Product Expansions have been conducted in the ordinary course and in accordance with Applicable Law and standards and to the Seller’s Knowledge there are no circumstances relating to the development of the Product Expansions that could involve or lead to a material violation of any material Applicable Law or standards.

20.4No material regulatory, clinical or safety event has occurred in relation to the Products and no member of the Seller’s Group has received any notification or claim from any person of any such event (or the possibility of any such event).

21.Manufacturing Licences and Manufacture

21.1All Manufacturing Licences which are material to the manufacture of the Products, are in effect and are validly held by a member of the Seller’s Group and during the Relevant Period, to the Seller’s Knowledge, no member of the Seller’s Group has received any written notice of any suit, action or proceeding regarding the revocation or modification of any such Manufacturing Licence.

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21.2No directive, order or notice has been given to the Seller or any member of the Seller’s Group by any relevant regulatory authority to update, modify, amend, vary, supplement or delete any process and/or methodology relevant to the manufacture of any Product and, so far as the Seller is aware, no such directive, order or notice is pending.

22.The Company

22.1The Company does not have outstanding any borrowing or indebtedness with any person who is not a member of the Seller’s Group.

22.2The Company does not have any derivative, hedging or swap arrangements or contracts or anything similar in nature to such documentation.

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Schedule 15
Warranties given by the Purchaser under Clause 9.3

1.Authority and Capacity

1.1Incorporation

The Purchaser is validly existing and is a company duly incorporated and registered under the law of its jurisdiction of incorporation.

1.2Authority to enter into Agreement

1.2.1The Purchaser has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed by it pursuant to or in connection with this Agreement.

1.2.2The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Purchaser in accordance with their respective terms.

1.2.3Except as referred to in this Agreement, the Purchaser:

(i)is not required to make any announcement, consultation, notice, report or filing; and

(ii)does not require any consent, approval, registration, authorisation or permit,

in each case in connection with the performance of this Agreement or any other document referred to in paragraph 1.2.1.

1.2.4The execution and delivery of the documents referred to in paragraph 1.2.1 and the performance by the Purchaser and each member of its Group of their respective obligations under them, will not:

(i)result in a breach of any provision of the memorandum or articles of association or by laws or equivalent constitutional document of the relevant member of the Purchaser’s Group;

(ii)result in a breach of, or constitute a default under, any instrument or contract to which the relevant member of the Purchaser’s Group is party or by which the relevant member of the Purchaser’s Group is bound where such breach is material to their ability to perform their obligations under such documents;

(iii)result in a breach of any existing order, judgment or decree of any court, Governmental Entity by which the relevant member of the Purchaser’s Group is bound and where such breach is material to their ability to perform their obligations under such documents.

1.3Authorisation

The Purchaser has taken, or will have taken by Closing, all corporate action required by it to authorise it to enter into and to perform this Agreement, any Ancillary

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Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Ancillary Agreement.

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Schedule 16
Certificate
(Clause 4.4)

To: Novartis AG

[Date]

Certificate

This Certificate is issued in accordance with Clause 4.4.1(iii)(b) and paragraph 1.1.3 of Schedule 12 of the sale and purchase agreement between Novartis AG and GlaxoSmithKline plc dated 22 April 2014 (as amended) (the “Agreement”).  Unless otherwise defined, capitalised words used in this Certificate shall have the meanings given to them in the Agreement.

We confirm that:

1.no Material Adverse Effect has occurred between the date of the Agreement and the date of this Certificate;

2.having made due and careful enquiry, we are not aware of any breach or breaches of Clause 9.1 which alone or together give rise to a Material Adverse Effect; and

[either]

3.having made due and careful enquiry, we are not aware of any breach or breaches of the Seller’s Warranties that would have occurred and that would, alone or together, have given rise to a Material Adverse Effect had the Seller’s Warranties been repeated immediately before Closing by reference to the facts, circumstances and knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date.

[or]

3.having made due and careful enquiry, we are aware of the following material breaches of the Seller’s Warranties that would, alone or together, be material and have occurred had the Seller’s Warranties been repeated immediately before Closing by reference to the facts, circumstances and knowledge then existing as if references in the Seller’s Warranties to the date of this Agreement were references to the Closing Date.

[description of material breaches.]

For and on behalf of GlaxoSmithKline plc

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Schedule 17
Key Study Plans

[***]

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Schedule 18
Pre-Closing Product Reorganisation

Part 1Description of the Pre-Closing Product Reorganisation

1.For the purposes of this Schedule:

“Category 1A Assets” means:

(i)all the Transferred Product Intellectual Property Rights which are owned directly by GIPL and relate to Votrient (including the right to call for full legal title to such Transferred Product Intellectual Property Rights for no consideration), other than legal title to such Transferred Intellectual Property Rights; and

(ii)for so long as the Votrient LLC Licence remains in force, the licensed interest in all Transferred Product Intellectual Property Rights licensed under the Votrient LLC Licence,

and which for the avoidance of doubt shall not include any Transferred Intellectual Property Contracts but shall, for the purposes of steps 9 to 12, include any Category 2 Assets which have merged by operation of law with those Transferred Product Intellectual Property Rights following Step 6;

“Category 1B Assets” means:

(i)all the Transferred Product Intellectual Property Rights which are owned directly by SB Cork and relate to Tykerb (including the right to call for full legal title to such Transferred Product Intellectual Property Rights for no consideration), other than legal title to such Transferred Product Intellectual Property Rights; and

(ii)for so long as the Tykerb LLC Licence remains in force, the licensed interest in all the Transferred Product Intellectual Property Rights licensed under the Tykerb LLC Licence,

and which for the avoidance of doubt shall not include any Transferred Intellectual Property Contracts but shall, for the purposes of steps 9 to 12, include any Category 2 Assets which have merged by operation of law with those Transferred Product Intellectual Property Rights following Step 6;

“Category 2 Assets” means full legal and beneficial economic ownership of all the Transferred Product Intellectual Property Rights, other than the Category 1A Assets and Category 1B Assets, that relate to Votrient or Tykerb and are owned by GSK LLC, SB Cork, GIPL, GlaxoSmithKline Inc, GlaxoSmithKline K.K, SmithKline Beecham Limited, GlaxoSmithKline GMBH & CO. KG, GlaxoSmithKline BRASIL LIMITADA, GlaxoSmithKline Korea Limited, GlaxoSmithKline EOOD, GlaxoSmithKline D.O.O., GlaxoSmithKline OY, Groupe GlaxoSmithKline S.A.S., GlaxoSmithKline Medical And Healthcare Products Limited, GlaxoSmithKline S.P.A., GlaxoSmithKline Slovakia S.R.O., GlaxoSmithKline Holding AS or GGL and which for the avoidance of doubt shall not include any Transferred Intellectual Property Contracts;

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“Company” means Leo Osprey Limited, a company incorporated in England and Wales on 16 April 2014 under company number 9000270, whose registered office is 980 Great West Road, Brentford, TW8 9GS, United Kingdom, which has an issued share capital of one share of £1 and whose sole shareholder is Glaxo Group Limited;

“Company Intra-Group Debt” means all sums owed by the Company to GlaxoSmithKline Finance plc at the Closing Date (immediately prior to Closing) as shall be notified by the Seller to the Purchaser in accordance with Clause 6.3.2;

“Company Tax Indemnity” means the deed of tax covenant relating to the Company, in the Agreed Terms;

“Direct Indemnity” means the deed of covenant directly in favour of the Company in the form of Clause 2.3.6 of this Agreement and of the Company Tax Indemnity, mutatis mutandis, in the Agreed Terms;

“GFplc” means GlaxoSmithKline Finance plc;

“GGL” means Glaxo Group Limited;

“GIPL” means GlaxoSmithKline Intellectual Property Limited;

“GIPL B Share” means one share in GIPL carrying a right to a preferential special dividend by GIPL of the Category 1A Assets, whereupon the GIPL B Share shall convert into a deferred share having no voting rights and economic rights typical of deferred shares created in a B share scheme implemented by an English public limited company;

“GIPL Estimated Value” means £2,934,000,000;

“GSKHIL” means GlaxoSmithKline Holdings (Ireland) Limited;

“GSKHIL B Share” means one share in GSKHIL carrying a right to a preferential dividend by GSKHIL of the Category 1B Assets, whereupon the GSKHIL B Share shall convert into a deferred share having no voting rights and economic rights typical of deferred shares created in a B share scheme implemented by an English public limited company;

“GSKHIL Estimated Value” means £147,000,000;

“GSK LLC” means GlaxoSmithKline LLC;

“Purchaser Tax Indemnity” means the deed of tax covenant relating to the Purchaser’s Group, in the Agreed Terms;

“SB Cork” means SmithKline Beecham (Cork) Limited;

“Setfirst” means Setfirst Limited;

“Share” means the entire issued share capital of the Company;

“Tykerb LLC Licence” means the licence agreement dated 1 January 2004 between GSK LLC and SB Cork relating to Tykerb (as amended from time to time); and

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“Votrient LLC Licence” means the licence agreement dated 1 July 2008 between GSK LLC and GIPL relating to Votrient (as amended from time to time).

2.Subject to paragraphs 3 and 4 below, and to Part 4 of this Schedule, the Pre-Closing Product Reorganisation shall consist of all of the following steps.

2.1The Seller shall procure that the following steps are taken in the order set out below.

Preliminary step(s)

(A)Any steps necessary to procure that GGL has full legal and beneficial ownership of the Share.

Step 1

(B)The Company shall receive funding sufficient to carry out Step 3 and Step 3A in the form of (i) an intra-group interest-bearing loan from GFplc on terms standard within the Seller’s Group, and (ii) a subscription for ordinary shares by GGL.

(C)GFplc shall provide the Company with an interest-bearing on demand loan facility (which shall terminate at Closing) on terms standard within the Seller’s Group, under which the Company can draw down any further funds it requires to pay any purchase price adjustment on the GIPL B Share or the GSKHIL B Share, as required under paragraph (F)(ii) or (I)(ii) below.

The loans referred to in paragraphs (B)(i) and (C) shall take the form of a single facility.

Step 2

(D)GIPL shall reclassify one ordinary share in its capital, held by GGL, as the GIPL B Share.

Step 3

(E)Promptly after completion of Step 2, the Company shall purchase the GIPL B Share from GGL for consideration reflecting the percentage allocated to Votrient in accordance with Schedule 10 less the fair market value of (i) all the royalty rights in respect of Votrient which are held by members of the Seller’s Group other than the Company and (ii) any Transferred Intellectual Property Contracts to the extent relating to Votrient, as at Closing (the “GIPL Agreed Value”).

(F)The sale terms in respect of the sale and purchase of the GIPL B Share shall provide that:

(i)the GIPL B Share shall be transferred to the Company for the GIPL Estimated Value; and

(ii)as soon as reasonably practicable after the GIPL Agreed Value has been agreed or determined pursuant to Schedule 10, the Company or GGL shall pay the other an amount equal to the difference

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between the GIPL Agreed Value and the GIPL Estimated Value, as appropriate, to ensure that the total amount paid for the GIPL B Share is equal to the GIPL Agreed Value.

(G)The Seller shall procure that, at the Seller’s cost (such that, if any such costs are paid by the Purchaser, the Seller shall reimburse the Purchaser for the amount of such costs): (i) all steps are taken which are necessary to pay any stamp duty and/or stamp duty reserve tax in respect of the sale of the GIPL B Share under this Step 3, and (ii) the GIPL B Share is registered in the name of the Company.

The Company shall subsequently (but before Step 4) enter into arrangements with another member of the Seller’s Group for the exploitation and management of any intellectual property that it may come to hold (the “Exploitation Arrangements”).  The material terms of the Exploitation Arrangements will be provided to the Purchaser in advance in the form of summaries.

Step 3A

(H)Promptly after completion of Step 2, the Company shall purchase the GSKHIL B Share from Setfirst for consideration reflecting the percentage allocated to Tykerb in accordance with Schedule 10 less the fair market value of (i) all the royalty rights in respect of Tykerb which are held by members of the Seller’s Group other than the Company and (ii) any Transferred Intellectual Property Contracts to the extent relating to Tykerb, as at Closing (the “GSKHIL Agreed Value”).  At the time at which the Company acquires the GSKHIL B Share, a wholly-owned subsidiary of GSKHIL will hold all of the Category 1B Assets.  Full beneficial and economic ownership of the Category 1B Assets will be transferred to GSKHIL by its wholly-owned subsidiary by way of dividend.

(I)The sale terms in respect of the sale and purchase of the GSKHIL B Share shall provide that:

(iii)the GSKHIL B Share shall be transferred to the Company for the GSKHIL Estimated Value; and

(iv)as soon as reasonably practicable after the GSKHIL Agreed Value has been agreed or determined pursuant to Schedule 10, the Company or GSKHIL shall pay the other an amount equal to the difference between the GSKHIL Agreed Value and the GSKHIL Estimated Value, as appropriate, to ensure that the total amount paid for the GSKHIL B Share is equal to the GSKHIL Agreed Value.

(J)The Seller shall procure that, at the Seller’s cost (such that, if any such costs are paid by the Purchaser, the Seller shall reimburse the Purchaser for the amount of such costs): (i) all steps are taken which are necessary to pay any stamp duty and/or stamp duty reserve tax in respect of the sale of the GSKHIL B Share under this Step 3, and (ii) the GSKHIL B Share is registered in the name of the Company.

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Step 4

(K)After completion of Step 3, GIPL shall declare a special dividend of the Category 1A Assets on the GIPL B Share and full beneficial and economic ownership of the Category 1A Assets shall be assigned to the Company (the “GIPL Distribution”).  GIPL shall not carry out a capital reduction in connection with such special dividend. The assignment of the Category 1A Assets will become effective at exactly the same time as the assignment of the Category 1B Assets under Step 4A.

Step 4A

(L)On 29 August 2014, GSKHIL shall become resident solely in the UK for UK Tax purposes and shall thereafter remain solely resident in the UK for UK Tax purposes until at least Closing.

(M)After having become resident in the UK for Tax purposes in accordance with paragraph (L) above, GSKHIL shall:

(i)carry out a reduction of capital in order to create distributable reserves; and

(ii)declare a special dividend of the Category 1B Assets on the GSKHIL B Share, to be paid solely out of profits available for distribution at the time the dividend is paid that arose on or after the Company’s acquisition of the GSKHIL B Share,

and full beneficial and economic ownership of the Category 1B Assets shall be assigned to the Company (the “GSKHIL Distribution”). The assignment of the Category 1B Assets will become effective at exactly the same time as the assignment of the Category 1A Assets under Step 4.

2.2After Step 4 and Step 4A and on or before the Business Day before Closing, the Seller shall procure that the following steps are taken.

Step 5

(A)The Company shall sell the GIPL B Share for a nominal amount to a company that is UK resident for UK Tax purposes and is in the same group (within the meaning of section 170 of the Taxation of Chargeable Gains Act 1992) as the Company.

(B)The Company shall exercise its rights under the Transferred Product Intellectual Property Rights falling with limb (i) of the definition of “Category 1A Assets” to procure that registered legal title to the Category 1A Assets is transferred to the Company for no consideration. If all Third Party Consents relevant to any particular Category 1A Asset are not obtained, that Category 1A Asset shall be treated in accordance with paragraph 2.5 below.

Step 5A

(C)The Company shall sell the GSKHIL B Share for a nominal amount to a company that is UK resident for UK Tax purposes and is in the same group

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(within the meaning of section 170 of the Taxation of Chargeable Gains Act 1992) as the Company.

(D)The Company shall exercise its rights under the Transferred Product Intellectual Property Rights falling with limb (i) of the definition of “Category 1B Assets” to procure that registered legal title to the Category 1B Assets is transferred to the Company for no consideration. If all Third Party Consents relevant to any particular Category 1B Asset are not obtained, that Category 1B Asset shall be treated in accordance with paragraph 2.5 below.

2.3After completion of Step 5 and Step 5A and before the Closing Date the Seller shall procure the following actions are taken:

Step 6A

(A)The Company shall transfer full beneficial and economic ownership of the Category 1A Assets and the Category 1B Assets, insofar as each of them relate to Ukraine, to GGL.

2.4After completion of Step 6A and on or before 00:01 (GMT) on the Closing Date the Seller shall procure the following actions are taken.

Step 6B

(A)The Company shall acquire the Category 2 Assets, except insofar as such Category 2 Assets relate to the Ukraine, from the relevant members of the Seller’s Group, either: (i) for consideration in cash reflecting, in respect of each Category 2 Asset, the percentage allocated to the Product to which that Category 2 Asset is attributable in accordance with Schedule 10 less that part attributable to that Product other than that Category 2 Asset; or (ii) to the extent that particular Category 2 Asset represents bare legal title and carries no rights to royalties, for no consideration. If all Third Party Consents relevant to any particular Category 2 Asset are not obtained, that Category 2 Asset shall be treated in accordance with paragraph 2.5 below.

(B)In order to acquire the Category 2 Assets, the Company shall be funded in the form of (i) an intra-group interest-bearing loan from GFplc on terms standard within the Seller’s Group, (ii) an ordinary share subscription from GGL, or (iii) a combination of both.

(C)GSK LLC shall transfer its rights in the Category 2 Assets, insofar as they relate to Ukraine, to GGL.

2.5If a Third Party Consent has not been obtained in respect of any Category 1A Asset, Category 1B Asset or Category 2 Asset before the date on which Step 5 takes effect:

(A)the legal title in the relevant Category 1A Asset, Category 1B Asset or Category 2 Asset affected by the Third Party Consent shall not be transferred to the Company pursuant to Step 5, Step 5A or Step 6; and

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(B)the relevant Category 1A Asset, Category 1B Asset or Category 2 Asset affected by the Third Party Consent will be dealt with in accordance with paragraphs 4 to 6 of Schedule 7.

2.6After completion of Step 6, the Votrient LLC Licence and the Tykerb LLC Licence shall terminate in so far as such licences relate to Business Product Intellectual Property Rights owned by or transferred to the Company. In the event that such termination does not terminate the Tykerb LLC Licence and the Votrient LLC Licence entirely, the licensee interest in the Votrient LLC Licence and the licensee interest in the Tykerb LLC Licence shall then be assigned by the Company to another member of the Seller’s Group.

Step 7

(A)The Company shall:

(i)pay to GFplc an amount equal to the sum of any after-Tax profits generated in respect of the Category 1A Assets since the GIPL Distribution and any after-Tax profits generated in respect of the Category 1B Assets since the GSKHIL Distribution to partly discharge the debt owed by the Company to GFplc; and

(ii)sell to another member of the Seller’s Group any rights to receive future adjustment payments under the Exploitation Arrangements in respect of the use of its assets prior to Closing, in consideration of the payment of £1 and the assumption of any obligations to make payments in respect of the use of such assets prior to Closing.

2.7On:

(A)the day before Closing, the Seller shall procure that the then current accounting period of the Company is terminated on that day; and

(B)the Closing Date but prior to Closing, the Company Intra-Group Debt shall be refinanced into interest-free debts denominated in US dollars in accordance with Clause 6.3.2.

Step 8(a)

2.8On Closing:

(A)the Seller shall procure that GGL will sell; and

(B)the Purchaser shall purchase, or shall procure that a member of the Purchaser Group, will purchase,

the Share in accordance with the terms of this Agreement (and whichever member of the Purchaser’s Group acquires the Share shall be the “Novartis Purchaser” for the purposes of this Schedule).

2.9On Closing, the Purchaser shall procure that the Company will discharge the Company Intra-Group Debt.

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Step 8(b)

2.10For the purpose of discharging the Company Intra-Group Debt in paragraph 2.9, the Company shall receive funding in the form of: (i) a loan from a member of the Purchaser’s Group; (ii) a subscription for ordinary shares in the Company by the Novartis Purchaser; or (iii) a combination of both.  Subject to those constraints, the Purchaser shall be free to decide the form in which this funding is provided to the Company at Closing.

Step 9

2.11Within four weeks after Closing, the relevant member of the Purchaser’s Group shall waive or convert into ordinary shares in the Company any loan provided to the Company under paragraph 2.10, which step may be preceded by a transfer of such loan within the Purchaser’s Group.  The loan may be converted into ordinary shares (rather than being waived) only if the Novartis Purchaser is the creditor under the loan at the time of such conversion.

Step 10

2.12By the later of (a) four weeks after Closing and (b) two weeks after the Seller provides any material which it is required to provide under paragraph 3, the Company shall effect a reduction of share capital using the method prescribed in sections 642-644 of the Companies Act 2006 (reduction of share capital supported by solvency statement) to create an amount of additional distributable reserves at least sufficient for it to distribute the Category 1A Assets and the Category 1B Assets.  Prior to Closing, the Seller shall enter into the Direct Indemnity.

Step 11

2.13By the later of (a) four weeks after Closing and (b) two weeks after the Seller provides any material which it is required to provide under paragraph 3, the Company shall declare a distribution in specie of the Category 1A Assets and the Category 1B Assets and accordingly transfer the Category 1A Assets and the Category 1B Assets to the Novartis Purchaser.

Step 12

2.14By the later of (a) six weeks after Closing and (b) four weeks after the Seller provides any material which it is required to provide under paragraph 3, and to the extent only that the Category 2 Assets continue to have an existence separate to that of the Category 1A Assets and the Category 1B Assets following Step 6, the Company shall either:

(A)sell the Category 2 Assets to the Novartis Purchaser for consideration in cash or one or more debt instruments reflecting, in respect of each Category 2 Asset, the percentage allocated to that Category 2 Asset in accordance with Schedule 10; or

(B)declare a distribution in specie of the Category 2 Assets and transfer the Category 2 Assets to the Novartis Purchaser.

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Step 13

At the Delayed Closing Date in respect of the Ukraine Business, GGL shall transfer its rights in the Category 1A Assets and the Category 1B Assets, insofar as they relate to Ukraine, to Novartis Pharma AG or its designee for nominal consideration.

3.The parties shall co-operate in good faith, and the Seller shall provide any assistance reasonably requested by the Purchaser, in connection with the implementation of any of Steps 9 to 12.  In particular, the parties shall consult before Closing on whether any interim accounts or other material are required to support the reduction of capital at Step 10 and/or the distribution in specie at Step 11.  If the Purchaser considers (acting reasonably and in good faith) that any such material is required, and notifies the Seller of this, then the Seller shall, at its own cost, procure the preparation of this material, with the input and cooperation of the Purchaser, by the later of (a) thirty Business Days after receipt of such notice and (b) ten Business Days before Closing.

4.The Seller may notify the Purchaser in writing, at any time up to five Business Days before Closing, that the Seller no longer wishes to proceed with the Pre-Closing Product Reorganisation set out in this Schedule.  If the Seller notifies the Purchaser to this effect, then:

(A)the Seller shall not be entitled to sell the Share to the Purchaser at Closing; and

(B)the Seller shall reimburse the whole of any reasonable out of pocket costs and expenses incurred by the Purchaser and/or any other member of the Purchaser’s Group in connection with their assessment of the Pre-Closing Product Reorganisation or with any preparation undertaken for Steps 8 to 12 (to the extent that those costs and expenses would not have been incurred had the sale and purchase of the Category 1A Assets, the Category 1B Assets and the Category 2 Assets always been structured as a direct sale of those assets from a member of the Seller’s Group to a member of the Purchaser’s Group).

5.The Seller acknowledges that any decision to proceed with Steps 9 to 12 shall be a matter for the Purchaser and for the then directors of the Company, and that neither the Purchaser nor the Company shall be under any obligation to implement all or any of those steps.

Part 2Seller undertakings

1.The Seller undertakes to procure that, between the date of this Agreement and Closing:

(A)the Company will not acquire any assets which are not the Category 1A Assets, Category 1B Assets, Category 2 Assets or assets arising under or pursuant to the Exploitation Arrangements;

(B)the Company will not carry on any business or other activities, other than the acquisition, management and exploitation of the Category 1A Assets, the Category 1B Assets and Category 2 Assets;

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(C)the Company will not have any employees;

(D)any agreements which the Company enters into in connection with the management and exploitation of the Category 1A Assets, the Category 1B Assets and Category 2 Assets shall be terminated, with immediate effect, by the Company immediately before Closing; and

(E)the Company will not be a member of any VAT group, party to any group payment arrangement or otherwise party to any Tax allocation, contribution, indemnification or sharing arrangement, Tax consolidation or fiscal unity,

except as may be required in connection with the provisions listed in Part 1 of this Schedule or as agreed by the parties.

2.The Seller undertakes that the Company will have no Third Party Indebtedness at Closing, except as agreed by the parties.

3.The Seller shall procure that on Closing the Company will have no debts (other than the Company Intra-Group Debt).

4.For the avoidance of doubt, the Seller acknowledges that the indemnity in Clause 2.3.6 of this Agreement shall apply to the Pre-Closing Product Reorganisation set out in this Schedule.

5.The Seller shall procure that, at Closing, the Company will have a Permitted Cash Receivable equal to the amount for which the Seller would be liable under clause 2 of the Company Tax Indemnity in the absence of clause 3.1(A) of the Company Tax Indemnity.

Part 3Co-operation between the parties; modifications

1.At any time, the parties shall, on the request of the Seller and at the Seller’s expense, cooperate in good faith to identify and, subject to paragraph 4 below, to implement any reasonable steps which can be taken to mitigate or remove any risk in relation to Swiss Tax which will result in a liability or potential liability for the Seller under clause 2 of the Purchaser Tax Indemnity.  For the avoidance of doubt, a step shall not be considered “reasonable” for the purposes of this Part 3 of this Schedule if it may have the effect on increasing an unindemnified Liability of the Purchaser’s Group.

2.Subject to paragraph 4 below, such reasonable steps may include:

(A)the Purchaser seeking a ruling from the Swiss Tax authorities, with both parties having input into the drafting of any ruling application and subsequent correspondence, and with the Seller being consulted in good faith on the approach which should be taken at any discussion, meetings or negotiations with the Swiss Tax authorities to discuss the ruling application, so far as permitted under Swiss law and being informed within a reasonable time thereafter of the outcome of any such discussion, meeting or negotiation (but without giving the Seller any rights to attend); and

(B)amending the steps set out in Part 1 of this Schedule (at the Seller’s sole expense and risk) if, pursuant to their good faith cooperation under

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paragraph 1 of this Part 3, the parties identify any alternative or additional reasonable steps for implementing the Pre-Closing Product Reorganisation set out in this Schedule in a way which reduces or removes any risk indemnified under the Purchaser Tax Indemnity.

3.The parties shall co-operate in good faith in relation to the Company’s affairs with a view to minimising the Company’s balance sheet assets and liabilities, and winding the Company up as soon as commercially practicable, in each case following completion of Step 8 and, if undertaken, Steps 9 to 12 and any agreed modifications to any of those Steps.

4.Any modification or amendment of (including any addition to) the steps set out in Part 1 of this Schedule (other than the Seller electing at any time not to proceed with the Pre-Closing Product Reorganisation) shall require the prior written consent of the Purchaser, not to be unreasonably withheld or delayed.  Without prejudice to any other exercise of a discretion whether or not to give consent, the Purchaser shall not be acting unreasonably if:

(A)it withholds or delays its consent because it believes in good faith that the modification or amendment would result in exposure of any member of the Purchaser’s Group to cost, loss of benefit or Liability; and

(B)the relevant member or members of the Purchaser’s Group would not be indemnified (and the Seller does not agree to indemnify them), in each case to the Purchaser’s reasonable satisfaction, in respect of that cost, loss of benefit or Liability.

5.The parties agree that the Company’s accounts shall record both (i) the redenomination of the Company Intra-Group Debt pursuant to Clause 6.3.2, and (ii) the discharge of the Company Intra-Group Debt on Closing at Step 8(a), using the US$ Spot Rate (as defined in Clause 1.13) as the appropriate spot exchange rate.

6.Nothing done by or at the request of the Seller pursuant to this Part 3 of this Schedule shall in any respect reduce or restrict any rights the Purchaser may have to make a claim against the Seller under the Company Tax Indemnity or the Purchaser Tax Indemnity.

Part 4Definitions

1.In this Schedule, the following expressions shall have the following meanings:

“Indebtedness” means all loans and other financing liabilities and obligations in the nature of borrowed moneys and overdrafts and moneys borrowed, but excluding trade debt and liabilities arising in the ordinary course of business;

“Third Party Indebtedness” means any Indebtedness owed by the Company to any third party and, for the purposes of this definition, third party shall exclude any member of the Seller’s Group;

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Part 5Details of the Company

Name of Company:	Leo Osprey Limited (the “Company”)
Registered Number:	9000270
Registered Office:	980 Great West Road,
	Brentford, TW8 9GS
	United Kingdom
Date and place of incorporation:	16 April 2014, United Kingdom
Issued share capital:	one share of £1
Shareholders and shares held:	Glaxo Group Limited	1 (100%)

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Schedule 19
Pre-Closing Obligations

(Clause 5)

Part 1Seller’s Group Restrictions

The actions for the purposes of Clause 5.1.2 are:

1.1(a) terminate, materially amend (or amend in any respect in relation to a Key Product) or grant any material waiver under (or any waiver in relation to a Key Product) any Transferred Intellectual Property Contract, or (b) terminate any Transferred Contract other than in the ordinary course of business;

1.2fail to comply in all material respects with all Applicable Law, Product Approvals and Marketing Authorisations applicable to the operation of the Business;

1.3assign, dispose of, license (save in respect of non-exclusive licences relating to the Seller’s research, development or Commercialisation of the Products or in respect of any transfers to Glaxo Group Limited as a preliminary step before their sale by Glaxo Group Limited to the Purchaser pursuant to this Agreement) or abandon any material Business Product Intellectual Property Rights (or any Business Product Intellectual Property Rights in respect of a Key Product) or cease to prosecute or fail to maintain, defend, or pursue applications for any material Business Product Intellectual Property Rights (or any Business Product Intellectual Property Rights in respect of a Key Product).  Notwithstanding the foregoing, the parties agree that the restrictions set out in this paragraph 1.3  will not apply in respect of the Abandoned Patents abandoned prior to 22 April 2014;

1.4save where requested in writing by the Purchaser or required by any applicable Governmental Entity, cancel, surrender or materially amend (or amend in any respect in relation to a Key Product) any applications, submissions or filings with respect to Registered Business Product Intellectual Property Rights;

1.5take any further steps to abandon US patent with publication number 2012/0202822;

1.6terminate (except for good cause) the employment of any Key Personnel;

1.7take any steps to increase or reduce the proportion of time spent working in the Business by any employee of any member of the Seller’s Group or to transfer the employment of any Employee to another member of the Seller’s Group or to employ or offer to employ or engage any new persons in the Business other than in the ordinary course of business consistent with past practice and subject to an aggregate increase of not more than 2.5 per cent. in total staff costs of the Business per annum;

1.8make, or commit to make, any changes to the terms and conditions of employment (including pension fund commitments or any increase to remuneration) or to any employee benefit plan of any Employee, other than (a) those required by Applicable Law or (b) pursuant to normal annual pay reviews in the ordinary course of business consistent with past practice and subject to an aggregate increase of not more than 5 per cent. in total staff costs of the Business per annum or (c) retention arrangements (in the form of cash or shares) to retain key employees in connection with the matters

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contemplated by this Agreement as described in paragraphs 9 and 10 of Schedule 8 or (d) those changes to share-based incentive schemes made for the purpose of complying with paragraph 10 of Schedule 8;

1.9make any promises or commitment to any Employees or employee representative body concerning the matters contemplated by this Agreement or offer or otherwise give any assurances to any Employees as to the possibility of continued employment with the Purchaser’s Group after Closing;

1.10make any change or commitment to make any change to the terms of any redundancy policy or practice applying to the Employees (including amounts payable on redundancy);

1.11enter into (where there is no existing agreement) or materially amend any collective bargaining agreement or other contract with a labour organisation, works council or employee organisation to create new or additional obligations for any member of the Seller’s Group, in each case in relation to the Business;

1.12instigate, cease, compromise or settle any litigation or arbitration proceedings related to the Business or the Company in relation to a claim for which the potential liability attaching thereto is in excess of US$5 million;

1.13make any material amendment to any Marketing Authorisation, except to the extent required by: (a) Applicable Law; (b) any Governmental Entity, or (c) the standards, policies and procedures of the Seller’s Group as then in force;

1.14enter into or amend in any material respect any Transferred Contract, or incur any commitment, which is not capable of being terminated without compensation at any time with twelve months’ notice or less or which is not in the ordinary course of business, or which involves or may involve total annual expenditure in excess of US$10 million, exclusive of VAT;

1.15enter into any contract which would materially restrict the freedom of the Business to operate in any part of the world;

1.16save in respect of Intellectual Property Rights, sell, lease, license, transfer or dispose of, or create any Encumbrance (other than a Permitted Encumbrance) over, any material assets (other than any Excluded Asset) of the Business;

1.17undertake any recall or withdrawal of any Product (other than in the ordinary course of business or to comply with Applicable Law);

1.18amend or otherwise modify the constitutional documents of the Company other than minor or administrative amendments or modifications which are not adverse to the Business or to the Purchaser or any member of the Purchaser’s Group;

1.19create, allot or issue, or grant an option or right to subscribe for or purchase, any share capital or other securities or loan capital of the Company;

1.20repay, redeem or repurchase any share capital, or other securities of the Company; and

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1.21cause or permit the Company to be subject to Tax in any jurisdiction other than in the United Kingdom.

Part 2Seller’s Group Obligations

1.Obligations to be satisfied prior to the Closing Date

1.1[***]

1.2The Seller shall procure that the relevant member(s) of the Seller’s Group shall use best efforts to:

1.2.1obtain the unconditional consent of [***] to the assignment to the Purchaser of the rights and obligations of the relevant member of the Seller’s Group under each of the [***] (at the Seller’s cost); and

1.2.2obtain the unconditional consent of [***] to the assignment to the Purchaser of the rights and obligations of the relevant member of the Seller’s Group under the [***] (at the Seller’s cost).

1.3At least 5 Business Days prior to the Closing Date, the Seller shall provide the Purchaser with a list of any required actions that must be taken by the Purchaser within three (3) months after Closing with respect to the payment of any registration, maintenance, or renewal fees or the filing of any documents, applications or certificates in order to maintain Registered Intellectual Property Product Rights in full force and effect.

2.Obligations from the date of the Agreement to the Closing Date

The requirements for the purposes of Clause 5.1.3 are:

2.1so far as permitted by Applicable Law, inform the Purchaser promptly if it becomes aware of, or has reasonable grounds for suspecting any violation of Anti-Bribery Law which is reasonably likely to have an impact on the Business;

2.2maintain in force all Seller’s Group Insurance Policies for the benefit of the Business;

2.3allow the Purchaser and its respective agents, upon reasonable notice, reasonable access to personnel, and such information as the Seller considers reasonable, provided that the obligations of the Seller under this Clause shall not extend to allowing access to information which is (i) reasonably regarded as confidential to the activities of the Seller and the Seller’s Group otherwise than in relation to the Business or (ii) commercially sensitive or other information which is related to the Business if such information cannot be shared with the Purchaser prior to Closing in compliance with Applicable Law;

2.4in so far as it relates to the Business, continue to take such steps as are currently planned by the Seller’s Group in relation to the remediation of the manufacturing site operated by the Seller’s Group in Cork, Ireland;

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2.5maintain and keep any Business Product Intellectual Property Rights and ensure that all filings and notifications required to be made in respect of the same are made in accordance with past practice;

2.6progress, in accordance with past practice, any applications, submissions, filings or other correspondence relating to the grant of new Business Product Intellectual Property Rights;

2.7continue to conduct the Ongoing Clinical Trials in accordance with GCP and the Seller Group’s policies and procedures;

2.8notify the Purchaser in writing of any actual safety or quality issue in respect of any Product or the manufacture of any Product (as soon as reasonably practicable after becoming aware of the same) which issue the relevant member of the Seller’s Group, acting reasonably and in good faith, considers material in the context of the manufacture or commercialisation of such Product;

2.9so far as permitted by Applicable Law, report periodically to the Purchaser concerning the status of the Business, including delivering to the Purchaser as soon as reasonably practicable each month:

2.9.1an update on material commercial developments in relation to the Business and the Products during the previous month;

2.9.2the gross profit for each Product in respect of the previous month; and

2.9.3a report on the month-end in-trade inventory in respect of each Product for the previous month prepared in the ordinary course of business consistent with past practice, together with a comparison against the comparable period of trading for the prior year;

2.10not discontinue or cease to operate or materially reduce the resources applied to any part of the Business related to the Products or the Product Expansions;

2.11continue to promote, market and Commercialise the Products in a manner consistent with past practice;

2.12maintain levels of in-trade inventory in accordance with past practice and not materially accelerate or increase the quantity of the Products distributed to the relevant distributors and/or wholesalers, except in respect of a bona fide increase in demand for the relevant Product by the relevant distributor and/or wholesaler which has not been stimulated in any way by discounts, rebates, claw-backs or the like outside of the ordinary course or the grant of preferred terms offered by the Seller’s Group outside of the ordinary course; and

2.13continue to respond to any Call For New Tender in accordance with past practices in the relevant market.

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Schedule 20
Key Personnel

[***]

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Schedule 21
Regulatory Approvals

1.The following table provides the additional jurisdictions and applicable antitrust, merger control, or foreign investment rules referenced in Clause 4.1.3 of the Agreement.

2.This list of jurisdictions and statutes is not meant to be indicative of a known filing or approval requirement in these jurisdictions.  To the extent that clearances, approvals, waivers, no action letters or consents are not required to be obtained or not otherwise agreed by the parties to be appropriate and waiting periods are not required to have expired in these jurisdictions prior to closing of the transactions contemplated by the Agreement, such clearances, approvals, waivers, no action letters, consents, and waiting period expirations will not be conditions precedent to closing of the transactions contemplated by the Agreement.

Country	Statute Under Which Filing/Approval Is Required
Australia	The Competition and Consumer Act of 2010
Brazil	Law No. 12,529 of November 30, 2011
Canada	The Competition Act
China	The Chinese Anti-Monopoly Law
India	The Competition Act of 2002, as amended by The Competition (Amendment) Act of 2007
Israel	The Restrictive Trade Practices Law, 5748-1988
Japan	The Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade No. 54 of 1947
Mexico	The Federal Law on Economic Competition
New Zealand	The Commerce Act of 1986
Russia	Federal Law No. 135-FZ of July 16, 2006 on Protection of Competition
South Africa	The Competition Act 89 of 1998
South Korea	The Monopoly Regulation and Fair Trade Act
Taiwan	The Fair Trade Law of 1991
Turkey	The Law on Protection of Competition No. 4054 of 1994

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Schedule 22
Ongoing Collaboration

1.Subject to paragraph 4 below, in the event that:

1.1.1any member of the Seller’s Group decides in its applicable governance committee (and in any event before approaching any third party) to seek a third party partner for global or major market (that is, pan-EU, Spain, Italy, UK, Germany, France, US, a group of emerging markets, Switzerland, Japan, Canada or China) co-development or commercialisation of, or to whom to divest rights to, any Relevant Development Product (the “In-scope Relevant Development Product”); or

1.1.2any member of the Seller’s Group proposes to seek a marketing authorisation in a major market (that is, EU, US, Switzerland, Japan, Canada or China) for an In-Scope Relevant Development Product,

the Seller shall (prior to (in the case of paragraph 1.1.1 above) entering into any such discussions with any third party or (in the case of paragraph 1.1.2 above) filing an application for any such marketing authorisation) first notify the Purchaser of the same, including in such notification details of the geographic markets in which it would intend to explore opportunities with the third party.  The Purchaser shall then have a period of 30 days to confirm whether or not it is in principle interested in pursuing discussions regarding the co-development and commercialisation or acquisition of the In-scope Relevant Development Product, and shall specify to the Seller the geographic markets in which it is interested in the opportunity (which need not be limited to the markets specified by the Seller and may be worldwide).  If the Purchaser declines the same or confirms in writing that it is not interested, then the provisions of this Schedule shall cease to apply with respect to such In-scope Relevant Development Product for the following 24 months.

2.If the Purchaser confirms its interest in pursuing discussions, then, during the 6 month period from the date of such notification (the “Negotiation Period”):

2.1the Seller shall not (and shall procure that no other member of its Group shall) enter into any discussions or negotiations with any third party in relation to possible co-development and commercialisation arrangements in respect of or the divestment of the In-scope Relevant Development Product in all territories specified by the Seller and/or the Purchaser in the foregoing notifications;

2.2the Seller shall make available to the Purchaser, subject to reasonable obligations and appropriate arrangements of confidence and compliance, all information reasonably necessary for the Purchaser to assess the opportunity, including information regarding project budgets and costs, timelines and relevant clinical plans and data; and

2.3the Seller and the Purchaser (or the relevant members of their respective Groups) shall negotiate in good faith, the terms and conditions of a co-development and commercialisation arrangement for or divestment of the In-Scope Relevant Development Product, including (without limitation) financial terms, allocation of costs

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and responsibilities, project governance arrangements and appropriate intellectual property licences, which terms and conditions shall include (without limitation), exclusive commercialization rights in favour of the Purchaser with respect to the In-Scope Relevant Development Product and otherwise be reasonable and customary (for similarly situated products).

3.In the event that the Negotiation Period expires and the Seller and the Purchaser (or the relevant members of their respective Groups) have not entered into a binding agreement in relation to the co-development or commercialisation or acquisition of the In-scope Relevant Development Product, then the Seller (or the relevant member of its Group) shall be free:

3.1.1to pursue the continued internal development and commercialisation of such In-scope Relevant Development Product; or

3.1.2at any time thereafter, to enter into discussions and/or negotiations with a third party in relation to the same, provided that for a period of 18 months after such expiration, the Seller shall not enter into an agreement with a third party involving any such co-development and/or commercialisation arrangement for or divestment of the In-scope Relevant Development Product on terms that are more favourable to the third party than those last offered by the Seller to the Purchaser without first notifying the Purchaser of the material terms thereof and offering the Purchaser the right to match the offer by entering into an agreement on such terms (or substantially similar terms if any of such terms are unique to the third party).  In the event that such an offer is made by the Seller, the Purchaser shall have a period of 30 days to accept it.  If the Purchaser does not do so within such period, then the Seller shall be free to proceed with the agreement with the third party on substantially such terms without further restrictions hereunder; provided, that, in the spirit of partnership, the Seller will in any event notify the Purchaser at least 5 days prior to entering into an agreement with a third party regarding such an arrangement or divestment, including (where not restricted by law or contract from doing so) the material terms thereof (it being understood that, other than as provided above, no match right will apply),

and, save as provided in paragraph 3.1.2 above, the provisions of this Schedule shall cease to apply with respect to such In-scope Relevant Development Product.

4.The provisions of this Schedule:

4.1shall expire 12 years and six months after Closing unless renewed by mutual agreement;

4.2shall apply subject to the Seller’s existing written agreements with third parties, provided that the Seller represents and warrants that neither it nor any member of its Group is party to any agreement or arrangement with a third party which would materially impact the expected benefit to the Purchaser of the arrangement set out in this Schedule;

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4.3shall apply notwithstanding Clause 12.1 (Non-compete) and, subject to the provisions of this Schedule, shall not restrict any activities of the Seller’s Group in relation to the research and development (including manufacturing for development) of or relating to Relevant Development Products;

4.4shall not apply to situations where the Seller is seeking a third party partner for the co-development or commercialisation of a broad portfolio of products where the majority of such portfolio is not comprised of Relevant Development Products; and

4.5for the avoidance of doubt, shall not apply to situations where the Seller is seeking a third party contractor to provide research or development services.

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Schedule 23
Seller Marks

[***]

198

Schedule 24
Statement of Company Intra-Group Debt

[***]

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Schedule 25
Delayed Jurisdictions

1.Definitions used in this Schedule

1.1In this Schedule:

“Bangladesh Business” means the assets and liabilities transferring from GlaxoSmithKline Bangladesh Limited to the Designated Purchaser in accordance with this Agreement and the relevant Local Transfer Document;

“Bangladesh Transfer Documents” means the Local Transfer Document in respect of the transfer of the Bangladesh Business to the Designated Purchaser;

“Contract Amount” means the revenues minus the costs derived from the operation of a Contract in respect of a Delayed Business which, if Closing had occurred in respect of the relevant Delayed Business, would be a Transferred Contract, a Transferred Intellectual Property Contract, the Relevant Part of a Shared Business Contract or a Non-transferring Tender, but excluding any amounts taken into consideration in paragraph 4.2 of this Schedule 25;

“Controlled Delayed Business” means a Delayed Business other than a Non-Controlled Delayed Business;

“Delayed Business Representative” has the meaning given to in paragraph 3.3 of this Schedule 25;

“Delayed Employee Costs” means the FTE costs incurred by the Seller’s Group in connection with the employment of the Delayed Employees by the Seller’s Group as provided in paragraph 12.2 of Schedule 8;

“Delayed Indemnity Parties” has the meaning given to it in paragraph 3.12 of this Schedule 25;

“Delay Milestone” means the milestone set out next to the relevant Delayed Business in the Appendix to this Schedule;

“Delay Period” has the meaning given to it in paragraph 4.1 of this Schedule 25;

“Foreign Business Licence” means a foreign business certificate or a foreign business licence from the Thailand Ministry of Commerce to provide transitional services and/or transitional distribution services in Thailand;

“Incremental Delay Liabilities” has the meaning given to it in paragraph 3.12 of this Schedule 25;

“India Business” means the assets and liabilities transferring from GlaxoSmithKline Pharmaceuticals Limited to the Designated Purchaser in accordance with this Agreement and the relevant Local Transfer Document;

“India Transfer Documents” means the Local Transfer Document in respect of the transfer of the India Business to the Designated Purchaser; and

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“Non-Controlled Delayed Business” means each of the Bangladesh Business, the India Business and the Ukraine Business;

“Profit” means the profit or loss deriving from sales of the Products by a Delayed Business in the relevant period calculated in accordance with clause 4.1 of the Transitional Distribution Services Agreement;

“Provider Costs” means those costs set out in clause 4.3(E) to (G) (inclusive) of the Transitional Distribution Services Agreement;

“R&D Costs” mean the research and development costs which do not arise under or relate to a Clinical Trial Agreement incurred by any member of the Seller’s group in relation to Ongoing Clinical Trials undertaken directly by the Seller’s Group but excluding any Delayed Employee Costs; and

“Saudi Business” means the assets and liabilities transferring from Glaxo Saudi Arabia Limited to the Designated Purchaser in accordance with this Agreement and the relevant Local Transfer Document;

“Saudi Transfer Documents” means the Local Transfer Document in respect of the transfer of the Saudi Business to the Designated Purchaser;

“Seller Involvement Instruction” has the meaning given to it in paragraph 3.9 of this Schedule 25;

“Thailand Business” means the assets and liabilities transferring from GlaxoSmithKline (Thailand) Limited to the Designated Purchaser in accordance with this Agreement and the relevant Local Transfer Document;

“Thailand Transfer Documents” means the Local Transfer Document in respect of the transfer of the Thailand Business to the Designated Purchaser;

“Ukraine Business” means the assets and liabilities transferring from GlaxoSmithKline Pharmaceuticals Ukraine LLC to the Purchaser in accordance with this Agreement and the relevant Local Transfer Document; and

“Ukraine Transfer Document” means the Local Transfer Document in respect of the transfer of the Ukraine Business to the Designated Purchaser.

1.2The parties agree that legal ownership of the Delayed Businesses shall not be transferred by the Seller to the Purchaser at Closing but that the Delayed Businesses shall be operated by Seller and that the benefit and burden of such Delayed Business shall be for the Purchaser with effect from the Effective Time on the terms set out in this Schedule.

1.3The Seller and the Purchaser shall (and shall procure that their respective Affiliates shall) use all reasonable endeavours to procure the achievement of each Delay Milestone as soon as possible after the Closing Date.

1.4Delayed Closing in respect of a Delayed Business shall occur on the date which is the last Business Day of the month in which the relevant Delay Milestone has been achieved except that:

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1.4.1where the last day of such month is not a Business Day, the Delayed Closing shall take place on the first Business Day of the following month; and

1.4.2where less than five (5) Business Days remain between achievement of the Delay Milestone and the last Business Day of the month, Delayed Closing shall take place:

(i)on the last Business Day of the following month;

(ii)where the last day of such month is not a Business Day, the Delayed Closing shall take place on the first Business Day of the month following the month referred to in paragraph 1.4.2(i) of this Schedule 25; or

(iii)on such other date as may be agreed between the Purchaser and the Seller,

(the “Delayed Closing Date”).

2.Obligations on Delayed Closing Date

2.1The Sellers’ Obligations

On each Delayed Closing Date, the Seller shall deliver to the Purchaser any relevant Ancillary Agreements relating to the Delayed Business (including, without limitation, any Local Transfer Documents) duly executed by the relevant member of the Seller’s Group.

2.2The Purchaser’s Obligations

2.2.1On each Delayed Closing Date, the Purchaser shall deliver to the Seller any relevant Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents) duly executed by the relevant member of the Purchaser’s Group.

2.2.2For the purposes of compliance with paragraphs 2.1 and 2.2.1 of this Schedule 25, the Seller and the Purchaser shall, between the date of this Agreement and the Delayed Closing Date, negotiate in good faith any and all Ancillary Agreements relating to the Delayed Business (including, without limitation, if required, any Local Transfer Documents) such that they are consistent with the equivalent Ancillary Agreements executed at Closing and shall take all such steps as are required to transfer the Delayed Businesses in accordance with this Agreement and the other Ancillary Agreements.

2.3Tax Indemnity

References in paragraphs 2.1 to 2.2 above to Ancillary Agreements shall not include the Company Tax Indemnity, the Direct Indemnity or the Purchaser Tax Indemnity.

3.Management and Control of Delayed Business

3.1To the maximum extent permissible by Applicable Law and the terms of the Product Approvals and Product Expansion Applications, the parties intend that, pursuant to

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this Schedule 25, all management and control rights and powers that the Seller (or any member of the Seller’s Group) has in relation to a Controlled Delayed Business shall transfer to the Purchaser with effect from Closing.

3.2As soon as reasonably practicable after Closing, the Purchaser shall notify the Seller of the names of its personnel permitted to provide Controlled Business Instructions (“Instructing Personnel”) and the Seller shall be entitled to rely on and act in accordance with Controlled Business Instructions from Instructing Personnel without further verification. Instructions provided by or on behalf of the Purchaser shall not be required to be in writing if they are provided by the Instructing Personnel. The Purchaser shall be free to change its Instructing Personnel from time to time by providing 10 Business Days’ written notice to the Seller’s Delayed Business Representative.

3.3In order to cooperate in managing the implementation of the provisions of this Schedule, the Seller and the Purchaser shall each notify the other of the identity of a senior member of management (the “Delayed Business Representative”) who shall be the primary point of contact in the event that there is any issue in connection with the operation of the provisions in this Schedule.  The parties shall notify each other in writing of the contact details for their respective Delayed Business Representatives from time to time.

3.4From Closing until the relevant Delayed Closing Date, in respect of any Controlled Delayed Business, the Seller (or relevant member of the Seller’s Group) shall:

3.4.1subject to paragraph 3.10 of this Schedule 25 and to the maximum extent permitted by Applicable Law and the terms of any relevant Product Approvals and Product Expansion Applications, act in accordance with any instructions provided to it by any of the Instructing Personnel in relation to any aspect of the management and operation of that Controlled Delayed Business or any part of it, whether in relation to sales, marketing, distribution, research and development or any other activities of that Controlled Delayed Business, the making (or otherwise) of expenditure, investments, employee matters (including the hiring or dismissal of any Delayed Employee), and in each case with the effect that the Purchaser shall have, to the maximum extent permissible by Applicable Law and the terms of any relevant Product Approvals or Production Expansion Applications, the same powers in relation to the relevant Controlled Delayed Business as it would have following the Delayed Closing Date of that Controlled Delayed Business (in each case, a “Controlled Business Instruction”);

3.4.2comply with the provisions of Schedule 6 in relation to Product Approvals and Product Expansion Applications relating to the Controlled Delayed Businesses; and

3.4.3except to the extent otherwise instructed by the Purchaser’s Instructing Personnel in accordance with this paragraph 3.4 or as required by Schedule 6, ensure that the Controlled Delayed Business is carried on in the ordinary course of business consistent with past practice in relation to that Controlled Delayed Business,

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and provided that the Seller shall not be required pursuant to a Controlled Business Instruction to take any action (or omit to take any action) in relation to any of its business (or the business of the Seller’s Group) that is not a Delayed Business.

3.5The provisions of Clause 5 and Schedule 19 shall not apply in respect of any Controlled Delayed Business following Closing and the provisions of Clause 12.1 shall not apply in respect of any Delayed Business from Closing.

3.6The Purchaser shall (or shall procure that its Affiliates shall) supply such assistance and access (including the supply of products, the supply of services and access to Transferred Books and Records and Commercial Information, but excluding any access to Intellectual Property Rights except as referred to in paragraph 3.7 below) as shall be reasonably necessary to allow the Seller to operate each Delayed Business in accordance with this Schedule.

3.7The Purchaser shall (or shall procure that its Affiliates shall) grant the Seller from Closing a non-exclusive, fully paid up, royalty free and sub-licensable licence or sub-licence (as applicable) to use, notwithstanding any other provision of this Agreement or any of the Ancillary Agreements, the Transferred Intellectual Property Rights and Intellectual Property Rights licensed to the Purchaser under any Ancillary Agreement for the sole purpose of (i) operating each Delayed Business in accordance with the provisions of this Schedule 25; and (ii) exercising the Seller’s rights to research, Develop, Manufacture, and Commercialise the Ofatumumab Product in the Field solely in accordance with the Permitted Uses (as defined in the Ofatumumab Intellectual Property Licence Agreement). This licence shall continue on a country by country basis, in relation to each Delayed Business until the date on which that Delayed Business has been transferred by the Seller to the Purchaser in accordance with this Schedule.

3.8Delayed Employees who are engaged in a Controlled Delayed Business shall report to the management of the Purchaser and shall be treated for such management and reporting purposes in the same way as any employee of the Purchaser’s Group. Controlled Business Instructions may, accordingly, be given by the Instructing Personnel directly to any Delayed Employee engaged in a Controlled Delayed Business.

3.9To the extent that the implementation of any Controlled Business Instruction requires an action or actions of a person employed by the Seller’s Group who is not a Delayed Employee engaged in a Controlled Delayed Business (whether because Applicable Law prevents such Controlled Business Instruction from being made directly to a Delayed Employee or for any other reason) (a “Seller Involvement Instruction”), the Purchaser (or relevant member of the Purchaser’s Group) shall also provide the Controlled Business Instruction, in writing (which may include email) to that Seller’s Delayed Business Representative, specifying (i) that it is a Seller Involvement Instruction; (ii) the actions that are required to be taken by such person; and (iii) a reasonable time within which such actions are required to be taken.

3.10The Seller and the Purchaser each acknowledges that the Seller’s Delayed Employees shall continue to be bound by, and shall comply with, the employment

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policies and procedures (including terms and conditions and disciplinary procedures) of the Seller’s Group that apply to employees of such Seller’s Group.

3.11Subject to paragraph 3.10 of this Schedule 25, the Seller and the Purchaser acknowledge that the Seller’s Delayed Employees shall continue to be bound by, and shall comply with the policies of the Seller’s Group provided that the Seller shall provide the Purchaser with copies of its operational and other policies that apply in relation to Controlled Delayed Businesses.  In respect of such policies, the Purchaser may give notice to the Seller that it wishes a particular policy of the Purchaser’s Group to apply in respect of a Controlled Delayed Business and/or the applicable Delayed Employees in addition to the Seller’s equivalent policy.  The Purchaser’s equivalent policy shall apply to the applicable Delayed Employees from the date on which such Delayed Employees are given notice of the relevant policy. If a policy of the Seller and a policy of the Purchaser apply at the same time, if and to the extent there is any inconsistency or conflict between the two policies, the policy which requires behaviour that is least likely to expose the parties to legal, regulatory and/or compliance risk shall prevail.

3.12The Purchaser hereby undertakes to the Seller (for itself and on behalf of each other member of such Seller’s Group) and their respective directors, officers, employees and agents (excluding any Delayed Employees) (the “Delayed Indemnity Parties”) that, with effect from the Effective Time, the Purchaser will indemnify on demand and hold harmless each of the Delayed Indemnity Parties against and in respect of any and all Liabilities, other than Liabilities in respect of Tax that are taken into account in calculating any amount pursuant to paragraph 4.2 of this Schedule 25, resulting directly or indirectly from any Controlled Delayed Business and/or from any Controlled Business Instruction to the extent that (i) such Liabilities are not Assumed Liabilities and (ii) the Delayed Indemnity Parties concerned would not have incurred such Liabilities if the Controlled Delayed Business in question had been transferred to the relevant member of the Purchaser’s Group at Closing (“Incremental Delay Liabilities”) but in any case excluding any such Liabilities to the extent that such Liabilities arise as a result of a breach of paragraph 3.15 of this Schedule 25.

3.13If a Seller is of the opinion that any Controlled Business Instruction may result in any Liability that would fall to be indemnified pursuant to paragraph 3.12 of this Schedule 25, the Seller shall use its reasonable endeavours to inform (and procure that the members of the Seller’s Group shall inform) the Purchaser of that opinion and the reasons for it as soon as reasonably practicable after reaching that opinion.  The indemnity set out in paragraph 3.12 shall not be affected or limited in any way by any failure of any member of the Seller’s Group so to inform the Purchaser.

3.14The Purchaser shall not be entitled to make any claim for damages against a Seller in respect of a breach of a provision of this Schedule 25 otherwise than pursuant to a claim brought under paragraph 3.15 of this Schedule 25.

3.15The Seller shall procure that:

3.15.1for Controlled Business Instructions that are not Seller Involvement Instructions, neither it nor any of its Associated Persons shall act (or fail to act) fraudulently or with Gross Negligence in connection with the

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implementation of any Controlled Delayed Business or Controlled Business Instruction.  “Gross Negligence” for these purposes means any act or failure to act by the Seller (or any of its Associated Persons that: (i) the Seller (or the relevant Associated Person) knew may create a risk of material harm to the relevant Controlled Delayed Business; (ii) was intended to cause such harm, or was done in reckless disregard of, or in wanton indifference to, such risk of harm; and (iii) in all the circumstances (having regard to both the probability and seriousness of such harm) was an unreasonable risk for the Seller (or the relevant Associated Person) to take; and

3.15.2for Seller Involvement Instructions, neither it nor any of its Associated Persons shall act (or fail to act) fraudulently or negligently or in wilful default in connection with the implementation of the Seller Involvement Instruction and shall take no step which is intended to prevent the implementation of a Seller Involvement Instruction,

but it shall not be a breach of this paragraph 3.15 (and shall accordingly not be acting with Gross Negligence for the purposes of this paragraph) to carry out any act, or fail to act, if to do so is:

(i)required in connection with a Controlled Business Instruction;

(ii)required to comply with Applicable Law;

(iii)required to implement or comply with the terms of this Agreement or any Ancillary Agreement; or

(iv)taken to mitigate any other loss or damage to the Controlled Delayed Business which the Seller (or the relevant Associated Person) believes, acting reasonably and in good faith, could be material in the context of that Controlled Delayed Business.

In any event, no claim shall be made by the Purchaser (and the Purchaser shall ensure that no member of the Purchaser’s Group shall make any claim) for any breach of any other provisions of this Agreement (or the provisions of any Ancillary Agreement) by a Seller (or any member of the Seller’s Group) that occurs in order to comply with any Controlled Business Instruction.

3.16Prior to the making of any claim under this Schedule 25, the parties shall use reasonable endeavours to escalate such matter first for consideration to the Delayed Business Representatives and then to the Purchaser’s and the Seller’s chief financial officers, for the purposes of seeking to resolve such matter within a period of 30 days following such escalation.

3.17Subject to Applicable Law, the Seller shall, in the period between Closing and the relevant Delayed Closing Date, promptly upon request by the Purchaser provide (or procure that any member of its Group shall provide) the Purchaser and its representatives with access to:

3.17.1any books and records of the Seller’s Group to the extent relating to any Delayed Business of the Seller; and

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3.17.2any personnel of the Seller for the purposes of any requests for information from such personnel in relation to the Delayed Business.

For the avoidance of doubt, the parties shall take all steps necessary to ensure that no information is provided to the Purchaser or any person on behalf of the Purchaser which relates to any business of the Seller or any member of the Seller’s Group other than the Controlled Delayed Business.

3.18For the purposes of the Warranties deemed repeated by the Seller (on behalf of the relevant Business Seller) immediately before Closing pursuant to Clause 9.1.5, ownership of the Delayed Businesses shall be deemed to have transferred to the Purchaser at Closing.

Non-Controlled Delayed Businesses

3.19From Closing until the relevant Delayed Closing Date:

3.19.1the other provisions of paragraph 3 of this Schedule 25 shall not apply in respect of the Non-Controlled Delayed Businesses, with the exception of paragraphs 3.6, 3.7, 3.10, 3.17 and 3.18 which shall apply to the extent permitted by Applicable Law; and

3.19.2to the extent permitted by Applicable Law, the provisions of Clause 5 and Schedule 19 will continue to apply to the Non-Controlled Delayed Businesses and the Seller shall exercise such interests, rights and powers that the Seller has in respect of that Non-Controlled Business to the maximum extent that it is able in order to procure that the Non-Controlled Business is operated in accordance with Clause 5 and Schedule 19.

Saudi Business

3.20The Seller and the Purchaser agree that the Saudi Business need not transfer to the Purchaser (or a member of the Purchaser’s Group) on a single date and the Purchaser and the Seller agree to cooperate to ensure that the relevant Assets and Employees shall transfer to the Purchaser (or a member of the Purchaser’s Group or its designee) as soon as this is permitted by Applicable Law.

4.Economic transfer

4.1The economic benefit and burden of the Delayed Business which shall be for the account of the Purchaser in respect of each Delayed Business for the period from the Effective Time to the relevant Delayed Closing Date (the “Delay Period”), shall be calculated and paid in accordance with this paragraph 4.

4.2The economic benefit or burden attributable to each Delayed Business during the Delay Period shall be calculated by the Seller on a monthly basis and shall be:

4.2.1the Profit derived from sales of the Products by the relevant Delayed Business in the relevant month;

minus

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4.2.2the sum of the Provider Costs, the Delayed Employee Costs and the R&D Costs incurred by the relevant Delayed Business in the relevant month,

provided that any cost which falls within more than one of the categories listed in sub-paragraph 4.2.2 shall not be counted more than once.

4.3The provisions of clause 4 of the Transitional Distribution Services Agreement shall apply for the relevant Delay Period in respect of each Delayed Business as if such Delayed Business were subject to the provisions of clause 4 of that agreement from the Effective Time such that:

4.3.1net sales received from the sale and distribution of the Products by each Delayed Business shall be calculated in accordance with clause 4.1(A) of the Transitional Distribution Services Agreement and be included in the relevant  “Sales Report” provided to the Purchaser pursuant to clause 4.3 of the Transitional Distribution Services Agreement; but

4.3.2the amount payable under any “Invoice” pursuant to clause 4.6 of the Transitional Distribution Agreement in respect of each Delayed Business shall be calculated in accordance with paragraph 4.2 above so as to include the relevant Provider Costs, Delayed Employee Costs and R&D Costs and shall be subject to paragraphs 4.4 to 4.6 (inclusive) below.

4.4To the extent that the amount resulting from the calculation set out in paragraph 4.2 above results in a profit (an amount greater than zero) then, if the relevant Delayed Business is a Controlled Delayed Business, such amount shall be added to the amount to be remitted to the Purchaser (or the relevant member of the Purchaser’s Group) in accordance with clause 4 of the Transitional Distribution Services Agreement.

4.5To the extent that the amount resulting from the calculation set out in paragraph 4.2 above results in a loss (an amount less than zero) then, if the relevant Delayed Business is a Controlled Delayed Business, such amount shall be deducted from the amount to be remitted to the Purchaser (or the relevant member of the Purchaser’s Group) in accordance with clause 4 of the Transitional Distribution Services Agreement.

4.6In respect of each Non-Controlled Delayed Business, the accrued profit or loss (as calculated in accordance with paragraph 4.2 above) made by such Non-Controlled Delayed Business in the Delay Period, shall be added or deducted (as applicable) to the amount to be remitted to the Purchaser (or the relevant member of the Purchaser’s Group) on the first date following the Delayed Closing Date in respect of such Non-Controlled Delayed Business on which any profit or loss would be remitted to the relevant member of the Purchaser’s Group under clause 4 of the Transitional Distribution Services Agreement.

4.7Within 30 days after the end of the Delay Period in respect of a Delayed Business the Seller (or relevant Business Seller) shall provide to the Purchaser (or relevant Business Purchaser) a statement setting out, in respect of the relevant Delayed Business:

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4.7.1the Contract Amount in respect of each Contract during the Delay Period; and

4.7.2details of any other revenue, cost or expense of the relevant Delayed Business during the Delay Period which is not a Contract Amount, has not been taken into account under paragraph 4.2 above, and which would need to be taken into account in order to put the Purchaser’s Group and the Seller’s Group in the same economic position they would have been in, taking into account any arrangements that would have been in place in respect of the Delayed Business pursuant to any Ancillary Agreement, had the Delayed Business transferred to the Purchaser at Closing,

(the “Draft Economic Benefit Statement”) and which shall include details of the components of the revenues, costs and expenses incorporated in the Draft Economic Benefit Statement and shall be accompanied by reasonable supporting information.

4.8The Seller shall, and shall procure that the members of the Seller’s Group (and, if applicable, its external accountants) shall, provide to the Purchaser and its Representatives, without charge, such access to their personnel, books and records, calculations and working papers as the Purchaser may reasonably request in connection with its review of the Draft Economic Benefit Statement (and the parties acknowledge that local market information that is not contained on central consolidation systems will only be requested where material in the context of the Draft Economic Benefit Statement as a whole), subject (where applicable) to the Purchaser providing such undertakings as the relevant external accountants may reasonably request, and provided that the Purchaser hereby undertakes to the Seller that it shall procure that each Representative of any member of the Purchaser’s Group who has access to such information shall (i) keep any such information which is commercially sensitive (the “Protected Information”) confidential and shall only disclose such information to, and discuss such information with, other such Representatives who are engaged in the review of the Draft Economic Benefit Statement; (ii) be expressly prohibited from communicating (in any form) any Protected Information to any other employee, agent, adviser or consultant of any member of the Purchaser’s Group; and (iii) be subject to the above requirements whilst employed or engaged by any member of that Purchaser’s Group in any capacity.  The provisions of Clause 13 of this Agreement shall apply mutatis mutandis to such information including, for the avoidance of doubt, to allow (where permitted by that clause) disclosure of information otherwise prohibited to be communicated to any agent, adviser or consultant of the Purchaser’s Group.

4.9The Seller and the Purchaser shall meet within 10 Business Days after the delivery of each Draft Economic Benefit Statement to discuss in good faith and use their reasonable endeavours to agree within 20 Business Days of the commencement of such discussions (or such longer period as they may agree in writing) the contents of the Draft Economic Benefit Statement as soon as reasonably practicable and:

4.9.1any dispute or difference in relation to the Draft Economic Benefit Statement shall be referred to the Co-Chairs appointed by the Seller and Purchaser in accordance with clause 12.1 of the Transitional Distribution Services

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Agreement, who shall be responsible for working within the protocols established between the Parties; and

4.9.2if such dispute is not resolved by such Co-Chairs within 10 Business Days, it shall be referred to the Committee (established under clause 12.1 of the Transitional Distribution Services Agreement) for determination;

4.9.3if such Committee is unable to resolve the dispute within 10 Business Days the dispute shall be referred to the Chief Financial Officer of the Seller and the Chief Financial Officer of the Purchaser for resolution and, if they are unable to resolve the matter within 10 Business Days, the dispute resolution process will be deemed to have been exhausted in respect of such dispute, and each Party shall be free to pursue the rights granted to it by this Agreement in respect of such dispute without further reference to this dispute resolution process.

If the Purchaser and the Seller, or their representatives referred to in this paragraph 4.9 are able to agree the contents of the Draft Economic Benefit Statement, it shall be amended to reflect any changes which have been so agreed and shall then constitute the “Economic Benefit Statement” in respect of that Delayed Business for the relevant Delay Period.

4.10The Contract Amount and the aggregate revenues and the aggregate costs and expenses referred to in paragraph 4.7.2, in each case as set out in the Economic Benefit Statement in respect of a Delayed Business, shall be added or deducted (as applicable) to the amount to be remitted to the Purchaser (or the relevant member of the Purchaser’s Group) on the first date on which any profit would be remitted to the relevant member of the Purchaser’s Group under clause 4 of the Transitional Distribution Services Agreement after either the agreement of the Economic Benefit Statement for such Delayed Business or the exhaustion of the dispute resolution process in accordance with paragraph 4.9 above in respect of the Draft Economic Benefit Statement or, if it is not practicable to make such an addition or deduction, the Seller and the Purchaser may agree that the Seller or the Purchaser (as applicable) shall make the necessary payment as is required to settle the Economic Benefit Statement.

4.11The Seller shall provide to the Purchaser with equivalent information and audit rights in respect of sales of the Products or the calculation of Profit as the Purchaser would have received under the Transitional Distribution Services Agreement had the relevant Delayed Business transferred to the Purchaser on Closing.  The parties agree that the information and audit rights set out in clause 27 of the Transitional Distribution Services Agreement shall apply mutatis mutandis to the Delayed Employee Costs and the R&D Costs.

Appendix
Delayed Businesses

Jurisdiction	Delayed Business	Delay Milestone
Bangladesh	GlaxoSmithKline	The passing of a resolution of the board of Novartis (Bangladesh) Limited validly

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	Bangladesh Limited	approving the acquisition of the Bangladesh Business by the Purchaser and the entry into of the Bangladesh Transfer Documents.
India	GlaxoSmithKline Pharmaceuticals Limited	The receipt by the parties of all necessary approvals, consents and filings from or with the Indian Foreign Investment Promotion Board in respect of the sale and transfer of the India Business and the India Transfer Documents.
Ukraine	GlaxoSmithKline Pharmaceuticals Ukraine LLC	The receipt by the parties of all necessary approvals, consents and filings from or with the Competition Commission of Ukraine in respect of the transfer of the Ukraine Business.
Saudi Arabia	Glaxo Saudi Arabia Ltd	As soon as reasonably practicable after Closing and by written agreement by the parties but no later than the Marketing Authorisation Transfer Date in respect of Saudi Arabia.
Thailand	GlaxoSmithKline (Thailand) Limited	The receipt by the relevant members of the Seller’s Group of a Foreign Business Licence in respect of transitional services and/or transitional distribution services to be provided to the Purchaser in Thailand and, if required, the receipt by the relevant members of the Purchaser’s Group of a Foreign Business Licence in respect of transitional services to be provided by the Purchaser’s Group to the Sellers’s Group.

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Schedule 26
Assets related to China

[***]

212

Schedule 27
Transitional Trademark Licence

1.Transitional Trademark Use

1.1Grant of Transitional Trademark Licence

1.1.1Subject to the terms set out in this paragraph 1, the Seller hereby grants, and shall procure that each member of the Seller’s Group shall grant (as applicable), to the Purchaser from Closing a non-exclusive, worldwide, royalty-free, non-assignable, licence without the right to sub-license (save with the prior written consent of the Seller which shall not be unreasonably withheld or delayed, or as otherwise permitted under paragraph 1.1.7) to use the Seller Marks:

(i)subject to paragraph 1.1.3, on any websites (or related digital assets) which exclusively relate to any Product solely in the manner and to the extent such websites (or related digital assets) bear any Seller Marks as at the Closing Date, which licence shall, unless terminated earlier under paragraph 1.6, continue in force on a country by country basis for the longer of: (i) 6 months from the Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration Date, as applicable, in accordance with Schedule 6; or (ii) for such period following the Closing Date as is required by Applicable Laws, provided that in either case the Purchaser shall, and shall procure that its sub-licensees shall, use all reasonable endeavours to cease such use of such Seller Marks as soon as reasonably practicable following the Closing Date (“GSK Branded Websites”);

(ii)on any Products intended to be sold by the Business as the result of the Manufacturing and Supply Agreements or the Transitional Distribution Services Agreement solely in the manner and to the extent that those Products bear any Seller Marks as at the Closing Date or as is otherwise required by Applicable Law (“GSK Branded Products”); and

(iii)on any stationery, sales literature, patient information leaflets or similar documentation used in the Business, solely in the manner and to the extent such materials: (i) bear any Seller Marks as at the Closing Date; and (ii) relate to the GSK Branded Products (“GSK Branded Literature”)

(the “Transitional Trademark Licence”).

1.1.2Subject to paragraphs 1.1.3, 1.1.4, 1.1.5 and 1.1.6, in each case in respect of paragraphs 1.1.1(ii) and 1.1.1(iii), such licence shall, unless terminated earlier under paragraph 1.6, continue in force, on a country by country basis, in relation to each item of GSK Branded Product (or any GSK Branded Literature related to the same), as applicable, from the Closing Date for the longer of:

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(i)the period required by the Manufacturing and Supply Agreements or the Transitional Distribution Services Agreement, where applicable;

(ii)the period until the Marketing Authorisation Transfer Date or Marketing Authorisation Re-registration, as applicable, in accordance with Schedule 6; or

(iii)such period as is required by Applicable Law.

1.1.3Subject always to paragraph 1.1.6, the parties shall co-operate in the consideration of an extension of any licences granted under this paragraph 1.1 in the event that it is reasonably necessary for any such licences to continue beyond the period contemplated in paragraph 1.1 and the Seller shall not unreasonably withhold its agreement to any such extension.

1.1.4The Purchaser shall, and shall procure that its sub-licensees shall:

(i)use all reasonable endeavours to cease such use of the Seller Marks as soon as reasonably practicable following the Closing Date; and

(ii)use the Seller Marks in accordance with Applicable Law only.

1.1.5Neither the Purchaser nor its sub-licensees shall have any rights under the licences granted in paragraphs 1.1.1(ii) and 1.1.1(iii) to use any of the Seller Marks in relation to any GSK Branded Products whose “sell-by date” or shelf life, as applicable, has passed or expired.

1.1.6The licences granted under paragraphs 1.1.1(i) to 1.1.1(iii) shall expire after 24 months of the Closing Date (the “Long Stop Expiry Date”).

1.1.7The Purchaser shall be entitled to sub-license its rights under the Transitional Trademark Licence to:

(i)any member of the Purchaser’s Group without the prior written consent of the Seller, provided that any act of the sub-licensee, which would if committed by the Purchaser be a breach of any of the terms applying to the Transitional Trademark Licence, shall be treated as an equivalent breach by the Purchaser of the terms of the Transitional Trademark Licence; and

(ii)if the Seller or the Purchaser determines that any sub-licensee under paragraph 1.1.7(i) is using any Seller Marks outside the scope of a permitted sub-licence under this paragraph 1.1, the Purchaser promptly will cause the sub-licensee to cease such unpermitted use and will notify such sub-licensee that it is in material breach of its sub-licence agreement. If the breach continues unremedied for a period of fifteen (15) calendar days after the Purchaser provides notice to such sub-licensee describing the nature of the breach, the Purchaser will, upon the Seller’s request, terminate the applicable sub-licence and will cooperate with the Seller to enforce the Seller’s rights against such former sub-licensee as the Seller directs.

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1.2Reservation of Rights

The Seller reserves all rights in and to the Seller Marks. The Purchaser acknowledges and agrees that as between the Seller (or the relevant member of the Seller’s Group) and the Purchaser, the Seller (or the relevant member of the Seller’s Group) is the sole and exclusive owner of all right, title and interest in and to the Seller Marks, including all goodwill of the business connected with the use of, or symbolised by, the Seller Marks. All goodwill generated from the use of the Seller Marks by the Purchaser or its sub-licensees shall inure solely to the benefit of the Seller (or the relevant member of the Seller’s Group). Nothing in this paragraph 1 grants the Purchaser or its sub-licensees any ownership or other proprietary interest in any Seller Marks.

1.3Restrictions on Use

1.3.1The Purchaser shall have no right pursuant to this paragraph 1 to use or permit any other person to use, any of the Seller Marks as part of a corporate or trading name or to hold itself out or otherwise represent itself to be a member of, or to be associated or connected with, any member or business venture of the Seller’s Group, or permit any other person to do that same.

1.3.2Without limiting the generality of paragraph 1.2 above, the Purchaser will not, nor attempt to, nor permit, enable, or request any other person to:

(i)use any Seller Marks in any manner, or engage in any other act or omission, that would impair the right of the Seller (or the relevant member of the Seller’s Group) in and to the Seller Marks, including any act or omission that would invalidate or cause the cancellation or abandonment of any Seller Marks;

(ii)file, acquire or otherwise obtain any registration for or application to register any Trademark or domain name, or acquire, create or otherwise obtain any social media account that consists of, incorporates, uses, or is confusingly similar to any Seller Marks; whether with any Governmental Entity, internet domain name registrar, social media platform or otherwise (each, a “Registration”);

(iii)adopt or use any variation, derivation or acronym of the Seller Marks or any word, symbol or Trademark that is confusingly similar to the Seller Marks (each, a “Variation”);

(iv)use any Seller Marks with any other word, symbol or Trademark (other than a Trademark assigned or otherwise expressly transferred to the Purchaser pursuant to this Agreement) so as to form a composite Trademark (each, a “Composite”);

(v)represent to any other person that it, any sub-licensee, or any other person (other than the Seller (or the relevant member of the Seller’s Group) or its or their successors in interest to the Seller Marks) has or will have any ownership interest in any Seller Marks; or

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(vi)grant or attempt to grant a security interest in or lien on, record any security interest or lien against, or otherwise encumber, any Seller Marks.

1.4Transfer of Rights

If the Purchaser or any of its sub-licensees has or acquires any rights in or to the Seller Marks, or any Registrations, Composites or Variations, the Purchaser hereby irrevocably assigns, and will cause its sub-licensees to assign irrevocably, all such rights to the Seller. At the request of the Seller, the Purchaser will, and will procure that its sub-licensees will, execute any document, and perform any act reasonably necessary to obtain, or confirm the Seller’s or its designee’s exclusive ownership interest in and to the Seller Marks and Registrations, in each applicable jurisdiction, including executing and delivering applications, oaths, declarations, affidavits, waivers, assignments and other documents.

1.5Quality Control

1.5.1The Purchaser will use, and cause its sub-licensees to use, the Seller Marks under the terms of this paragraph 1 solely in a manner consistent with the operation of the Business immediately prior to the Closing Date.

1.5.2The Purchaser will comply, and will cause its sub-licensees to comply, with any specifications, standards and directions that the Seller may provide in writing from time to time relating to the use of the Seller Marks under this paragraph 1.

1.5.3Concerning any GSK Branded Products manufactured by the Seller or its Affiliates, or by any third party in privity of contract with the Seller or its Affiliates, the Purchaser will not tamper, modify or otherwise take any action, and will procure that its sub-licensees will not tamper, modify or otherwise take any action, to affect the quality of such GSK Branded Products.

1.5.4Concerning any GSK Branded Products manufactured by the Purchaser or its sub-licensees, or by any third party in privity of contract with the Purchaser or its sub-licensees, the Purchaser will ensure that such GSK Branded Products at all times meet or exceed (i) the quality and manufacturing standards of similar products in the GSK Branded Products’ industry; (ii) the Good Manufacturing Practices applicable to such GSK Branded Products, as updated from time to time; (iii) any other standards imposed by the applicable Governmental Entities; and (iv) any specifications and quality provisions set forth in any agreement entered into by the Parties in connection with this Agreement. The Purchaser will notify the Seller in the event that any Product does not meet such standards.

1.5.51.5.5Except where GSK Branded Literature originate with the Seller or the Seller’s Affiliates, the Purchaser will, to the extent physically practicable, include, and will procure that its sub-licensees will include on all GSK Branded Literature and GSK Branded Websites that bear the Seller Marks: (i) a statement that the Seller Marks used thereon is a Trademark of the Seller and used under license (or any similar statement required by the Seller

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concerning the status of the Seller Marks), and (ii) the symbols “®,” “™” or other notice required by the applicable Governmental Entity in proximity to each prominent use of the Seller Marks, all in line with the current practices applied by the Seller or its Affiliates prior to the Closing Date.

1.6Termination of the Transitional Trademark Licence

1.6.1The Seller may terminate the Transitional Trademark Licence and the rights granted to the Purchaser under the same at any time by providing notice of termination to the Purchaser if:

(i)the Purchaser commits a material breach of this paragraph 1 and the breach continues un-remedied for two months after the Seller provides notice to the Purchaser describing the nature of the material breach.

(ii)the Purchaser contests, challenges or otherwise makes any claim or takes any action adverse to the Seller’s (or the relevant member of the Seller’s Group) ownership of or interest in, or the validity of, the Seller Marks, including in any proceeding before any Governmental Entity.

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Schedule 28
Local Payments

[***]

218

Schedule 29
Excluded Employees

[***]

219

Schedule 30
China Product Trademarks

[***]

220

Schedule 31
Anti-bribery and corruption

[***]

221

Schedule 32
Ukraine Business

1.From Closing until the date on which the parties receive all necessary approvals, consents and filings from or with the Antimonopoly Committee of Ukraine in respect of the concentration intended to be effected through the transfer of the Ukraine Business in accordance with this Agreement (such date, the “Ukraine Clearance Date”), the Purchaser and the Seller shall ensure, to the extent each is legally able, that no competitively sensitive information in relation to the Ukraine Business shall be provided to anybody other than: (i) any Delayed Employees located in the Ukraine; and (ii) other employees of any member of the Seller’s Group located outside of the Ukraine who strictly need access to such competitively sensitive information in order to operate the Ukraine Business.

2.From Closing until the Ukraine Clearance Date, the Purchaser shall not, and shall have no right to, exercise any management control over or in relation to the Ukraine Business or any part of the Ukraine Business, there shall be no transfer of any commercially sensitive information between the Sellers and the Purchaser in relation to the Ukraine Business and the Seller shall ensure that the Ukraine Business is in no way held out to any person as being related to the Purchaser.

3.The parties agree that from Closing until the Ukraine Clearance Date:

(i)the Ukraine Business shall constitute a Delayed Business for the purposes of this Agreement;

(ii)to the extent permitted by Applicable Law, the provisions of paragraphs 3.6, 3.7, 3.10, 3.18 and 3.19 of Schedule 25 shall apply in respect of the Ukraine Business;

(iii)the provisions of paragraph 4 of Schedule 25 shall not apply in respect of the Ukraine Business and, after the Ukraine Clearance Date such provisions shall apply with respect to the entire period from the Effective Time until Delayed Closing in respect of the Ukraine Business; and

(iv)if and to the extent permitted by Applicable Law, the provisions of Clause 5 and Schedule 19 will continue to apply to the Ukraine Business.

4.For the avoidance of doubt, the parties agree that during the period from Closing until the Ukraine Clearance Date, the Seller shall not exercise any control over, or derive any economic benefit from, any Intellectual Property Rights relating to the oncology business of the Purchaser’s Group in the Ukraine.

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CONTENTS

CLAUSE	PAGE
1.Interpretation	1
2.Sale and Purchase of the Business	31
3.Amounts Payable	37
4.Conditions	39
5.Pre-Closing	46
6.Closing	49
7.Development Plans	56
8.Post-Closing Obligations	57
9.Warranties	72
10.Limitation of Liability	73
11.Claims	76
12.Restrictive Covenants	78
13.Confidentiality	80
14.Insurance	81
15.France Business and Netherlands Business	82
16.Other Provisions	84
Schedule 1 Products	92
Schedule 2 Certain Intellectual Property Rights Matters (Clause 2.3.1)	93
Schedule 3 Excluded Assets and Excluded Contracts (Clause 2.3.2)	94
Part 1Excluded Assets	94
Part 2Excluded Contracts	94
Schedule 4 Excluded Liabilities (Clause 2.3.4)	95
Schedule 5 Permitted Encumbrances (Clause 1.1)	96
Schedule 6 Product Approvals (Clause 6.2.2)	97
Part 1Terms relating to the Product Approvals	97
Part 2Marketing Authorisation Transfer Provisions	98
Part 3Tenders	107
Schedule 7 Transferred Contracts, Transferred Intellectual Property Contracts, Co-Owned Transferred Product Intellectual Property Rights, and Shared Business Contracts (Clause 2.3.1)	109
Schedule 8 Employees (Clause 2.4.1)	118
Schedule 9 Employee Benefits (Clause 2.4.2)	140
Schedule 10 Allocation (Clause 3.2)	150
Schedule 11 VAT	152
Schedule 12 Closing Obligations	155
Schedule 13 Not Used	157
Schedule 14 Warranties given under Clause 9.1	158

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Schedule 15 Warranties given by the Purchaser under Clause 9.3	173
Schedule 16 Certificate (Clause 4.4)	175
Schedule 17 Key Study Plans	176
Schedule 18 Pre-Closing Product Reorganisation	177
Part 1Description of the Pre-Closing Product Reorganisation	177
Part 2Seller undertakings	185
Part 3Co-operation between the parties; modifications	186
Part 4Definitions	187
Part 5Details of the Company	188
Schedule 19 Pre-Closing Obligations	189
Part 1Seller’s Group Restrictions	189
Part 2Seller’s Group Obligations	191
Schedule 20 Key Personnel	193
Schedule 21 Regulatory Approvals	194
Schedule 22 Ongoing Collaboration	195
Schedule 23 Seller Marks	198
Schedule 24 Statement of Company Intra-Group Debt	199
Schedule 25 Delayed Jurisdictions	200
Schedule 26 Assets related to China	212
Schedule 27 Transitional Trademark Licence	213
Schedule 28 Local Payments	218
Schedule 29 Excluded Employees	219
Schedule 30 China Product Trademarks	220
Schedule 31 Anti-bribery and corruption	221
Schedule 32 Ukraine Business	222

TABLE OF SCHEDULES

(The following schedules and exhibits to the agreement identified above have been omitted in reliance upon Rule 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish such schedules and exhibits to the Commission supplementally upon request.)

Schedule No.	Schedule Name
Schedule 1	Products
Schedule 2	Certain Intellectual Property Rights Matters
Schedule 17	Key Study Plans
Schedule 20	Key Personnel
Schedule 23	Seller Marks
Schedule 24	Statement of Company Intra-Group Debt
Schedule 28	Local Payments
Schedule 29	Excluded Employees
Schedule 30	China Product Trademarks
Schedule 31	Anti-bribery and corruption

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EX-4.7

Exhibit 4.7

Confidential portions of this exhibit have
been omitted and filed separately with the
Securities and Exchange Commission

EXECUTION VERSION

31 July 2015

NOVARTIS AG

and

CSL LIMITED

DEED OF AMENDMENT AND RESTATEMENT

relating to the

SHARE AND BUSINESS SALE AGREEMENT

relating to the Flu Group, dated 26 October 2014

Linklaters LLP

One Silk Street

London EC2Y 8HQ

Telephone (+44) 20 7456 2000

Facsimile (+44) 20 7456 2222

Ref L-225505

This Deed (the “Deed”) is made on 31 July 2015 between:

(1)NOVARTIS AG, a corporation (Aktiengesellschaft) incorporated in Switzerland whose registered office is at Lichtstrasse 35, 4056 Basel, Switzerland (the “Seller”); and

(2)CSL LIMITED, a company incorporated in Australia whose registered office is at 45 Poplar Road, Parkville, Victoria 3052, Australia (the “Purchaser”),

each a “party” and together the “parties”.

Whereas:

(A)The Seller and the Purchaser entered into the Original Agreement (as defined below) on 26 October 2014 (the “Signing Date”).

(B)The Seller and the Purchaser now wish to amend and restate the Original Agreement, in the form of the Amended Agreement (as defined below).

It is agreed as follows:

1Definitions and Interpretation

In this Deed, unless the context otherwise requires, the provisions in this Clause 1 apply.

1.1Incorporation of defined terms

Unless otherwise stated, terms defined in the Original Agreement shall have the same meaning in this Deed.

1.2Definitions

“Amended Agreement” means the Original Agreement, as amended and restated in the form set out in the Schedule to this Deed;

“Original Agreement” means the Share and Business Sale Agreement relating to the Flu Group, dated 26 October 2014; and

“Signing Date” means 26 October 2014.

1.3Interpretation clauses

1.3.1The principles of interpretation set out in clause 1 of the Original Agreement shall have effect as if set out in this Deed, save that references to “this Agreement” shall be construed as references to “this Deed”.

1.3.2References to this Deed include the Schedule.

2Amendment

2.1In accordance with Clauses 15.4.3 and 15.5.1 of the Original Agreement, the parties agree that the Original Agreement shall be amended and restated as set out in the Schedule to this Deed.

2.2The amendment and restatement of the Original Agreement pursuant to Clause 2.1 shall take effect from the Signing Date, as if the Amended Agreement had been entered into on the Signing Date.

2.3Upon this Deed being entered into, the Amendment Agreement shall supersede the Original Agreement in its entirety.

3Miscellaneous

3.1Each party represents and warrants that it has full power and authority to enter into this Deed and to perform its obligations under it.

3.2The provisions of clauses 12, 15.2 to 15.5, 15.11, 15.12 and 15.15 of the Amended Agreement shall apply to this Deed as if set out in full in this Deed and as if references in those clauses to “this Agreement” are references to this Deed and references to “party” or “parties” are references to parties to this Deed.

3.3This Deed may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. A party may enter into this Deed by executing any such counterpart.

4Governing law and submission to jurisdiction

4.1Governing law

This Deed and any non-contractual obligations arising out of or in connection with it are governed by English law.

4.2Jurisdiction

The parties irrevocably agree that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Deed.

In witness whereof this Deed has been delivered on the date first stated above.

SIGNED, SEALED and DELIVERED AS A DEED for NOVARTIS AG a company incorporated under the laws of Switzerland, by its attorneys pursuant to Power of Attorney dated 30 April 2015			/s/ Roy Papatheodorou
			/s/ Christelle Sanglier
In the presence of:	/s/ Rupert Cheyne
Print name of witness: Rupert Cheyne Address: Linklaters LLP

SIGNED, SEALED and DELIVERED AS A DEED for CSL LIMITED a company incorporated in Australia, by its attorney pursuant to Power of Attorney dated 15 October 2014
			/s/ Greg Boss
In the presence of:	/s/ Alec Veznedaroglu
Print name of witness: Alec Veznedaroglu Address: Philadelphia, Pennsylvania

Schedule

Amended Agreement

Dated 26 October 2014

as amended and restated on 31 July 2015

NOVARTIS AG

and

CSL LIMITED

SHARE AND BUSINESS SALE AGREEMENT

relating to the Flu Group

Linklaters LLP
One Silk Street
London EC2Y 8HQ

Telephone (+44 20) 7456 2000

Facsimile (+44 20) 7456 2222

Ref L-225505

A19908996

Share and Business Sale Agreement

This Agreement is made on 26 October 2014 and amended and restated on 31 July 2015 between:

(1)NOVARTIS AG, a corporation (Aktiengesellschaft) incorporated in Switzerland whose registered office is at Lichtstrasse 35, 4056 Basel, Switzerland (the “Seller”); and

(2)CSL LIMITED, a company incorporated in Australia whose registered office is at 45 Poplar Road, Parkville, Victoria 3052, Australia (the “Purchaser”),

each a “party” and together the “parties”.

Whereas:

(A)The Seller and certain of the Seller’s Affiliates, including the Flu Group Companies (as defined below), are engaged in the Business.

(B)As of the date of this Agreement, the Seller and certain of the Seller’s Affiliates directly or indirectly own shares or other equity interests in the Flu Group Companies.

(C)Subject to the terms and conditions of this Agreement, the Seller has agreed to sell (or procure the sale of) the Flu Group (as defined below) and to assume the obligations imposed on the Seller under this Agreement.

(D)Subject to the terms and conditions of this Agreement, the Purchaser has agreed to purchase (or procure the purchase of) the Flu Group and to assume the obligations imposed on the Purchaser under this Agreement.

(E)In connection with the transactions contemplated by this Agreement, the Purchaser and the Seller, or certain of their respective Affiliates, have or will enter into the Ancillary Agreements.

It is agreed as follows:

1Interpretation

In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:

1.1Definitions

“2013 Carve Out Accounts” means the unaudited carve out balance sheet of the Flu Group as at 31 December 2013 and the unaudited carve out profit and loss account and cash flow statement of the Flu Group for the accounting reference period ended on 31 December 2013, as contained in the Data Room at 9.1.2.2.3.1;

“2014 Accounts” means the audited statutory financial statements of each of Novartis Vaccines Holdings Limited and Novartis Vaccines and Diagnostics Limited, prepared in accordance with IFRS as adopted by the European Union and Applicable Law, for the accounting reference period ended on 31 December 2014, comprising the balance sheet, the profit and loss account and the notes to the accounts;

“Accounts” means the audited statutory financial statements of each of Novartis Vaccines Holdings Limited and Novartis Vaccines and Diagnostics Limited for the accounting reference period ended on the Accounts Date, comprising the balance sheet, the profit and

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loss account and the notes to the accounts, as filed with the UK registrar of Companies on 3 October 2014 and as contained in the Data Room at 1.2.1.2.6 and 1.2.1.2.5;

“Accounts Date” means 31 December 2013;

“Affiliate” means, with respect to any person, any other person that Controls, is Controlled by or is under common Control with such person, and “Affiliates” shall be interpreted accordingly;

“Affiliate Contract” means a Contract between or among any member of the Seller’s Group (other than the Flu Group Companies) on the one hand, and any Flu Group Company on the other hand, but excluding any Ancillary Agreement;

“Agreed Form MBASA” means the “Marburg bulk antigen supply agreement” relating to the manufacture and supply of influenza cell culture by the Seller to the Purchaser in the Agreed Terms;

“Agreed Terms” means, in relation to a document, such document in the terms agreed between the Seller and the Purchaser and initialled for identification purposes by the Seller or its representatives and the Purchaser or its representatives, with such alterations as may be agreed in writing between the Seller and the Purchaser from time to time;

“Agreement” means this share and business sale agreement;

“Ancillary Agreements” means:

(a)the Disclosure Letter, the Tax Indemnity and the Local Transfer Documents;

(b)the Global Transitional Services Agreement and any Local Transitional Services Agreement;

(c)the Global Transitional Distribution Services Agreement and any Local Transitional Distribution Services Agreement;

(d)the MF59® Manufacturing and Supply Agreement;

(e)the Purchaser Intellectual Property Licence Agreement, the Intellectual Property Assignment Agreement and the Transitional Trademark Licence;

(f)the Netherlands Offer Letter, the Netherlands APA and the Netherlands Services Agreement;

(g)the US Secondment Agreement, Novartis Share Incentives Plans Record of Terms and the Retirement Benefit Arrangements Purchase Price Adjustment Record of Terms;

(h)the Pharmacovigilance Agreement and the Quality Agreements (including any quality agreements referred to therein);

(i)the Chiron UK Pension Scheme Deed and the Novartis UK Pension Scheme Deed;

(j)the GSK Ancillary Agreements; and

(k)if the Purchaser elects to enter into the Agreed Form MBASA, the Agreed Form, MBASA;

“Anti-Bribery Law” means any Applicable Law that relates to bribery or corruption, including the US Foreign Corrupt Practices Act of 1977 and the UK Bribery Act 2010, in each case as amended, re-enacted or replaced from time to time;

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“Applicable Law” means any supra-national, federal, national, state, municipal or local statute, law, ordinance, regulation, rule, code, order (whether executive, legislative, judicial or otherwise), judgment, injunction, notice, decree or other requirement or rule of law or legal process (including common law), or any other order of, or agreement issued, promulgated or entered into by, any Governmental Entity or any rule or requirement of any national securities exchange, including, for the avoidance of doubt, the Transfer Regulations;

“Assumed Liabilities” has the meaning given to it in Clause 8.1.1;

“Australian Business” means the Business as operated by Novartis Influenza Pty Limited and Novartis Pharmaceuticals Australia Pty Limited;

“Benefit Plans” means the US Benefit Plans and the Non-US Benefit Plans;

“Business” means:

(i)the business conducted by the Seller’s Group from time to time of research, development, manufacture, sales, distribution, marketing and Commercialisation of:

(a)influenza Vaccines and other products using egg-based technologies and related adjuvant technologies;

(b)influenza Vaccines using cell-based technologies, including such business conducted at the Holly Springs Site;

(c)adjuvants conducted at the Holly Springs Site; and

(d)other Vaccines products to the extent that such business is conducted or contemplated to be conducted by the Seller’s Group at the Holly Springs Site in accordance with its obligations to, or as requested by, the US government or regulatory authorities;

(ii)the operations for the manufacture of the MF59® adjuvant located within the Marburg MF59® Premises and at the Holly Springs Site; and

(iii)the technical development, manufacturing and supply of any other pharmaceutical or biological products at the Holly Springs Site;

other than the Excluded Assets;

“Business Assets” has the meaning given to it in Clause 2.3.1 of this Agreement;

“Business Day” means a day which is not a Saturday, a Sunday or a public holiday in the canton of Basel-Stadt (Switzerland), London (UK) or Melbourne (Australia);

“Business Information” means: (i) Commercial Information; (ii) Medical Information; and (iii) any other information Exclusively Related to the Business (including the Products, Pipeline Products and Products Under Registration);

“Business Sellers” means the members of the Seller’s Group (other than the Flu Group Companies) that own assets of or otherwise conduct any of the Flu Group Businesses;

“Cash Balances” means cash in hand or credited to any account with a financial institution and securities which are readily convertible into cash as at the Effective Time;

“Cash Pooling Arrangements” means the cash pooling arrangements of members of the

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Seller’s Group in which the Flu Group Companies participate;

“CFIUS” means the Committee on Foreign Investment in the United States;

“CFIUS Approval” means written notice from CFIUS that any review or investigation of the Transaction under Section 721 of the Defense Production Act of 1950, as amended (50 U.S.C. App. Section 2170), has been concluded and there are no unresolved national security concerns with respect to the Transaction or the President shall have determined not to take action with respect to the Transaction;

“CFIUS Filing” has the meaning given to it in Clause 4.2.9;

“Chiron UK Pension Scheme” means the Chiron UK Pension Scheme;

“Chiron UK Pension Scheme Deed” means the deed to effect the change of principal employer, confirm the interim participation of Novartis Vaccines and Diagnostics Limited and the discharge of liability of Novartis Vaccines Holdings Limited and Novartis Vaccines and Diagnostics Limited, in each case in relation to the Chiron UK Pension Scheme;

“Closing” means the completion of the sale of the Shares and the Flu Group Businesses pursuant to this Agreement and Closing shall be deemed to have taken place notwithstanding that only some parts of the Flu Group Businesses have transferred to the Purchaser on the Closing Date and the Delayed Businesses have not transferred to the Purchaser on the Closing Date;

“Closing Date” means the date on which Closing takes place;

“Closing Statement” means the statement of net assets setting out, inter alia, the Flu Group Companies’ Cash Balances, the Tax Adjustment and the Third Party Indebtedness to be prepared by the Seller and agreed or determined in accordance with Clause 7 and Schedule 14;

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985 of the United States, as amended, section 4980B of the Code, Title I Part 6 of ERISA, and any similar US state group health plan continuation law, together with its implementing regulations;

“Code” means the U.S. Internal Revenue Code of 1986, as amended, together with its implementing regulations;

“Commercial Information” means information that is, as of the Closing Date, or, in respect of any Delayed Business, as of the relevant Delayed Closing Date, as applicable, owned or in the possession of the Seller and/or its Affiliates and relates exclusively to the Commercialisation of any Product or future possible Commercialisation of any Pipeline Product or Product Under Registration other than information which the Seller and/or its Affiliate is required by Applicable Law to retain;

“Commercialisation” means the promotion, marketing, distribution and/or sale of a Product, and “Commercialise” shall be construed accordingly;

“Company Leased Real Properties” has the meaning given to it in Part 1 of Schedule 3;

“Company Leases” has the meaning given to it in Part 1 of Schedule 3;

“Company Owned Real Properties” has the meaning given to it in Part 1 of Schedule 3;

“Company Real Properties” means the Company Owned Real Properties and the

4

Company Leased Real Properties, and “Company Real Property” means any one of them;

“Competition Authorities” has the meaning given to it in Clause 4.1.1;

“Confidentiality Agreement” means the confidentiality agreement dated 12 May 2014 between Novartis International AG and the Purchaser pursuant to which the Seller made available to the Purchaser certain confidential information relating to the Flu Group;

“Contract” means any binding contract, agreement, instrument, lease, licence or commitment, excluding: (i) any lease or other related or similar agreements, undertakings and arrangements with respect to the leasing or ownership of the Properties (to which the provisions set out in Schedule 3 shall apply); and (ii) any contract with any Employee (to which the provisions set out in Schedule 9 shall apply);

“Control” means the power to direct the management and policies of a person (directly or indirectly), whether through ownership of voting securities, by Contract or otherwise, and the term “Controlled” shall be interpreted accordingly;

“Co-Owned Flu Group Intellectual Property Right” means any Flu Group Intellectual Property Right that is owned in part by any person other than the Seller or one of its Affiliates;

“Copyright” means any works of authorship, copyrights, database rights, mask work rights and registrations and applications therefor;

“Data Room” means the electronic data room containing documents and information relating to the Flu Group made available by IntraLinks, Inc. on behalf of the Seller, the index of which has been and initialled for identification purposes by the Seller or its representatives and the Purchaser or its representatives and the contents of which is listed in the Disclosure Letter and copied to a CD ROM that has been exchanged between the parties on or about the date of this Agreement;

“Decision” means the issuing of any decision by any competition, antitrust, foreign investment, national, federal, state, local, supranational or supervisory or other government, governmental, quasi-governmental, trade, or regulatory body, agency, branch, subdivision, department, commission, official or authority, including any Tax Authority and any governmental department and any court or other tribunal, that would have the effect of preventing the consummation of the transactions contemplated by this Agreement;

“Deferred Employee” means, subject to Clauses 5.1.2(xviii) to 5.1.2(xxiv), any person to whom the Seller, any Flu Group Company or any other member of the Seller’s Group has made an offer of employment for a role in the Business and whose employment in the Business will take effect on a date following the Closing Date, save that no person shall become a Deferred Employee unless and until the Seller has provided to the Purchaser a copy of the offer letter setting out the agreed principal terms of employment and/or employment agreement applicable to such person;

“Delayed Businesses” has the meaning given to it in Schedule 24;

“Delayed Jurisdiction” means the jurisdictions in which Business to be transferred to the Purchaser will be subject to Delayed Closings, as listed in Appendix 1 of Schedule 24;

“Delayed Local Payment Amount” has the meaning given to it in Clause 6.5;

“Delayed Local Payments Conversion Rate” means the spot reference rates quoted by

5

the European Central Bank to convert a relevant local currency to US dollars (or if there are no such rates, the spot reference rate quoted by the nearest equivalent institution) on the Business Day immediately preceding the relevant Delayed Closing Date or, if no such rates are quoted on that date, on the preceding date on which such rate is quoted;

“Designated Purchaser” has the meaning given to it in Clause 6.5;

“Disclosed” means fairly disclosed and with sufficient particularity to enable a reasonable purchaser to identify the nature and scope of the fact, matter or circumstances disclosed;

“Disclosure Letter” means the letter dated 26 October 2014 from the Seller to the Purchaser disclosing information against the Seller’s Warranties;

“Draft Closing Statement” has the meaning given to it in Clause 7.1;

“Effective Time” means: (i) if the Closing Date is the last day of a month, 11.59 p.m. (local time in the relevant location) on the Closing Date; or (ii) if the Closing Date is the first Business Day of a month, 11.59 p.m. (local time in the relevant location) on the last day of the immediately preceding month;

“Election Date” has the meaning given in Clause 4.2.9;

“Employee Benefit Liabilities” has the meaning given to it in Schedule 10;

“Employee Benefits” has the meaning given to it in Schedule 10;

“Employee Inventor Payments” means any past or future compensation payments payable to any employee of the Seller’s Group who was an inventor of any Flu Group Intellectual Property Rights provided that the Seller was, prior to the date of this Agreement, aware of such compensation payments being payable to such employee. For the purposes of this definition the Seller’s awareness shall be deemed to refer to the actual knowledge of [***]. For the avoidance of doubt, this shall include the claims brought by employees of Novartis Vaccines and Diagnostics GmbH before the date of this Agreement for inventor compensation under German law for sales of Begrivac between 2006 and 2011 that are based on the employee’s rights in or contributions to the development of the Flu Group Intellectual Property;

“Employees” means the Flu Business Employees and the Flu Group Company Employees, and “Employee” means any one of them;

“Encumbrance” means any claim, charge, mortgage, restriction, lien, option, equitable right, power of sale, pledge, hypothecation, usufruct, retention of title, right of pre-emption, right of first refusal or other security interest of any kind or an agreement, arrangement or obligation to create any of the foregoing, and for the avoidance of doubt shall exclude any licences of or claims of infringement relating to Intellectual Property Rights;

“Environmental Laws” means any and all Applicable Law, Permit or agreement regulating or imposing Liability or standards of conduct concerning pollution or protection of the environment (including air (including air within buildings and other natural or man-made structures above or below the ground), water, or land and any ecological systems and living organisms (including humans) supported by any of those media);

“ERISA” means the Employee Retirement Income Security Act of 1974 of the United States, as amended, together with its implementing regulations;

“Estimated Flu Group Companies’ Cash Balances” means the Seller’s reasonable and

6

good faith estimate of the aggregate of the Flu Group Companies’ Cash Balances, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Tax Adjustment” means the Seller’s reasonable and good faith estimate of the aggregate of the Tax Adjustment, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Estimated Third Party Indebtedness” means the Seller’s reasonable and good faith estimate of the Third Party Indebtedness, to be notified by the Seller to the Purchaser pursuant to Clause 6.4;

“Event” means any transaction, event, circumstance, action or omission, including, without limitation, any change in the residence of any person for the purposes of any Tax, and shall also include Closing;

“Excluded Assets” has the meaning given to it in Clause 2.3.2;

“Excluded Contracts” means, collectively, each Contract: (i) which is not Predominantly Related to the Business; (ii) which is listed in Schedule 5; (iii) which is solely between members of the Seller’s Group (excluding the Flu Group Companies); or (iv) which is a MF59® Platform Intellectual Property Rights Contract;

“Excluded Employees” means the employees listed in Schedule 18;

“Excluded Liabilities” has the meaning given to it in Clause 8.2;

“Exclusively Related to the Business” means exclusively related to, or exclusively used or held for use exclusively in connection with, the Business;

“Executed MBASA” has the meaning given to it in Clause 8.17.1;

“FCC Operations” means the operations (including all assets and liabilities related thereto) for the manufacture of FCC Vaccines at Marburg Germany excluding FCC related Intellectual Property to the extent exclusively related to the Business;

“FCC Vaccines” means bulk influenza Vaccines produced using cell-based technologies;

“FDA” means the United States Food and Drug Administration (or its successor);

“Final Payment Date” means 5 Business Days after the agreement or determination of the Closing Statement in accordance with Clause 7 and Schedule 14;

“Flu Business Employees” means, subject to any changes made in accordance with Clauses 5.1.2(xviii) to 5.1.2(xxiv) (inclusive), but excluding Clause 5.1.2(xxii), the employees of any member of the Seller’s Group who work wholly or mainly in the Business or who perform a critical role in the Business, an indicative list, as at the date of this Agreement, of whom are identified with a unique identifier (not name) as appended to the Disclosure Letter, including, for the avoidance of any doubt, the International Assignees, other than the Flu Group Company Employees and the Excluded Employees, and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at the date of this Agreement” and “Flu Business Employee” means any one of them;

“Flu Group” means the Flu Group Companies and the Flu Group Businesses, taken as a whole;

“Flu Group Businesses” means the businesses of the Business (but excluding the

7

businesses of the Business carried on by the Flu Group Companies) as set out in Clause 2.3.1, but subject always to Clause 2.3.2;

“Flu Group Companies” means:

(i)Novartis Vaccines Holdings Limited and the Subsidiary;

(ii)Novartis Vaccines Influenza Srl; and

(iii)Novartis Influenza Vaccines AG,

and “Flu Group Company” means any one of them;

“Flu Group Companies’ Cash Balances” means the Cash Balances held by or on behalf of the Flu Group which are derived from the Closing Statement;

“Flu Group Company Employees” means, subject to any changes made in accordance with Clauses 5.1.2(xviii) to 5.1.2(xxiv) (inclusive), but excluding Clause 5.1.2(xxii), the employees employed by any of the Flu Group Companies who work wholly or mainly in the Business or who perform a critical role in the Business other than the Excluded Employees, an indicative list of whom, as at 26 October 2014, are identified with a unique identifier (not name) as contained in the Data Room at 5.1.3.5, and provided that, in relation to the Seller’s Warranties only, the words “from time to time” shall be deemed to be replaced by “at 26 October 2014”, and “Flu Group Company Employee” means any one of them;

“Flu Group Information Technology” means the Transferred Information Technology and the Owned Information Technology;

“Flu Group Insurance Policies” means all insurance policies held exclusively by and for the benefit of the Flu Group Companies and “Flu Group Insurance Policy” means any one of them;

“Flu Group Intellectual Property Contracts” means the Transferred Intellectual Property Contracts and the Owned Intellectual Property Contracts;

“Flu Group Intellectual Property Rights” means the Transferred Intellectual Property Rights and the Owned Intellectual Property Rights;

“German Transferred Intellectual Property Rights” means the Transferred Intellectual Property Rights of Novartis Influenza Vaccines Marburg GmbH which shall transfer to Seqirus UK Ltd at Closing;

“Global Transitional Distribution Services Agreement” means the agreement to be entered into at Closing in the Agreed Terms, between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates, relating to the performance of certain activities relating to distribution and the transfer of the Marketing Authorisations;

“Global Transitional Services Agreement” means the transitional services agreement to be entered into at Closing in the Agreed Terms, between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates;

“GMP” means current good manufacturing practices as set out in the ICH Guideline on Good Manufacturing Practice for Active Pharmaceutical Ingredients; the corresponding requirements of any other Governmental Entity and any other good manufacturing practices applicable to the relevant Product, Product Under Registration and Pipeline Product Approval;

8

“Governmental Entity” means any supra-national, federal, national, state, county, local, municipal or other governmental, regulatory or administrative authority, agency, commission or other instrumentality, any court, tribunal or arbitral body with competent jurisdiction, or any national securities exchange or automated quotation service, including, any governmental regulatory authority or agency responsible for the grant approval, clearance, qualification, licensing or permitting of any aspect of the research, development, manufacture, marketing distribution or sale of the Products, Pipeline Products or Products Under Registration, including the FDA, the European Medicines Agency, or any successor agency thereto, but excluding any Tax Authority;

“GSK” means GlaxoSmithKline plc and its Affiliates;

“GSK Ancillary Agreements” means:

(i)the manufacturing and supply agreement pursuant to which GSK will manufacture and supply certain products relating to the treatment of influenza;

(ii)the manufacturing, supply and distribution agreement pursuant to which GSK will undertake certain activities in relation to certain marketing authorisations pending their transfer to, or re-registration by the Seller or the Purchaser; and

(iii)the support services agreement pursuant to which GSK will provide certain clean utility services to the Marburg MF59® Premises (the “GSK Support Services Agreement”),

in each case entered into by GSK and a member of the Seller’s Group on or around 23 October 2014 (and as amended);

“GSK Mixed Contracts” means any Contract which is related both:

(i)to the Business or any part of the Business to be transferred to the Purchaser at Closing or Delayed Closing, as applicable; and

(ii)to any part of the Vaccines business sold by the Seller to GSK,

to which either GSK or a member of the Seller’s Group on the one hand, and any person who is not either a member of the Seller’s Group or the GSK group on the other hand is a party and “GSK Mixed Contract” shall mean any of them;

“GSK Support Services Agreement” shall have the meaning set out in paragraph (iii) of the definition of GSK Ancillary Agreements set out above;

“Hazardous Substance” means any gasoline or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, hazardous wastes, toxic substances, asbestos, pollutants, or contaminants defined as such in or regulated under any applicable Environmental Law;

“Headline Price” has the meaning given to it in Clause 3.1;

“Holly Springs Site” means the Properties located in Holly Springs, North Carolina, United States of America at which the Business undertakes, among other things, Manufacturing activities;

“IFRS” means the International Financial Reporting Standards promulgated by the International Accounting Standards Board;

“lllustrative Statement of Net Assets” has the meaning given to it in Clause 5.7.8(iii);

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“In-Market Inventory” means all inventory of Products for Commercialisation that, at any particular time: (i) is beneficially owned by a member of the Seller’s Group; and (ii) is in finished packed form and released for Commercialisation; and (iii) is located: (a) in (or in transit to) the relevant market; or (b) in (or in transit to) a multi-market warehouse owned or operated by a member of the Seller’s Group or by a third party; or (c) at a Property pending despatch following release by the relevant qualified person to the relevant market or multi-market warehouse;

“Indebtedness” means all loans and other financing liabilities and obligations in the nature of borrowed moneys and overdrafts and moneys borrowed and other debt like items, but excluding trade debt and liabilities arising in the ordinary course of business and excluding any amounts in respect of Tax;

“Information Technology” means computer, hardware, software and network;

“Intellectual Property Assignment Agreements” means the assignments between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates in the Agreed Terms, to be entered into at Closing, in respect of the transfer of certain Intellectual Property Rights in each of the relevant jurisdictions;

“Intellectual Property Litigation” means actual and threatened litigation anywhere in the world with:

(i)[***] in relation to [***] and [***] or counterpart wherever registered; and

(ii)[***], [***] and [***] in relation to [***] or counterpart patents wherever registered;

“Intellectual Property Rights” means all: (i) Patents; (ii) Know-How; (iii) Trademarks; (iv) internet domain names; (v) Copyrights; (vi) rights in designs; (vii) database rights; and (viii) all rights or forms of protection, anywhere in the world, having equivalent or similar effect to the rights referred to in (i) to (vii) above, in each case, whether registered or unregistered and including applications for registration of any such thing;

“International Assignees” means the employees listed in Schedule 19;

“Intra-Group Non-Trade Payables” means all outstanding loans or other financing liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends declared or payable but not paid) owed by a Flu Group Company to a member of the Seller’s Group (other than a Flu Group Company) as at the Effective Time, but excluding: (i) Intra-Group Trading Balances; and (ii) any amounts in respect of Tax;

“Intra-Group Non-Trade Receivables” means all outstanding loans or other financing liabilities or obligations (including, for the avoidance of doubt, interest accrued, dividends declared or payable but not paid) owed by a member of the Seller’s Group (other than a Flu Group Company) to a Flu Group Company as at the Effective Time, but excluding: (i) Intra-Group Trading Balances; and (ii) any amounts in respect of Tax;

“Intra-Group Trading Balances” means all trade accounts and notes receivable or payable arising in the ordinary course between any two members of the Seller’s Group, in each case to the extent related to the Business, together with any unpaid financing charges accrued thereon;

“Judgment” means any order, writ, judgment, injunction, decree, stipulation, determination, Decision or award entered into by or with any Governmental Entity of competent jurisdiction;

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“Key Sites” means the Holly Springs Site and the Liverpool Site, and “Key Site” means any one of them;

“Key Warranty” means the warranties set out in the following paragraphs of Schedule 16:

(i)2.1.2;

(ii)2.3.1 and 2.3.2;

(iii)2.5 (but for these purposes only the words “or Business Seller or Share Seller” in each of paragraphs 2.5.1 and 2.5.2 shall be deemed to be deleted);

(iv)2.11.1(iv) and 2.11.2(iii) (but for these purposes only each such paragraph shall be deemed to include the following additional sentence:

“Neither of the Key Sites (each taken as a whole) is at Closing:

(a)incapable of operation by the Purchaser’s Group without a member of the Purchaser’s Group being in breach of any Applicable Law or any other material duty or obligation; or

(b)otherwise incapable of operation by virtue of some other event, matter, or circumstance,

but only where the circumstances giving rise to the inability of the Purchaser’s Group to operate a Key Site would, or would be reasonably likely to, result in:

A.a Key Site being prohibited from, or otherwise being substantially incapable of, operation for a period of at least three consecutive months in the 12 month period immediately following the Closing Date; and

B.the manufacturing output of that Key Site in the 12 month period following the Closing Date falling by 30 per cent. or more as compared to the manufacturing output at that Key Site in the 12 month period ending on the corresponding date in the immediately preceding year.”;

(v)2.13.3 (but for these purposes only such paragraph shall be deemed to read: “No member of the Seller’s Group has received written notice that it is in material default under any US Government Contract with a value in excess of US$5 million (as determined based on annual sales or expenditure in 2013) or the UK Pandemic Agreement.”);

(vi)2.16.1 (but for these purposes only such paragraph shall be deemed not to include the first sentence);

(vii)2.17.2; and

(viii)2.24;

“Know-How” means all existing and available technical information, know-how and data, including inventions (whether patentable or not), discoveries, trade secrets, specifications, instructions, processes and formulae, including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data;

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“Local Incentive Agreements” means:

(i)the Economic Development Agreement between Novartis Vaccines and Diagnostics, Inc. and the Town of Holly Springs, North Carolina, dated 18 July  2006;

(ii)Grant Agreement between Novartis Vaccines and Diagnostics, Inc. and Wake County, North Carolina, dated 18 July 2006;

(iii)Community Economic Development Agreement between Novartis Vaccines and Diagnostics, Inc. and the Economic Investment Committee of the State of North Carolina, dated 18 July 2006; and

(iv)Community Economic Development Agreement between Novartis Vaccines and Diagnostics, Inc. and the Economic Development Committee of the State of North Carolina, dated 22 December 2010;

“LEK Filling and Packaging Agreement” means the agreement for the production of ready to fill formulation on the declaration of a pandemic entered into by LEK Pharmaceuticals d.d., Sandoz AG and Novartis Vaccines and Diagnostics AG on or about 23 October 2014;

“Liabilities” means all liabilities, claims, damages, proceedings, demands, orders, suits, costs, losses and expenses of every description, whether deriving from contract, common law, statute or otherwise, whether present or future, actual or contingent, ascertained or unascertained or disputed and whether owed or incurred severally or jointly or as principal or surety;

“Liabilities In The Nature Of Working Capital” means any Liabilities in the nature of working capital which are Exclusively Related to the Business and reflected in the Closing Statement (which, for reference only, are or should be included in line items BS01_610 Trade payables (3rd parties and AC), BS01_620 Payables own BU, BS01_630 Payables other BUs, BS01_670 Accrued and other current liabilities (3rd parties and AC));

“LIBOR” means the London interbank offered rate, being the interest rate offered in the London inter-bank market for three month deposits (or such other relevant period) in the relevant currency as displayed on the relevant Reuters screen at 11 a.m. (London) on the date the funding is proposed to be made;

“Liverpool Site” means the Properties located in Liverpool at which the Business undertakes Manufacturing activities;

“Local Transfer Document” has the meaning given to it in Clause 2.6.1;

“Local Transitional Distribution Services Agreement” means the agreement relating to the performance of certain activities relating to distribution and the transfer of the Marketing Authorisations in respect of the Business in a particular country;

“Local Transitional Services Agreement” means any transitional services agreement between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates in respect of the Business in a particular country;

“Long Stop Date” has the meaning given to it in Clause 4.4;

“Losses” means all losses, liabilities, costs (including legal costs and experts’ and consultants’ fees), charges, expenses, actions, proceedings, claims and demands;

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“Manufacture”, “Manufacturing” or “Manufactured” means the planning, purchasing of materials for, production, processing, compounding, storage, filling, packaging, labelling, leafleting, warehousing, quality control testing, waste disposal, quality release, sample retention and stability testing of products;

“Manufacturing Inventory” means any packed inventory of Products that is: (i) in finished form; (ii) beneficially owned by any member of the Seller’s Group; (iii) held at a Property or outside of a Property where secondary packaging is undertaken; and (iv) not yet released by a qualified person of the Seller’s Group; and excluding in each case, for the avoidance of doubt, any In-Market Inventory and Manufacturing Stocks;

“Manufacturing Stocks” means, as at Closing, all stocks of raw materials, active pharmaceutical ingredients, ingredients, adjuvants, drug substances, intermediates, packaging materials, components, devices and other production and pre-production consumables and work-in-progress that are beneficially owned by any member of the Seller’s Group for use in the Manufacture of Products, Products Under Registration or Pipeline Products;

“Marburg MF59® Premises” means the premises leased by the Seller, a member of the Seller’s Group or a member of the Flu Group and which are located in Marburg (Germany) in which the Flu Group undertakes the manufacture of MF59® adjuvant;

“Marketing Authorisation Data” means the existing dossiers in the Seller’s Group possession or control containing the relevant Know-How used by the Seller and/or its Affiliates to obtain and maintain the Marketing Authorisations;

“Marketing Authorisations” means the marketing authorisations issued or applications for marketing authorisations with respect to the Products, Pipeline Products and Products Under Registration and all supplements, amendments and revisions thereto;

“Material Adverse Effect” means any event, occurrence, fact, condition, change or effect that has had or would have a materially adverse effect on the business, financial condition or results of operations of the Flu Group taken as a whole (other than on a short term, cyclical or temporary basis), except to the extent caused by: (i) the transactions contemplated by this Agreement and the Ancillary Agreements and the announcement and consummation thereof; (ii) changes in law, regulation or accounting standards, principles or interpretations thereof applicable to the Business; (iii) changes generally applicable to financial, economic, political or similar conditions (including acts of war, declared or undeclared, armed hostilities and terrorism) or to financial, securities, commodities or other market conditions or prevailing interest rates; (iv) changes generally applicable in the industry in which the Business operates; or (v) any matters disclosed in this Agreement, the Ancillary Agreements, the Disclosure Letter or the Data Room (other than any such matters which would not as at the date of this Agreement have constituted a Material Adverse Effect but which subsequently develop in such a manner as to constitute a Material Adverse Effect as a result of an event or occurrence after the date of this Agreement which could not reasonably have been anticipated at the date of this Agreement);

“Material Employee Jurisdictions” means the United Kingdom, the United States of America, Italy and Switzerland;

“MBASA Confirmation” has the meaning given to it in Clause 8.17.1;

“MDCK Cell Bank” means the master cell bank and working cell bank of Madin Darby

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Canine Kidney cells located in the premises used by the Seller or a member of the Seller’s Group for the manufacture of FCC Vaccines in Marburg, Germany;

“Medical Information” means information relating to clinical and technical matters, such as therapeutic uses for the approved indications, drug-disease information, and other product characteristics Exclusively Related to the Business (including the Products, Pipeline Products and Products Under Registration) which is owned or in the possession of the Seller and/or its Affiliates as of the Closing Date, or, in respect of any Delayed Business, as of the relevant Delayed Closing Date, as applicable, other than information which the Seller and/or its Affiliate is required by Applicable Law to retain;

“MF59® Flu Specific Intellectual Property Rights” means the Intellectual Property Rights owned by the Seller’s Group comprised within the MF59® Rights that are Exclusively Related to the Business;

“MF59® Flu Specific Intellectual Property Rights Contracts” means the Contracts held by the Seller’s Group relating to the Intellectual Property Rights comprised within the MF59® Rights that are Exclusively Related to the Business;

“MF59® Manufacturing and Supply Agreement” means the manufacturing and supply agreement for the supply of MF59® adjuvant to the Seller and/or its Affiliates to be entered into at Closing in the Agreed Terms;

“MF59® Platform Intellectual Property Rights” means the Intellectual Property Rights owned by the Seller’s Group comprised within the MF59® Rights excluding the MF59® Flu Specific Intellectual Property Rights, including the Intellectual Property Rights set out in Schedule 23;

“MF59® Platform Intellectual Property Rights Contracts” means the Contracts held by the Seller’s Group relating to the Intellectual Property Rights comprised within the MF59® Rights excluding the MF59® Flu Specific Intellectual Property Rights Contracts;

“MF59® Rights” means all rights in the MF59® adjuvant owned by or licensed to the Seller’s Group including: (i) all stocks of the adjuvant and materials used in its production; (ii) all Intellectual Property Rights in and relating to the MF59® adjuvant; and (iii) all Intellectual Property Rights in and relating to the manufacture and production or fill finish process relating to the MF59® adjuvant;

“Mixed Contracts” means any Contract which is Predominantly Related to the Business but relates both:

(i)to the Business or any part of the Business to be transferred to the Purchaser at Closing or Delayed Closing, as applicable; and

(ii)to any part of the Seller’s Group Retained Business (as at the date of this Agreement), any product other than the Products, Pipeline Products or Products Under Registration, or any Excluded Asset,

to which a member of the Seller’s Group (including the Flu Group Companies) on the one hand, and any person who is not a member of the Seller’s Group (including the Flu Group Companies) one the other hand is a party and “Mixed Contract” shall mean any of them;

“Netherlands APA” has the meaning given to it in the Netherlands Offer Letter;

“Netherlands Assumed Liabilities” means the Assumed Liabilities to the extent they relate to the Netherlands Business, excluding always the Excluded Liabilities;

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“Netherlands Business” means that part of the Flu Group, comprising:

(i)the Flu Group Businesses as conducted in the Netherlands;

(ii)the Netherlands Assumed Liabilities;

(iii)the Netherlands Employees; and

(iv)any other assets that are exclusively related to the Flu Group Business as conducted in the Netherlands;

“Netherlands Closing” has the meaning given to it in the Netherlands APA;

“Netherlands Employees” means the Employees employed in the Netherlands Business;

“Netherlands Offer Letter” means the letter from the Purchaser to the Seller in respect of the binding offer from the Purchaser to acquire the Netherlands Business dated on or around the date hereof;

“Netherlands Put Option Exercise” has the meaning given to it in the Netherlands Offer Letter;

“Netherlands Services Agreement” means the services agreement with respect to certain services provided by Novartis Pharma B.V. to be entered into between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates at Closing in the Agreed Terms;

“Non-US Benefit Plans” has the meaning given to it in paragraph 2.21.4 of Schedule 16;

“Notice” has the meaning given to it in Clause 15.11.1;

“Novartis Share Incentives Plans Record of Terms” means the letter detailing how share-based incentive plan arrangements are to be treated to be entered into between the Seller and the Purchaser at Closing in the Agreed Terms;

“Novartis UK Pension Scheme” means the Novartis UK Pension Scheme;

“Novartis UK Pension Scheme Deed” means the deed to confirm the interim participation and cessation and discharge of Novartis Vaccines and Diagnostics Limited;

“Owned Information Technology” means all Information Technology of any Flu Group Company to the extent Exclusively Related to the Business;

“Owned Intellectual Property Contracts” means the Contracts Exclusively Related to the Business which relate to Intellectual Property Rights and that are held by the Flu Group Companies;

“Owned Intellectual Property Rights” means the Intellectual Property Rights of any Flu Group Company to the extent Exclusively Related to the Business;

“Patents” means patents, design patents, patent applications and any reissues, re-examinations, divisionals, continuations, continuations-in-part, provisionals, and extensions thereof or any counterparts to any of the foregoing (including rights resulting from any post-grant proceedings relating to any of the foregoing);

“PA Transfer Date” means, in relation to a Product Approval or Product Application, the date upon which the relevant Governmental Entity approves and notifies the Product Approval or Product Application (as applicable) naming the Purchaser or the relevant Affiliate of the Purchaser (or designee thereof) as the holder of such Product Approval or

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Product Application in the relevant country or territory covered by that Product Approval or Product Application;

“Permit” has the meaning given to it in paragraph 2.16.1 of Schedule 16;

“Permitted Encumbrance” means:

(i)Encumbrances for Taxes, assessments and charges or levies of any Governmental Entity not yet delinquent or for which adequate reserves are maintained on any financial statements (including management accounts) relating to the Business, where such financial statements have been made available to the Purchaser;

(ii)Encumbrances imposed by Applicable Law;

(iii)Encumbrances imposed in the ordinary course of business which are not yet due and payable or which are being contested in good faith;

(iv)Encumbrances which are listed in Schedule 6;

(v)except with respect to the Transferred Real Property, pledges or deposits to secure obligations under Applicable Law relating to workers’ compensation, unemployment insurance or to secure public or statutory obligations; and

(vi)except with respect to the Transferred Real Property, liens, title retention arrangements or deposits to secure the performance of bids, trade contracts (other than for borrowed money), conditional sales contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of the Business;

“Pharmacovigilance Agreement” means the agreement to be entered into between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates which defines the roles and responsibilities of the parties in relation to pharmacovigilance activities;

“Pipeline Product” means:

(i)each product in development by the Business set out under the heading “Pipeline Products” in paragraph C of Part 2 of Schedule 7; and

(ii)any other product in development which is Exclusively Related to the Business;

“Pipeline Product Approvals” means all permits, licences, certificates, clearances, registration or other authorisations or consents issued by any Governmental Entity to the Seller or one of its Affiliates in relation to the research and development of Pipeline Products;

“Post Closing Adjustments” means the adjustments to the Purchase Price for Flu Group Companies’ Cash Balances, Third Party Indebtedness and Tax Adjustment as set out in Clause 7;

“Predominantly Related to the Business” means exclusively or predominantly related to, or used or held for use exclusively or predominantly in connection with, the Business;

“Product Applications” means all applications for Product Approval filed with respect to Products Under Registration, with each individual application being a “Product Application”;

“Product Approvals” means all permits, licences, certificates, clearances, registrations or

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other authorisations or consents, including any Marketing Authorisations, issued by any Governmental Entity to the Seller or one of its Affiliates with respect to the Products or the use, research, development, marketing, distribution or sale thereof;

“Products” means:

(i)the products set out under the heading “Products” in paragraph A of Part 2 of Schedule 7; and

(ii)any other products Exclusively Related to the Business;

“Products Under Registration” means:

(i)the products set out under the heading “Products Under Registration” in paragraph B of Part 2 of Schedule 7; and

(ii)any other product under registration Exclusively Related to the Business;

“Properties” means the Company Real Properties, the Transferred Real Properties and the Marburg MF59® Premises and “Property” means any one of them;

“Proprietary Information” means all confidential and proprietary information of the Seller or its Affiliates that is Exclusively Related to the Business, including confidential Medical Information, confidential Know How and confidential Commercial Information;

“Prosecution and Maintenance” means the preparation, filing, prosecution and maintenance of the Flu Group Intellectual Property Rights, and any re-examinations, re-issues, interference actions, oppositions or other similar proceedings before national or supranational patent offices. For the avoidance of doubt, Prosecution and Maintenance shall exclude the enforcement or defence of Flu Group Intellectual Property Rights in any U.S. federal court or any foreign counterpart thereof or before any international trade commission panel;

“Purchase Price” has the meaning given to it in Clause 3.1;

“Purchase Price Bank Accounts” means the accounts notified by the Seller to the Purchaser no later than 5 Business Days prior to the Closing Date;

“Purchaser Intellectual Property Licence Agreement” means the agreement between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates in the Agreed Terms, to be entered into on Closing, in respect of the grant of licences from the Seller’s Group (other than a Flu Group Company) to the Purchaser’s Group of certain Intellectual Property Rights;

[***];

“Purchaser’s Group” means the Purchaser and its Affiliates from time to time;

“Purchaser’s Lawyers” means Baker & McKenzie LLP of 100 New Bridge Street, London, EC4V 6JA, United Kingdom;

“Quality Agreements” means the agreements to be entered into between the Seller and/or one or more of its Affiliates and the Purchaser and/or one or more of its Affiliates, each of which defines the roles and responsibilities of the parties in relation to quality assurance activities in respect of the Transitional Services Agreement, the Global Transitional Distribution Services Agreement and any Local Transitional Distribution Services Agreement, the MF59 Manufacturing and Supply Agreement and, if the Purchaser

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elects to enter into the Agreed Form MBASA, the Agreed Form MBASA;

“Registered Intellectual Property Rights” means Intellectual Property Rights that are registered, issued, filed, or applied for under the authority of any Governmental Entity;

“Registered Flu Group Intellectual Property Rights” means all Flu Group Intellectual Property Rights that are Registered Intellectual Property Rights;

“Relevant Employers” means the Business Sellers and such other members of the Seller’s Group who employ the Relevant Flu Business Employees;

“Relevant Part” means the relevant part of a Shared Business Contract, a Mixed Contract or a GSK Mixed Contract, as applicable, which relates exclusively to the Business (or the relevant part of the Business that is transferred to the Purchaser as and from the Effective Time);

“Relevant Payors” means the entities whose names are set out in column 3 of Schedule 11;

“Relevant Pension and Employment Liabilities” means: (i) any Liabilities assumed by the Purchaser or a member of the Purchaser’s Group as contemplated by Schedule 9; and (ii) any Transferred Employee Benefit Liabilities which the Purchaser agrees to assume in accordance with Schedule 10;

“Relevant Persons” has the meaning given to it in Clause 8.4.2;

“Relevant Flu Business Employees” means the Flu Business Employees immediately prior to the Closing Date and “Relevant Flu Business Employee” means any one of them;

“Relevant Flu Group Company Employees” means the Flu Group Company Employees immediately prior to the Closing Date and “Relevant Flu Group Company Employee” means any one of them;

“Relief” means any loss, relief, allowance or credit in respect of any Tax and any deduction in computing Income, Profits or Gains for the purposes of any Tax;

“Reorganisation” has the meaning given to it in Clause 2.3.4;

“Reporting Accountants” means an internationally recognised and independent firm of accountants who does not act as auditor to the Seller or the Purchaser, to be agreed by the Seller and the Purchaser within seven days of a notice by one to the other requiring such agreement or, failing such agreement, to be nominated on the application of either of them by or on behalf of the Institute of Chartered Accountants of England and Wales;

“Required Antitrust Notifications” has the meaning given to it in Clause 4.1.1;

“Retained Part” means the relevant part of the Mixed Contract which relates exclusively to the Seller’s Group Retained Business;

“Retirement Benefit Arrangements Purchase Price Adjustment Record of Terms” means the letter detailing how the transferring pensions liabilities are to be dealt with which is to be entered into between the Seller and the Purchaser at Closing in the Agreed Terms;

“Sanctions Laws” has the meaning given to it in paragraph 2.16.6 of Schedule 16;

“Seller Marks” means any of the Trademarks (including in either or both logo and local script form) “Novartis”, “Sandoz”, “Alcon” and “Ciba Vision” used either alone or in

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combination with other words or marks;

“Seller Partner” means any counterparty to a development, contract research, commercialisation, manufacturing, distribution, sales, marketing, supply, consulting or other collaboration Contract with the Seller or any Affiliate of the Seller;

“Seller’s Group” means the Seller and its Affiliates from time to time;

“Seller’s Group Insurance Policies” means all insurance policies (whether under policies maintained with third party insurers or any member of the Seller’s Group), other than Flu Group Insurance Policies, maintained by the Seller or any member of the Seller’s Group in relation to the Flu Group or under which, immediately prior to Closing, any Flu Group Company or the Seller or member of the Seller’s Group in relation to the Flu Group Businesses is entitled to any benefit, and “Seller’s Group Insurance Policy” means any one of them;

“Seller’s Group Retained Business” means, from time to time, all businesses of the Seller’s Group, excluding the Business;

“Seller’s Knowledge” has the meaning given to it in Clause 9.1.4;

“Seller’s Lawyers” means Linklaters LLP, of One Silk Street, London, EC2Y 8HQ, United Kingdom;

“Seller’s Warranties” means the warranties given by the Seller pursuant to Clause 9.1 and Schedule 16, and “Seller’s Warranty” means any one of them;

“Share Sellers” means the members of the Seller’s Group (other than the Flu Group Companies) that own any Shares;

“Shared Business Contracts” means any Contract between a member of the Seller’s Group (excluding the Flu Group Companies) on the one hand, and any person who is not a member of the Seller’s Group, on the other hand, which is not Predominantly Related to the Business to be transferred to the Purchaser at Closing or Delayed Closing, as applicable but is a Contract under which a Flu Group Company or a Business Seller has a right to receive products or services in connection with the operation of the Business, and “Shared Business Contract” shall mean any of them;

“Shares” means the shares in the capital of any Flu Group Company (other than the Subsidiary);

“Sinergium Arrangements” means agreements and arrangements relating to the business and activities of the Sinergium Consortium, including agreements and arrangements between: (i) any of the Sinergium Consortium Members; (ii) any of the Sinergium Consortium Members (and/or the Sinergium Consortium) and the Argentinian Ministry of Health; and (iii) any member of the Seller’s Group and any Sinergium Consortium Member (and/or the Sinergium Consortium);

“Sinergium Consortium Members” means the members of Sinergium Biotech - Consorcio de Cooperación (taken together, the “Sinergium Consortium”), who as at the date of this Agreement are Novartis Argentina, S.A., Biogénesis Bago, S.A., Laboratorio ELEA S.A.C.I.F. y A. and Sinergium Biotech, S.A.;

“Statement of Net Assets” means the statement of net assets as at the Statement of Net Assets Date, as set out in Schedule 20;

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“Statement of Net Assets Date” means 31 December 2013;

“Statement of Net Assets Rules” means the rules in accordance with which the Statement of Net Assets was prepared, as set out in Part 2 of Schedule 20;

“Stub Period Carve Out Accounts” means the unaudited carve out profit and loss account of the Flu Group for the 9 month period ended on 30 September 2014, as contained in the Data Room at 9.1.2.2.5.1;

“Subsidiary” means Novartis Vaccines and Diagnostics Limited, details of which are set out in paragraph 4 of Schedule 2;

“Surviving Affiliate Contract” means:

(i)the LEK Filling and Packaging Agreement;

(ii)the manufacturing agreement between Novartis Influenza Vaccines Marburg GmbH and Novartis Influenza Vaccines AG;

(iii)the quality agreement for external manufacturing between Novartis Influenza Vaccines AG and Novartis Influenza Vaccines Marburg GmbH dated 11 June 2015;

(iv)the quality agreement on testing and complaint management between Novartis Influenza Vaccines Marburg GmbH and Novartis Vaccines and Diagnostics Limited dated 10 June 2015;

(v)any of the other agreements or arrangements referred to in Clause 5.2.2;

(vi)the quality agreement on filling, packaging and testing between Novartis Vaccines and Diagnostics AG, Novartis Vaccines and Diagnostics S.r.l and LEK Pharmaceuticals d.d., dated 16 October 2014 (which transferred from Novartis Vaccines and Diagnostics AG to Novartis Influenza Vaccines AG and from Novartis Vaccines and Diagnostics S.r.l to Novartis Vaccines Influenza S.r.l. pursuant to the Reorganisation); and

(vii)any agreements or arrangements between any member of the Flu Group and any member of the Seller’s Group Retained Business that are required in connection with the transitional arrangements contemplated under this Agreement, any of the Ancillary Agreements or are otherwise required in connection with the operation of the Business;

“Swiss Transferred Intellectual Property” means the Transferred Intellectual Property Rights, Transferred Intellectual Property Contracts, Transferred Accounts Receivable and Transferred Books and Records of Novartis Pharma AG together with the Assumed Liabilities of Novartis Pharma AG that relate exclusively to such assets, which, in each case, shall transfer to Seqirus UK Ltd at Closing;

“Taxation” or “Tax” means all forms of taxation (other than any accounting for deferred tax), and statutory, governmental, state, provincial, local governmental or municipal impositions, duties, contributions and levies, in each case in the nature of tax, whether levied by reference to income, profits, gains, net wealth, asset values, turnover, added value or otherwise and shall further include payments to a Tax Authority on account of Tax, in each case whether of the United Kingdom or elsewhere in the world whenever imposed and whether chargeable directly or primarily against or attributable directly or primarily to a member of the Seller’s Group or any other person, and including all interest, penalties and additions imposed with respect to such amounts by any Tax Authority or with respect to

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any failure to file any Tax Return;

“Tax Adjustment” means the amount by which:

(i)the aggregate amount of the corporate income taxes payable by the Flu Group Companies, as at the Effective Time and as derived from the Closing Statement,

exceeds or is less than

(ii)the aggregate amount of the corporate income tax receivables of the Flu Group Companies as at the Effective Time as derived from the Closing Statement,

and any such excess amount shall be treated as a positive number and any shortfall shall be treated as a negative amount;

“Tax Authority” means any taxing or other authority competent to impose any liability in respect of Taxation or responsible for the administration and/or collection of Taxation or enforcement of any law in relation to Taxation;

“Tax Indemnity” means the deed of covenant against taxation, in the Agreed Terms, to be entered into on the Closing Date between the Seller and the Purchaser;

“Tax Return” means any return, declaration, claim for refund, information return or statement, including any schedule or attachment thereto, which must be filed or lodged with, or submitted to, any Tax Authority in relation to the assessment, notification, collection or administration of any Tax, or which a taxpayer must prepare and retain;

“Tax Warranties” means the Seller’s Warranties set out in paragraph 2.18 of Schedule 16;

“Third Party Claim” has the meaning given to it in Clause 11.4;

“Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from third parties for the assignment or transfer to the Purchaser of any of the Transferred Contracts, Transferred Intellectual Property Contracts, Shared Business Contracts, Co-Owned Flu Group Intellectual Property Rights or Transferred Plant and Equipment and “Third Party Consent” means any one of them;

“Third Party Indebtedness” means the aggregate amount as at the Effective Time of all outstanding Indebtedness owed by the Flu Group Companies to any third party less any Indebtedness owed by any third party to any Flu Group Company as derived from the Closing Statement (but excluding: (i) any item included in respect of any Flu Group Companies’ Cash Balances and (ii) any loans made to the Sinergium Consortium which in the Statement of Net Assets and the Illustrative Statement of Net Assets have been treated as “Financial Assets — 3rd parties and loans to AC” (and have been included in line item BS01_035 Financial Assets — 3rd parties and loans to AC)), and, for the purposes of this definition, third party shall exclude any member of the Seller’s Group;

“Trademarks” means trademarks, service marks, trade names, certification marks, service names, industrial designs, brand names, brand marks, trade dress rights, identifying symbols, logos, emblems, and signs or insignia and all goodwill of the business in relation to which any of the foregoing are used (but no other or greater goodwill);

“Transaction” means the proposed acquisition of all or any of the Shares or Flu Group Businesses pursuant to this Agreement;

“Transfer Regulations” means the relevant national measure by which the employment of a Relevant Flu Business Employee automatically transfers to the Purchaser or a relevant

21

member of the Purchaser’s Group;

“Transferred Accounts Receivable” means all trade accounts and notes receivable arising in the ordinary course of the business of the Seller’s Group (other than any Flu Group Company) to the extent related to the Business and outstanding at the Effective Time, together with any unpaid financing charges accrued thereon;

“Transferred Books and Records” means copies of all books, ledgers, files, reports, plans, records, manuals and other materials (in any form or medium) to the extent relating to, or maintained exclusively for, the Business by the Seller’s Group (excluding the Flu Group Companies) (other than emails), but excluding:

(i)any such items to the extent that: (A) they are related to any Excluded Assets; (B) they are related to any corporate, Tax, human resources or stockholders matters of the Seller or its Affiliates (other than the Flu Group Companies); (C) any Applicable Law prohibits their transfer; or (D) any transfer thereof otherwise would subject the Seller or any of its Affiliates to any material liability (unless such items are required by Applicable Laws to be held by the Purchaser); and

(ii)any laboratory notebooks to the extent containing research and development information unrelated to the Business;

“Transferred Contracts” means:

(i)the Contracts, other than Transferred Intellectual Property Contracts and the US Government Contracts, that are Predominantly Related to the Business between a member of the Seller’s Group (excluding the Flu Group Companies), on the one hand, and any person who is not a member of the Seller’s Group, on the other hand (other than this Agreement and any Ancillary Agreement), but excluding any Excluded Contract;

(ii)the Relevant Part of the Shared Business Contracts;

(iii)the Relevant Part of the Mixed Contracts; and

(iv)the Relevant Part of the GSK Mixed Contracts,

“Transferred Employee Benefit Liabilities” has the meaning given to it in Schedule 10;

“Transferred Employees” means:

(i)the Flu Business Employees to whom the Purchaser (or a member of the Purchaser’s Group) offers employment and who accept such employment and become employed by the Purchaser (or a member of the Purchaser’s Group) in accordance with Schedule 9;

(ii)any Relevant Flu Business Employees who transfer to the Purchaser (or a member of the Purchaser’s Group) by operation of the Transfer Regulations and do not object to such transfer (to the extent permitted by the Transfer Regulations) in accordance with Schedule 9; and

(iii)the Relevant Flu Group Company Employees,

and “Transferred Flu Business Employees” means the employees in (i) and (ii), “Transferred Flu Group Company Employees” means the employees in (iii) and “Transferred Employee”, “Transferred Flu Business Employee” and “Transferred Flu Group Company Employee” respectively means any one of them;

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“Transferred Information Technology” means all Information Technology of any member of the Seller’s Group (other than a Flu Group Company) to the extent Exclusively Related to the Business;

“Transferred Intellectual Property Contracts” means Contracts Exclusively Related to the Business which relate to Intellectual Property Rights (but excluding the rights under any such Contracts that are held by the Flu Group Companies) including the MF59® Flu Specific Intellectual Property Rights Contracts, but excluding the MF59® Platform Intellectual Property Rights Contracts;

“Transferred Intellectual Property Rights” means the Intellectual Property Rights of any member of the Seller’s Group (other than a Flu Group Company) Exclusively Related to the Business including the MF59® Flu Specific Intellectual Property Rights, but excluding the MF59® Platform Intellectual Property Rights;

“Transferred Inventory” means all inventories (including Manufacturing Inventory and Manufacturing Stocks and In-Market Inventory), including all raw materials, work in progress, finished Products and packaging and labelling material in respect of the Products and otherwise Exclusively Related to the Business (but excluding any such items held by the Flu Group Companies) whether held at any location or facility of a member of the Seller’s Group or in transit to a member of the Seller’s Group, in each case as of the Effective Time;

“Transferred Leased Real Properties” has the meaning given to it in paragraph 1.1 of Part 4A of Schedule 3;

“Transferred Owned Real Properties” has the meaning given to it in paragraph 1.1 of Part 4A of Schedule 3;

“Transferred Plant and Equipment” means:

(i)the Transferred Information Technology;

(ii)all plant, furniture, furnishings, vehicles, equipment, tools and other tangible personal property (other than Transferred Inventory or Transferred Information Technology) of the Seller’s Group that are Exclusively Related to the Business (but excluding: (a) any such items owned by the Flu Group Companies; and (b) any such items situated at or otherwise used in relation to the Holly Springs Site); and

(iii)all plant, furniture, furnishings, vehicles, equipment, tools and other tangible personal property (other than Transferred Inventory or Transferred Information Technology) of the Seller’s Group that are Predominantly Related to the Business and are situated at or otherwise used in relation to the Holly Springs Site;

“Transferred Real Properties” means:

(i)the Transferred Owned Real Properties; and

(ii)the Transferred Leased Real Properties;

and “Transferred Real Property” means any one of them;

“Transitional Trademark Licence” means the transitional trademark licence to be entered into at Closing in the Agreed Terms, between the Seller and the Purchaser and/or one or more of its Affiliates;

“UK Pandemic Agreement” means the agreement for the reservation of manufacturing

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capacity and production and supply of vaccine during a pandemic entered into between the Secretary of State for Health (acting through the Commercial Medicines Unit) and Novartis Vaccines and Diagnostics Limited dated 1 June 2012;

“US Benefit Plans” means all benefit and compensation plans, contracts, policies or agreements, including but not limited to “employee benefit plans” (within the meaning of section 3(3) of ERISA), deferred compensation, severance, change in control or employment, vacation, incentive, bonus, stock option, stock purchase, or restricted stock plans, benefiting United States Flu Business Employees in respect of which any Flu Group Company or Business Seller contributes or under which any Flu Group Company or Business Seller is subject to continuing financial obligations or liabilities (whether actual or contingent);

“US Business” means the Business as operated by Novartis Vaccines and Diagnostics, Inc.;

“US Government Contracts” means: (i) the Contracts of Novartis Vaccines & Diagnostics, Inc. set out in Part 1 of Schedule 15; and (ii) any other Contracts that are Predominantly Related to the Business between a member of the Seller’s Group (excluding the Flu Group Companies), on the one hand, and a Governmental Entity in the United States of America on the other hand, but excluding any Excluded Contract;

“US Government Representations” means the representations, undertakings or other statements (whether written or oral and including, for the avoidance of doubt, by email) that the Seller (or any member of the Seller’s Group) has made or may be required to make to the U.S. Department of Health and Human Services (and any agency thereof) or the U.S. Department of Veterans Affairs in the United States of America regarding the Purchaser (or any member of the Purchaser’s Group or any of its or their respective directors, officers, employees or agents) in connection with the sub-contracting or novation of the US Government Contracts, the content of which has been approved by the Purchaser in writing (including, for the avoidance of doubt, by email);

“US Government Subcontracts” means the subcontracts to be entered into by Novartis Vaccines & Diagnostics, Inc. and a member of the Purchaser’s Group in respect of the US Government Contracts set out in paragraphs 1 to 6 and paragraphs 8 to 12 of Part 1 of Schedule 15;

“US Secondment Agreement” means the secondment agreement between the Seller, Seqirus Inc. and Novartis Vaccines and Diagnostics, Inc. with respect to the Flu Business Employees located in the USA at Closing in the Agreed Terms;

“US Transferred Employees” has the meaning given to it in paragraph 5.2 of Schedule 9;

“US Transferred Intellectual Property Rights” means the Transferred Intellectual Property Rights of Novartis Vaccines and Diagnostics, Inc. which shall transfer to Seqirus UK Ltd at Closing;

“USD LIBOR” means the London interbank offered rate, being the interest rate offered in the London inter-bank market for three month US dollar deposits as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen at 11 a.m. (London) on the Relevant Date;

“Vaccines” means a preparation comprising: (i) an antigen; (ii) an epitope of an antigen; or (iii) a polynucleotide encoding an antigen derived directly or indirectly from, or mimicking, an agent (including, but not limited to, a compound, a toxin, a microbe including a

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pathogen or component thereof), wherein such preparation may further comprise a composition capable of modulating an immune response, including preparations intended to improve a human’s immune response to a microbe that has been linked to cancer, wherein said preparation is intended for purposes of inducing an immune response in a human, including, but not limited to, a functional immune response or immunological memory to the particular or related antigen or agent, thereby causing or improving an immune response to a challenge by the particular or related agent. “Vaccines” shall not include preparations intended to improve a human’s immune response to or to treat other non-infectious conditions, whether or not related to pathogens, such as certain autoimmune diseases, Alzheimer’s disease and certain cancers, or non-antigen preparations comprising immune system components intended to function analogous to corresponding native components within the patient, such as antibodies or white blood cells (both unmodified or modified to better treat disease);

“VAT” means within the European Union such Taxation as may be levied in accordance with (but subject to derogations from) Council Directive 2006/112/EC and outside the European Union any Taxation levied by reference to added value or sales; and

“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988 of the United States.

1.2Shares

References to shares shall include, where relevant, quotas.

1.3Singular, plural, gender

References to one gender include all genders and references to the singular include the plural and vice versa.

1.4References to persons and companies

References to:

1.4.1a person include any individual, company, partnership or unincorporated association (whether or not having separate legal personality); and

1.4.2a company include any company, corporation or any body corporate, wherever incorporated.

1.5Schedules, etc.

References to this Agreement shall include any Recitals and Schedules to it and references to “Clauses” and “Schedules” are to Clauses of, and Schedules to, this Agreement. References to “paragraphs” and “Parts” are to paragraphs and parts of the Schedules.

1.6Reference to documents

References to any document (including this Agreement), or to a provision in a document, shall be construed as a reference to such document or provision as amended, supplemented, modified, restated or novated from time to time.

1.7References to enactments

Except as otherwise expressly provided in this Agreement, any express reference to an enactment (which includes any legislation in any jurisdiction) includes references: (i) to that

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enactment as amended, consolidated or re-enacted by or under any other enactment before or after the date of this Agreement; (ii) any enactment which that enactment re-enacts (with or without modification); and (iii) any subordinate legislation (including regulations) made before or after the date of this Agreement under that enactment as amended, consolidated or re-enacted as described in (i) or (ii) above, except to the extent that any of the matters referred to in (i) to (iii) occurs after the date of this Agreement and increases or alters the liability of the Seller or the Purchaser under this Agreement.

1.8Information

References to books, records or other information mean books, records or other information in any form including paper, electronically stored data, magnetic media, film and microfilm.

1.9Legal Terms

References to any English legal term shall, in respect of any jurisdiction other than England and Wales, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction.

1.10Non-limiting effect of words

The words “including”, “include”, “in particular” and words of similar effect shall not be deemed to limit the general effect of the words that precede them.

1.11Currency

References to “$”, “US$” and “US dollar” are references to the lawful currency of the United States of America.

Except as otherwise provided for in this Agreement, any amount to be converted from one currency into another currency for the purposes of this Agreement shall be converted into an equivalent amount at the Conversion Rate prevailing at the Relevant Date.

For the purposes of this Clause 1.11:

“Conversion Rate” means the spot reference rates quoted by the European Central Bank to convert a relevant local currency to US dollars (or if there are no such rates, the spot reference rates as quoted by the nearest equivalent institution) on the Business Day immediately preceding the Relevant Date or, if no such rates are quoted on that date, on the preceding date on which such rates are quoted; and

“Relevant Date” means, save as otherwise provided in this Agreement, the date on which a payment or an assessment is to be made, save that, for the following purposes, the date shall mean:

(i)for the purposes of the monetary amounts set out in Clause 5, the date of this Agreement;

(ii)for the purposes of Clause 7 and Schedule 14, the Closing Date;

(iii)for the purposes of Clause 10, the date of this Agreement; or

(iv)for the purposes of the monetary amounts set out in Schedule 16, the date of this Agreement.

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1.12References to “indemnify”

Unless specified to the contrary, references to “indemnify” and “indemnifying” any person against any circumstance means indemnifying and holding that person harmless on an after-Tax basis and:

1.12.1references to the Purchaser indemnifying each member of the Seller’s Group shall constitute undertakings by the Purchaser to the Seller for itself and on behalf of each other member of the Seller’s Group;

1.12.2references to the Seller indemnifying each member of the Purchaser’s Group shall constitute undertakings by the Seller to the Purchaser for itself and on behalf of each other member of the Purchaser’s Group;

1.12.3to the extent that the obligation to indemnify relates to the Shares (including any Flu Group Companies) or other assets or liabilities transferred by a Share Seller or a Business Seller (as the case may be) to a member of the Purchaser’s Group pursuant to this Agreement, references to the Seller indemnifying the Purchaser and references to the Seller indemnifying the Purchaser or any member of the Purchaser’s Group shall constitute undertakings by the Seller, to indemnify or procure that the relevant Share Seller or relevant Business Seller indemnify the relevant purchaser of the Shares or of the assets or liabilities transferred or to be transferred by that Business Seller (as the case may be), and references to the Purchaser indemnifying the Seller and references to the Purchaser indemnifying the Seller and each member of the Seller’s Group shall constitute undertakings by the Purchaser to indemnify or procure that the relevant purchaser of the Shares or of the assets or liabilities transferred or to be transferred (as the case may be) indemnify the relevant member of the Seller’s Group; and

1.12.4where under the terms of this Agreement one party is liable to indemnify or reimburse another party in respect of any costs, charges or expenses, the payment shall include an amount equal to any VAT thereon not otherwise recoverable by the other party or any member of any group or consolidation of which it forms part for VAT purposes, subject to that party using reasonable endeavours to recover or to procure recovery of such amount of VAT as may be practicable.

For the purposes of this Clause 1.12, indemnifying and holding harmless a person on an “after-Tax basis” means that the amount payable pursuant to the indemnity (the “Payment”) shall be calculated in such a manner as will ensure that, after taking into account:

(i)any Tax required to be deducted or withheld from the Payment and any additional amounts required to be paid by the payer of the Payment in consequence of such withholding;

(ii)the amount and timing of any additional Tax which becomes (or would, but for the use of any credit or other relief which would otherwise have been available to reduce the Tax liabilities of any member of the Seller’s Group, have become) payable by the recipient of the Payment (or a member of the Seller’s Group or the Purchaser’s Group, as the case may be) as a result of the Payment being subject to Tax in the hands of that person; and

(iii)the amount and timing of any Tax benefit which is obtained by the recipient of the Payment (or a member of the Seller’s Group or the Purchaser’s Group, as the case

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may be) to the extent that such Tax benefit is attributable to the matter giving rise to the indemnity payment or to the receipt of the Payment,

which amount and timing is to be determined by the auditors of the recipient at the shared expense of both relevant parties and is to be certified as such to the party making the Payment, the recipient of the Payment (together with the members of the Seller’s Group or the Purchaser’s Group, as relevant) is in no better and no worse after Tax position as that in which it would have been if the matter giving rise to the indemnity payment had not occurred, provided that if either party to this Agreement shall have transferred (whether by legal or equitable assignment, declaration of trust, novation or otherwise) the benefit of this Agreement in whole or in part or shall, after the date of this Agreement, have changed its Tax residence or the permanent establishment to which the rights under this Agreement are allocated then no Payment to that party shall be increased by reason of the operation of paragraphs (i) to (iii) above to any greater extent than would have been the case had no such transfer or change taken place.

2Sale and Purchase of the Flu Group

2.1Sale and Purchase of the Flu Group

On and subject to the terms and conditions of this Agreement:

2.1.1the Seller shall procure that the Share Sellers and Business Sellers shall sell; and

2.1.2the Purchaser shall purchase, or shall procure the purchase by one or more members of the Purchaser’s Group, of the whole of the Flu Group as a going concern.

2.2Sale of the Shares

2.2.1The Seller shall procure that the Share Sellers shall sell the Shares, which shall be sold free from Encumbrances and together with all rights attaching to them as at Closing (including the right to receive all dividends or distributions declared, made or paid on or after Closing).

2.2.2The Seller shall procure that, on or prior to Closing, any and all rights of pre-emption over the Shares are waived irrevocably by the persons entitled thereto.

2.3Sale of the Flu Group Businesses

2.3.1The Seller shall procure that the Business Sellers shall sell the Flu Group Businesses to be sold under this Agreement or, where relevant, under the Local Transfer Documents, free from Encumbrances other than Permitted Encumbrances, such Flu Group Businesses comprising:

(i)the Transferred Real Properties;

(ii)the Marburg MF59® Premises;

(iii)the Transferred Plant and Equipment;

(iv)the Transferred Inventory;

(v)the Transferred Accounts Receivable;

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(vi)the Transferred Books and Records;

(vii)subject to and in accordance with Schedule 8, the Transferred Intellectual Property Rights and the Transferred Intellectual Property Contracts;

(viii)subject to and in accordance with Schedule 8, the Transferred Contracts;

(ix)subject to and in accordance with Schedule 15, the US Government Contracts;

(x)the interest of the Seller’s Group in the Sinergium Arrangements;

(xi)subject to and in accordance with Schedule 7, all Products, all Product Approvals, all Pipeline Products, all Pipeline Product Approvals, all Products Under Registration and all Product Applications and all other permits, licences, certificates, registrations, marketing or other authorisations or consents issued by a Governmental Entity Exclusively Related to the Business and not held by the Flu Group Companies;

(xii)all Marketing Authorisation Data not held by the Flu Group Companies;

(xiii)all Business Information not held at Closing by the Flu Group Companies;

(xiv)all rights of the Purchaser, its Affiliates and the Flu Group Companies as contemplated by Schedule 9 and Schedule 10;

(xv)subject to and in accordance with the provisions of Clause 8.17, the MDCK Cell Bank; and

(xvi)all other property, rights and assets owned or held by the Seller’s Group (other than the Flu Group Companies) and Exclusively Related to the Business at Closing (other than any property, rights and assets of the Flu Group expressly excluded from the sale under this Agreement),

together the “Business Assets”.

2.3.2There shall be excluded from the sale of the Flu Group under this Agreement the following:

(i)all manufacturing, plant, equipment and other assets at any of the Seller’s Group’s facilities at: (a) Marburg, Germany (except those located within the Marburg MF59® Premises and the MDCK Cell Bank); (b) Rosia, Italy; and (c) Siena, Italy;

(ii)any interest in Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd. and any business carried on by or on behalf of Zhejiang Tianyuan Bio-Pharmaceutical Co., Ltd.;

(iii)the Seller’s Group Retained Business;

(iv)any Intellectual Property Right that is not a Flu Group Intellectual Property Right (subject to the Purchaser Intellectual Property Licence Agreement) and any Contract relating to Intellectual Property Rights that is

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not a Flu Group Intellectual Property Contract;

(v)the MF59® Platform Intellectual Property Rights Contracts and MF59® Platform Intellectual Property Rights (subject to the Purchaser Intellectual Property Licence Agreement);

(vi)any Information Technology other than Flu Group Information Technology;

(vii)the Seller Marks;

(viii)any product and any permits, licences, certificates, registrations, marketing or other authorisations or consents issued by any Governmental Entity in respect of any products, or any applications therefor, other than: (a) the Products, Product Approvals, Product Applications, Products Under Registration, Pipeline Product Approvals and Pipeline Products; and (b) Permits Exclusively Related to the Business;

(ix)all cash, marketable securities and negotiable instruments, and all other cash equivalents, of the Seller’s Group (other than the Flu Group Companies);

(x)all real property and any leases thereof and interests therein other than the Properties;

(xi)the company seal, minute books, charter documents, stock or equity record books and such other books and records pertaining to the Seller or its Affiliates (other than the Flu Group Companies and the Transferred Books and Records), as well as any other records or material relating to the Seller or its Affiliates (other than Flu Group Companies) generally and not involving or related to the Flu Group;

(xii)any right of the Seller or its Affiliates to be indemnified in respect of Assumed Liabilities or otherwise pursuant to the terms of this Agreement;

(xiii)all Tax assets (including Tax reliefs refunds and prepayments), other than Tax assets of any Flu Group Company to the extent that such assets remain in a Flu Group Company after Closing and subject to the terms of the Tax Indemnity;

(xiv)all Tax Returns of the Seller’s Group (other than Tax Returns relating solely to the Flu Group Companies) and all books and records (including working papers) related thereto;

(xv)any rights in respect of any insurance policies of the Seller’s Group, as provided in Clause 13;

(xvi)all artwork, paintings, drawings, sculptures, prints, photographs, lithographs and other artistic works of the Seller’s Group that are not embodiments of Flu Group Intellectual Property Rights;

(xvii)any rights of the Seller’s Group (other than the Flu Group Companies) under any Intra-Group Non-Trade Payables or Intra-Group Non-Trade Receivables (excluding Transferred Accounts Receivable);

(xviii)any rights of the Seller or its Affiliates (other than the Flu Group

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Companies) contemplated by Schedule 9 and Schedule 10;

(xix)any equity interest in any person other than a Flu Group Company (excluding the Seller’s Group’s interest in the Sinergium Arrangements);

(xx)the Excluded Contracts;

(xxi)all rights of the Seller’s Group under this Agreement and the Ancillary Agreements; and

(xxii)the Purchase Price Bank Account,

together the “Excluded Assets”.

2.3.3Notwithstanding anything in this Agreement to the contrary, on or prior to the Closing, the Seller shall, if it deems necessary or appropriate, cause the Flu Group Companies to convey, transfer, assign and deliver to the Seller or any member of the Seller’s Group (but always only in accordance with Applicable Law), and the Seller or any such member of the Seller’s Group shall accept from the Flu Group Companies, all of the Flu Group Companies’ right, title and interest, if any, in and to any Excluded Assets (but always only in accordance with Applicable Law).

2.3.4Subject to complying with its obligations pursuant to Clauses 2.1, 2.2, 2.3.1 to 2.3.3, 2.4 and 2.5 of this Agreement, on or prior to Closing, the Seller may:

(i)assign or otherwise transfer assets, liabilities and employees (subject to Clauses 5.1.2(xxiii) and 5.1.2(xxiv)) between members of the Seller’s Group as may be reasonably required to facilitate the separation of the Business from any other business or activities of the Seller’s Group or the Seller’s Group Retained Business (as at the date of this Agreement);

(ii)otherwise, carry out or procure one or more reorganisations of the Seller’s Group (including assigning or otherwise transferring assets, liabilities and employees between members of the Seller’s Group and including, without limitation, transferring all or part of the Flu Group Businesses into or (directly or indirectly) beneath, as the case may be, newly incorporated entities with the intention of such new entities being transferred to the Purchaser on Closing) as may reasonably be required to facilitate the Transaction (but always only in accordance with Applicable Law), and

(iii)capitalise or loan money to or from the Flu Group Companies in connection with any arrangements to facilitate the settlement of any Intra-Group Non-Trade Receivables and Intra-Group Non-Trade Payables at or prior to Closing in accordance with Clause 8.6 (but always in accordance with Applicable Law and taking account of the obligations set out in Clause 5.1,

each, together with any act permitted by Clause 2.3.3, a “Reorganisation”.

2.4Employees and Employee Benefits

2.4.1The provisions of Schedule 9 shall apply in respect of the Employees.

2.4.2The provisions of Schedule 10 shall apply in respect of Employee Benefits.

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2.5Properties

Subject to the provisions of Schedule 24, the provisions of Schedule 3 shall apply in respect of the Properties.

2.6Local Transfer Documents

2.6.1On Closing or at such other time as agreed between the parties, the Seller shall procure that the Share Sellers and Business Sellers execute, and the Purchaser shall execute (or procure the execution by one or more other members of the Purchaser’s Group of), such agreements, transfers, conveyances and other documents, as may be required pursuant to the relevant local law and otherwise as may be agreed between the Seller and the Purchaser to implement the transfer of: (i) the Shares; and (ii) the Flu Group Businesses, in each case on Closing, subject to the provisions of Schedule 24 (the “Local Transfer Documents” and each, a “Local Transfer Document”). Where such Local Transfer Documents are required pursuant to a relevant local law or otherwise agreed between the Seller and the Purchaser, title shall be transferred by the applicable Local Transfer Document. In all other cases, title shall be transferred by this Agreement. The parties do not intend this Agreement to transfer title to any of the Shares, title to which shall be transferred by the applicable Local Transfer Document.

2.6.2To the extent that the provisions of a Local Transfer Document are inconsistent with or (except to the extent that they implement a transfer in accordance with this Agreement) additional to the provisions of this Agreement:

(i)the provisions of this Agreement, shall prevail; and

(ii)so far as permissible under the laws of the relevant jurisdiction, the Seller and the Purchaser shall procure that the provisions of the relevant Local Transfer Document are adjusted, to the extent necessary to give effect to the provisions of this Agreement or, to the extent this is not permissible, the Seller shall indemnify the Purchaser against all Liabilities suffered by the Purchaser or its Affiliates or, as the case may be, the Purchaser shall indemnify the Seller against all Liabilities suffered by the Seller or its Affiliates, in either case through or arising from the inconsistency between the Local Transfer Document and this Agreement or the additional provisions (except to the extent that they implement a transfer in accordance with this Agreement).

2.6.3The Seller shall not, and shall procure that none of its Affiliates shall, bring any claim against the Purchaser or any member of the Purchaser’s Group in respect of or based upon the Local Transfer Documents save to the extent necessary to implement any transfer of the Shares or Flu Group Businesses as contemplated by this Agreement. To the extent that the Seller or a member of the Seller’s Group does bring a claim in breach of this Clause, the Seller shall indemnify the Purchaser and each member of the Purchaser’s Group against all Liabilities which the Purchaser or that member of the Purchaser’s Group may suffer through or arising from the bringing of such a claim.

2.6.4The Purchaser shall not, and shall procure that none of its Affiliates shall, bring any claim against the Seller or any member of the Seller’s Group in respect of or based upon the Local Transfer Documents save to the extent necessary to

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implement any transfer of the Shares or Flu Group Businesses as contemplated by this Agreement. To the extent that the Purchaser or a member of the Purchaser’s Group does bring a claim in breach of this Clause, the Purchaser shall indemnify the Seller and each member of the Seller’s Group against all Liabilities which the Seller or any member of the Seller’s Group may suffer through or arising from the bringing of such a claim.

2.7Delayed Jurisdictions

The provisions of Schedule 24 shall apply in respect of the Delayed Jurisdictions. For the avoidance of doubt, legal ownership of any Business Assets (excluding the Transferred Intellectual Property Rights) or Assumed Liabilities which are referable to the Delayed Businesses shall not transfer until the relevant Delayed Closing Date.

3Consideration

3.1Amount

3.1.1The aggregate consideration for the purchase of the Flu Group under this Agreement and the Local Transfer Documents (the “Purchase Price”) shall be an amount in US dollars equal to the sum of:

(i)US$ 275,000,000 (the “Headline Price”);

plus

(ii)the Flu Group Companies’ Cash Balances;

minus

(iii)the Third Party Indebtedness;

minus

(iv)the Tax Adjustment.

3.1.2For the avoidance of doubt, the aggregate consideration provided for under Clause 3.1.1 includes the consideration payable in respect of the Delayed Businesses.

3.2Payment of Purchase Price

The Purchaser shall procure that the Purchase Price shall be paid by the Relevant Payors by way of cash payments to the Purchase Price Bank Accounts pursuant to Clause 6.3.

3.3Allocation of Purchase Price

The Purchase Price shall be allocated in accordance with Schedule 11.

3.4VAT

3.4.1The provisions of Schedule 12 shall apply in respect of VAT.

3.4.2The Seller and the Purchaser agree that the consideration given under this Agreement in respect of the sale of the Flu Group Businesses and the Shares is exclusive of any VAT.

3.4.3The Seller and the Purchaser shall (and shall procure that any relevant Share Seller, Business Seller or member of the Purchaser’s Group shall) use reasonable endeavours to secure that, to the extent reasonably possible, the transfer of the Flu

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Group Businesses under the Local Transfer Documents is treated as a “transfer of a going concern” for VAT purposes.

3.4.4To the extent that VAT is properly chargeable in respect of any sale of the Shares or the Flu Group Businesses or any part thereof, the Purchaser shall (or shall procure that the relevant member of the Purchaser’s Group shall), against delivery of a valid VAT invoice (or equivalent, if any), in addition to any other amount expressed in this Agreement to be payable by the Purchaser or any member of the Purchaser’s Group, pay or procure the payment to the Seller (on behalf of the relevant Business Seller or Share Seller as applicable) any amount of any VAT so chargeable for which the Seller (or the relevant Share Seller or Business Seller, as the case may be) is liable to account.

3.5Treatment of Payments

3.5.1If any payment is made or procured: (a) by the Seller to the Purchaser or relevant member of the Purchaser’s Group; or (b) by the Purchaser to the Seller or a member of the Seller’s Group, in either case in respect of any claim under or for any breach of this Agreement, or pursuant to an indemnity (or equivalent covenant to pay) under this Agreement and relates to any particular Flu Group Company (and accordingly the Shares related to it) or a particular part of the Flu Group Businesses, then the relevant payment or claim shall be treated, so far as possible and to the extent that it so relates, as an adjustment of the consideration paid by the relevant member of the Purchaser’s Group for the relevant Shares or the particular part of the Flu Group Business and the consideration shall be deemed to be increased or reduced (as applicable) by the amount of such payment; and thereafter, as contemplated in Clause 3.5.2.

3.5.2If any payment is made or procured: (a) by the Seller to the Purchaser or relevant member of the Purchaser’s Group; or (b) by the Purchaser to the Seller or a member of the Seller’s Group, in either case in respect of any claim under or for any breach of this Agreement, or pursuant to an indemnity (or equivalent covenant to pay) under this Agreement and does not relate to any particular Flu Group Company  or to any particular category of Flu Group Businesses, it shall be treated:

(i)so as far as possible, as an adjustment of the consideration paid by Seqirus UK Limited for the Swiss Transferred Intellectual Property (provided that in no circumstances shall the adjustment result in an allocation to the Swiss Transferred Intellectual Property of less than [***]); thereafter

(i)first, as an adjustment of the consideration paid for the Delayed Businesses pro rata to the initial allocation of the Purchase Price among the Businesses; and

(ii)second, as an adjustment of the consideration paid by Seqirus Inc. for the US Business.

and in each case the consideration shall be deemed to have been reduced or increased (as applicable) by the amount of such payment.

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4Conditions

4.1Conditions Precedent

The sale and purchase of the Flu Group is conditional upon satisfaction of the following conditions, or their satisfaction subject only to Closing:

4.1.1any requisite filings with any competition authorities (the “Competition Authorities”) as set out in Schedule 22 (the “Required Antitrust Notifications”) shall have been made, and all consents and approvals of any such Competition Authority shall have been obtained and all applicable mandatory waiting periods in connection with any such filings, submissions or notification shall have expired or been terminated;

4.1.2receipt of CFIUS Approval if CFIUS has initiated a review of the transactions contemplated by this Agreement, whether pursuant to Clause 4.2.9 or otherwise;

4.1.3no Governmental Entity having enacted, issued, promulgated, enforced or entered any Applicable Law or Judgment (whether temporary, preliminary or permanent) that is in effect at the Closing Date and that has the effect of making the transactions contemplated by this Agreement illegal or otherwise restraining or prohibiting the consummation of such transactions;

4.1.4in relation to all US Government Contracts which require formal novation pursuant to 48 C.F.R. Subpart 42.12 in connection with the consummation of the Transaction, no relevant Governmental Entity within the United States Government having stated that it will not, or intends not to, grant consent to novation, unless such statement or indication has been withdrawn as at the Closing Date, and the parties having put in place (effective as from the Closing Date) a sub-contracting relationship with the United States Government’s consent, if such consent is required, that achieves substantially the same economic effect as novation until novation occurs or for the duration of the relevant US Government Contract in the event that novation does not occur;

4.1.5the Purchaser having received from the Secretary of State for Health (acting through the Commercial Medicines Unit), as required pursuant to the UK Pandemic Agreement, consent to the change in control in connection with the Transaction; and

4.1.6there having been no breach of any Key Warranty which constitutes a Material Adverse Effect the consequences of which have not been mitigated or remedied in all material respects on or prior to the Closing Date.

The Purchaser may, at its sole discretion, waive all or part of the conditions set out in Clause 4.1.5 and Clause 4.1.6. The condition set out in Clause 4.1.4 may only be waived by the mutual agreement of both the Seller and the Purchaser.

4.2Responsibility for Satisfaction

Competition condition:

4.2.1The Purchaser shall prepare and file the Required Antitrust Notifications at such times as are mutually agreed by the parties (but before 31 March 2015 and subject to Applicable Law), provided, however, that the Seller shall be responsible for preparing its Required Antitrust Notification under the Hart—Scott—Rodino Antitrust

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Improvements Act of 1976 as amended (the “HSR Act”) (again, before 31 March 2015 and subject to Applicable Law). Notwithstanding anything to the contrary contained in this Agreement, the Purchaser shall have primary responsibility for obtaining all consents, approvals or actions of any Competition Authority which are required in connection with the Required Antitrust Notifications.

4.2.2The Purchaser shall be responsible for the payment of all filing and other fees and expenses in connection with the Required Antitrust Notifications and the satisfaction of the condition in Clause 4.1.1, except that the Seller shall be responsible for the payment of all fees and expenses in connection with the Seller’s Required Antitrust Notification under the HSR Act.

4.2.3The parties shall cooperate with each other in connection with the satisfaction of the condition in Clause 4.1.1.

4.2.4In connection with the satisfaction of the condition in Clause 4.1.1 and subject to Clause 4.2.6, the parties will consult and cooperate reasonably with each other and consider in good faith the views of the other. Without limiting the foregoing or the parties’ obligations under Clause 4.2.3 and subject to Clause 4.2.6, the parties agree to: (a) give each other reasonable advance notice of all meetings with any Governmental Entity; (b) give each other an opportunity to participate in each such meeting; (c) give each other reasonable advance notice of all substantive oral communications with any Governmental Entity; (d) if any Governmental Entity initiates a substantive oral communication, promptly notify the other party; (e) provide each other with a reasonable advance opportunity to review and comment upon all substantive written communications (including any analyses, presentations, memoranda, briefs, arguments, opinions and proposals) with a Governmental Entity and take account of the comments of the other party; and (f) provide each other with copies of all written communications to or from any Governmental Entity, provided however, that neither party shall be required to comply with sub-Clause (b) above to the extent that the relevant Governmental Entity objects to the participation of a party or with sub-Clause (e) or (f) above to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis). The Purchaser further agrees that it will not file any Required Antitrust Notification or contact any Governmental Entity prior to the filing of any Required Antitrust Notification without the consent of the Seller (subject to Applicable Law and to the Seller’s compliance with its obligations under this Agreement in relation to the Required Antitrust Notifications).

4.2.5The Seller’s obligations under Clauses 4.2.1 to 4.2.7 (inclusive) relate solely to the satisfaction of the condition in Clauses 4.1.1. Without prejudice to the Seller’s obligations under Clauses 4.2.3, 4.2.4 or 4.2.7, and notwithstanding any other provision in the Agreement, the Seller shall not be obliged to inform, consult with, provide notice to or take account of the comments of the Purchaser in connection with any communication with any Governmental Entity concerning or relating in any way to any other transaction or investigation or the relationship or interaction with or between the Transaction and any other transaction or investigation.

4.2.6The Purchaser shall, and shall cause its Affiliates to, use all reasonable endeavours to procure the satisfaction of the condition in Clause 4.1.1 (in any event not later than the Long Stop Date). Notwithstanding anything in this Agreement to the

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contrary, the Purchaser shall consider, in good faith, proposing or agreeing to such conditions, obligations, undertakings or commitments of any Competition Authority as it may, in good faith, consider acceptable, including minor behavioural commitments, obligations or undertakings, but shall not be required to propose or agree to the sale, divestiture, licence or other disposition of assets or businesses.

4.2.7The Seller shall, and shall cause their Affiliates to, use reasonable endeavours to cooperate with the Purchaser in connection with procuring the satisfaction of the condition in Clause 4.1.1, including providing to the Purchaser such information as the Purchaser may reasonably require in connection with satisfaction of its obligations under this Clause; provided, however, that the Seller shall not be required to defend against the entry, or threatened entry, of any Judgment by any US court or Competition Authority.

4.2.8Notwithstanding anything in this Agreement to the contrary, the Purchaser shall not propose, negotiate, take or commit to, and neither the Seller, the Flu Group, nor any of their respective Affiliates shall be required to agree to, the taking of any action that would:

(i)require the Seller or any of its Affiliates to retain any part of the Flu Group;

(ii)place any limitations on the Seller, the Flu Group or any of their respective Affiliates, the effectiveness or consummation of which is not conditioned on Closing occurring; or

(iii)result in an adverse effect on the Seller or its Affiliates (other than the Flu Group Companies).

CFIUS condition:

4.2.9Within 60 days after the date of this Agreement, any party wishing to submit a formal joint voluntary notice to CFIUS pursuant to 31 C.F.R. Section 800.401, et. seq. (“CFIUS Filing”) shall provide the other party with written notice of its intent to make a CFIUS Filing (“Election Date”). Prior to making its election to submit a CFIUS Filing, the party wishing to make a CFIUS Filing shall consult in good faith with senior executives of the other party. If neither the Seller nor the Purchaser provides notice to submit a formal joint voluntary notice to CFIUS, a CFIUS Filing will not be made unless requested by CFIUS.

4.2.10If either the Seller or the Purchaser elects to make a CFIUS Filing following the procedures and consultations in Clause 4.2.9 or if CFIUS requires a filing then:

(i)the Seller and the Purchaser shall use their respective reasonable endeavours to submit a draft CFIUS Filing as soon as reasonably practicable after the Election Date, and a final CFIUS Filing no later than 30 Business Days after submitting the draft CFIUS filing, provided that the final CFIUS Filing shall not be submitted earlier than (1) 5 Business Days after submitting the draft CFIUS Filing or (2) 5 Business Days after the receipt of any comments from CFIUS staff regarding the draft CFIUS Filing;

(ii)the Seller and the Purchaser will provide each other with the reasonable opportunity to review and comment on any information provided to CFIUS to the extent permitted by Applicable Law, with the exception of personal identifier information required under Section 800.402(c)(6)(vi)(B) of the

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CFIUS regulations, 31 C.F.R or other personal information requested by CFIUS staff. Competitively sensitive information, or information not related to the transactions contemplated by this Agreement, may be restricted to each party’s external counsel to the extent reasonably considered necessary or advisable by the providing party;

(iii)the Seller and the Purchaser shall each have an opportunity to approve and mutually agree on the joint contents of the CFIUS Filing (subject to Clause 4.2.10(ii)) and shall be jointly responsible for the accuracy of such contents, except as provided below. The Seller and the Purchaser respectively, shall each be responsible for the accuracy of the contents of the CFIUS Filing to the extent exclusively relating to itself, its business, and any subsidiaries, parents or other related parties; and

(iv)the Seller and the Purchaser shall use their respective reasonable endeavours to obtain CFIUS Approval as promptly as practicable (and in any event not later than the Long Stop Date) and shall consult with each other on strategic matters related to obtaining such CFIUS Approval.

4.2.11In the event a CFIUS filing is made, the Seller and the Purchaser shall consult, cooperate and keep each other reasonably informed regarding communications with, and requests for additional information from, CFIUS with respect to the Transaction. The Seller and the Purchaser shall use their respective reasonable endeavours to provide promptly all information that is required pursuant to a request by CFIUS.

No prohibition of transaction condition:

4.2.12The Purchaser, subject to the limitations in Clause 4.2.6 (mutatis mutandis), and the Seller shall cooperate and use their respective reasonable endeavours to ensure that no Governmental Entity shall enact, issue, promulgate, enforce or enter any Applicable Law or Judgment as contemplated under Clause 4.1.3. In the event that any Governmental Entity enacts, issues, promulgates, enforces or enters any Applicable Law or Judgment as contemplated under Clause 4.1.3, the Purchaser, subject to the limitations in Clause 4.2.6 (mutatis mutandis), and the Seller shall cooperate and use their respective reasonable endeavours to put in place arrangements that would allow the Transaction to complete to the greatest possible extent in compliance with the relevant Applicable Law or Judgment.

Third Party Consents:

4.2.13With reference to the conditions set out in Clauses 4.1.4 and 4.1.5, the Parties shall use their respective reasonable endeavours to satisfy the conditions on a timetable to be mutually agreed (but in any event not later than the Long Stop Date) and shall consult with each other on matters relating to obtaining such consents or waivers.

4.3Notification of Satisfaction

The party responsible for satisfaction of each condition pursuant to this Clause 4 shall give notice to the other party of the satisfaction of the relevant condition within 1 Business Day of becoming aware of the same.

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4.4Non-Satisfaction by the Long Stop Date

4.4.1If the conditions in Clause 4.1 are not satisfied on or before 30 September 2016 (the “Long Stop Date”), the Purchaser or the Seller may, in its sole discretion, terminate this Agreement (other than Clauses 1, 12 and 15.2 to 15.15 inclusive). Neither the Seller nor the Purchaser may terminate this Agreement after satisfaction of the conditions in Clause 4.1, except in accordance with this Agreement.

4.4.2Nothing in this Clause 4.4 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement prior to termination of this Agreement.

4.5Termination

4.5.1This Agreement may be terminated at any time prior to the Closing:

(i)by written consent of the Seller and the Purchaser; or

(ii)by either the Seller or the Purchaser by notice to the other party in the event that any Judgment restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement shall have become final and non-appealable, provided that the party seeking to terminate this Agreement pursuant to this Clause 4.5 has complied with the terms of this Agreement; or

(iii)by the Seller by notice to the Purchaser at any time following the date that is 270 days after the date of filing of the Seller’s and the Purchaser’s Required Antitrust Notifications under the HSR Act in the event that the Seller determines, acting reasonably and in good faith, that it will not be possible for the Purchaser to ensure satisfaction of the condition in Clause 4.1.1 prior to the Long Stop Date.

4.5.2Save as provided by this Clause 4 or Clause 6.7, neither party shall be entitled to terminate or rescind this Agreement. If this Agreement is terminated pursuant to this Clause 4.5, this Agreement shall be of no further force and effect and there shall be no further liability on the part of any party, except that Clauses 1, 12 and 15.2 to 15.15 inclusive, in each case, to the extent applicable, shall survive any termination.

4.5.3Nothing in this Clause 4.5 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement prior to termination of this Agreement.

5Pre-Closing

5.1Seller’s Obligations in Relation to the Conduct of Business

5.1.1The Seller undertakes to procure that between the date of this Agreement and Closing, the Business Sellers and the relevant Flu Group Companies shall, so far as permitted by Applicable Law, save in so far as agreed in writing by the Purchaser (such consent not to be unreasonably withheld or delayed) or as provided in Clause 5.2 or Clause 5.7:

(i)carry on the business of the Flu Group as a going concern in the ordinary and usual course (including taking into account the seasonal and pandemic

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nature of the Business) in accordance with Applicable Law as carried on prior to the date of this Agreement;

(ii)take reasonable steps to preserve and protect the Business and the Business Assets and shall not remove any material Business Assets (except for any Excluded Assets) from any of the Properties or otherwise dispose of any of the Business Assets, save in the ordinary and usual course of business;

(iii)settle all trade payables incurred in the ordinary and usual course of the Business within the applicable periods of credit or otherwise in accordance with past practice;

(iv)continue to Commercialise the Products in accordance with past practice (including taking into account: (i) the seasonal and pandemic nature of the Business; and (ii) any increased capacity at the Holly Springs Site);

(v)maintain the level of inventory of seasonal Products held for use in the Business materially in accordance with past practice (including taking into account: (i) the seasonal and pandemic nature of the Business; and (ii) any increased capacity at the Holly Springs Site);

(vi)use reasonable endeavours to ensure that the Manufacture of the Products by the Seller’s Group complies with applicable GMP requirements in all material respects;

(vii)notify the Purchaser in writing of any actual safety issue in respect of any Product (as soon as reasonably practicable after becoming aware of the same) which issue the relevant member of the Seller’s Group, acting reasonably and in good faith, considers material in the context of the Manufacture or Commercialisation of such Product;

(viii)manage all observations, requests and recommendations from Governmental Entities in respect of the Manufacture of Products in accordance with the Business’ corporate policies and procedures and Applicable Law;

(ix)continue to conduct and perform the Business’s clinical trials in accordance with the current development plans associated with such trials, subject to such changes as the Seller and the Business reasonably determine are appropriate acting reasonably and taking into account the results of any such trials and any adverse effects reported in connection therewith;

(x)at their own cost, undertake all Prosecution and Maintenance in the same manner as Prosecution and Maintenance has been carried out prior to the date of this Agreement and allocate a yearly budget for such Prosecution and Maintenance that is no less than 80 per cent. of the average yearly spend on Prosecution and Maintenance over the 3 years prior to the date of this Agreement, and:

(a)provide the Purchaser with quarterly reports (within 14 days of the end of each calendar quarter) setting out a summary of all material Prosecution and Maintenance performed in the preceding quarter, the first of which reports shall be provided within 14 days of the end

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of the calendar quarter in which signing takes place;

(b)make reasonably available during normal business hours to the Purchaser or its counsel, on reasonable advance written notice, employees of the Seller’s Group and the Seller’s Group’s legal counsel (as at the time of the request), for the purposes of providing the Purchaser with reasonable assistance in relation to understanding the Prosecution and Maintenance activities relating to the Flu Group Intellectual Property Rights and facilitating the orderly transfer of the Flu Group Intellectual Property Rights from the Seller’s Group to the Purchaser’s Group; and

(c)to the extent necessary, enter into a common interest privilege agreement for the purposes of providing the information in Clauses 5.1.1(x)(a) or 5.1.1(x)(b),

provided that nothing in Clauses 5.1.1(x)(a) or 5.1.1(x)(b) shall require the Seller to provide the Purchaser with any information which is subject to legal professional privilege but not subject to common interest privilege;

(xi)maintain an appropriate level of capital expenditure in relation to the Business in accordance with the levels of expenditure budgeted for as set out in the management presentation on the Business given to the Purchaser in June 2014 (as contained in the Data Room at 9.1.1.2.20) and the information memorandum prepared in connection with the sale of the Flu Group (as contained in the Data Room at 9.1.11.1), subject to such changes as the Seller and the Business determine are appropriate acting reasonably and taking into account the need to maintain appropriate levels of capital expenditure in order to maintain and operate the Business in the ordinary course;

(xii)comply with material provisions in all material Transferred Contracts;

(xiii)comply with the Seller’s rights and obligations pursuant to the UK Pandemic Agreement to seek confirmation of whether the Authority intends to extend the agreement, and keep the Purchaser informed, to the extent permitted by Applicable Law, of the Seller’s progress with respect to any proposed renewals or extensions of the UK Pandemic Agreement; and

(xiv)comply with the Seller’s obligations to the Town of Holly Spring by removing, or procuring the removal of, the trailers known as “T8” and “T10” used as office space by the Holly Springs Site prior to Closing.

5.1.2Without prejudice to the generality of Clause 5.1.1 and subject to Clause 5.2, the Seller undertakes to procure that, between the date of this Agreement and Closing in relation to the Flu Group, the Business Sellers and the relevant Flu Group Companies shall not, except as may be required to comply with this Agreement, without the prior written consent of the Purchaser (such consent not to be unreasonably withheld or delayed) and so far as permitted by Applicable Law:

(i)amend or otherwise modify the constitutional documents of any Flu Group Company other than minor or administrative amendments or modifications which are not adverse to the Business;

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(ii)create, allot or issue, or grant an option to subscribe for, any share capital of any Flu Group Company;

(iii)repay, reduce, redeem or repurchase any share capital of any Flu Group Company;

(iv)voluntarily wind up, dissolve or liquidate any Flu Group Company (or take any steps in relation to the same);

(v)enter into any agreement or incur any commitment, in each case involving any capital expenditure, which is in excess of US$5 million, exclusive of VAT;

(vi)(A) enter into, or amend in any material respect, any material agreement relating to the Business, or incur any material commitment relating to the Business, which expires after 31 December 2015; or (B) make any material amendment to any existing material agreement relating to the Business, or any material commitment relating to the Business, which would result in such agreement expiring after 31 December 2015; unless such agreement or commitment is capable of being terminated without compensation at any time with 12 months’ notice or less, or where such agreement or commitment is entered into or amended in the ordinary course of business, or relates to the Employees (subject to Clauses 5.1.2(xvii) to 5.1.2(xxiii) inclusive). This Clause 5.1.2(vi) shall not apply to entering into, or amending in any material respect, any agreement, or incurring any material commitment, in relation to the sale by the Seller (or a member of the Seller’s Group) of all or any substantial part of the Seller’s Group Retained Business (including the Seller’s Group’s vaccines business (excluding the Business) and animal health business), provided that doing so would not materially prejudice the rights of the Purchaser under this Agreement;

(vii)make any material amendment to (except where such amendment is in the ordinary and usual course of business), terminate or assign to any third party, any agreement relating to the Business (including any Transferred Contracts, US Government Contracts, Transferred Intellectual Property Contracts, Co-Owned Flu Group Intellectual Property Rights or relevant part of a Shared Business Contract) which: (a) obligates total annual expenditure in excess of US$5 million, exclusive of VAT, save to the extent that such obligation can be terminated by the Seller at its discretion for a cost of less than US$5 million; or (b) is otherwise material and necessary for the operation of the Business and for which the primary purpose of such contract relates to the licence or grant of, or settlement of a dispute relating to, Intellectual Property Rights (which, for the avoidance of doubt and without limitation, shall exclude any distribution agreements, customer contracts and supply contracts). This Clause 5.1.2(vii) shall not apply to making any material amendment to, terminating or assigning to any third party, any agreement, in relation to the sale by the Seller (or a member of the Seller’s Group) of all or any substantial part of the Seller’s Group Retained Business (including the Seller’s Group’s vaccines business (excluding the Business) and animal health business), provided that doing so would not materially prejudice the rights of the Purchaser under this Agreement);

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(viii)enter into any agreement (including any Transferred Contracts, US Government Contracts, Transferred Intellectual Property Contracts, Co-Owned Flu Group Intellectual Property Rights or relevant part of a Shared Business Contract) or incur any commitment relating to the Business which obligates the Seller (or a member of the Seller’s Group) to make total annual contract expenditure in excess of US$5 million (exclusive of VAT), save in respect of any agreement or commitment that expires on or before 31 December 2015 or that can be terminated by the Seller at its discretion for a cost of less than US$5 million. This Clause 5.1.2(viii) shall not apply to any agreement requiring contract expenditure, or incurring any commitment, in respect of which the Purchaser would be entitled to be fully indemnified on an undisputed basis pursuant to the terms of this Agreement;

(ix)enter into any agreement (including any Transferred Contracts, US Government Contracts, Transferred Intellectual Property Contracts, Co-Owned Flu Group Intellectual Property Rights or relevant part of a Shared Business Contract) in relation to the Business whose primary purpose is the licence and/or transfer of Intellectual Property Rights or the settlement of Intellectual Property Rights disputes (in each case not including, by way of example, distribution or sales agreements) which:

(a)have an annual or initial expenditure of US$1 million or more; or

(b)would require the Purchaser after the Closing Date to pay any royalty in respect of: (A) the sale and manufacture of the MF59® adjuvant at any time; (B) the sale and manufacture of any seasonal flu product that is, as at the time of entering into such agreement, sold by the Business or reasonably expected to be sold by the Business within 18 months of the Closing Date; or (C) the sale and manufacture of a pandemic vaccine;

(x)acquire, or agree to acquire, any material asset or material stocks, involving consideration, expenditure or liabilities in excess of US$5 million, exclusive of VAT;

(xi)dispose of, or agree to dispose of, any material asset or material stock (other than any Excluded Asset) otherwise than in the ordinary course of business;

(xii)acquire any share, shares or other interest in any company, partnership or other body corporate, or any business, other than any investment of US$2.5 million or less in any such company, partnership or other body corporate;

(xiii)enter into any partnership or joint venture arrangement which involves investment by the Business or any Flu Group Company in excess of US$2.5 million;

(xiv)create or grant any Encumbrance (other than a Permitted Encumbrance) on, over or affecting any Shares, Business, or any Business Assets or assets of any Flu Group Company, other than in the ordinary course of business;

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(xv)discontinue, or cease operation, of all or any material part of the Business, other than ceasing any commercial relationships in the ordinary and usual course of business;

(xvi)allow any Flu Group Company to make any loan (other than the granting of trade credit in the ordinary course of business or other loans in the ordinary course of business) to any person (other than to a member of the Seller’s Group);

(xvii)allow any Flu Group Company to incur any additional borrowings other than: (a) the receipt of trade credit in the ordinary course of business (whether from a third party or a member of the Seller’s Group); (b) any borrowing from any member of the Seller’s Group; and (c) any third party indebtedness incurred by any Flu Group Company for general working capital purposes;

(xviii)offer to engage any employee in a role which is an executive committee role, or a direct report to an executive committee role and (in each case) at a base salary in excess of US$200,000 per annum (where such employee, would either be an employee of a member of the Seller’s Group working wholly or mainly in the Business or an employee of a Flu Group Company working wholly or mainly in the Business);

(xix)other than in the ordinary and usual course of business, offer to engage any employee in any role not covered by Clause 5.1.2(xviii) above where such employee, if employed would either be an employee of a member of the Seller’s Group working wholly or mainly in the Business or an employee of a Flu Group Company working wholly or mainly in the Business;

(xx)unilaterally dismiss any Employee from a role which is an executive committee role, or a direct report to an executive committee role and (in each case) at a base salary in excess of US$200,000 per annum, save for misconduct or gross misconduct, and other than in those instances where the dismissal process commenced prior to the date of this Agreement;

(xxi)other than in the ordinary and usual course of business, unilaterally dismiss any Employee from any role not covered by Clause 5.1.2(xx);

(xxii)make any material change or alteration to the terms and conditions of employment of, or the benefits conferred upon, any Employees which results in an aggregate increase in the total remuneration of the Employees in aggregate in excess of 2.5 per cent. per annum otherwise than in the ordinary course of business, or which is for the purposes of fulfilling the obligations under this Agreement (including in connection with complying with the Seller’s obligations under paragraph 14 of Schedule 10;

(xxiii)transfer any Employee from or to a role which is an executive committee role, or a direct report to an executive committee role and (in each case) at a base salary in excess of US$200,000 per annum;

(xxiv)other than in the ordinary and usual course of business:

(a)transfer any employee to any role not covered by Clause 5.1.2(xxiii) above where such transfer would result in the relevant employee

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becoming an employee of a member of the Seller’s Group working wholly or mainly in the Business or an employee of a Flu Group Company working wholly or mainly in the Business; or

(b)transfer any Employee from any role not covered by Clause 5.1.2(xxiii) above where such transfer would result in the individual ceasing to be an Employee;

(xxv)grant permission to any Flu Group Company to change the jurisdiction in which it is resident for Tax purposes;

(xxvi)initiate, settle or abandon any litigation, arbitration or other proceedings where the relief or amount claimed has a value above US$5 million and relating to a Flu Group Company, the Business, the Business Assets or any asset held by any Flu Group Company, other than:

(a)debt collection in the ordinary course of business;

(b)any claim, litigation, arbitration or other proceedings in respect of which the Purchaser would be entitled to be fully indemnified on an undisputed basis pursuant to the terms of this Agreement; or

(c)any claim in respect of Tax to which the provisions of the Tax Indemnity would apply from Closing; or

(xxvii)enter into any guarantee, indemnity or surety otherwise than in the ordinary course of business;

(xxviii)dispose of or terminate, or otherwise permit to lapse any rights in, or enter into any agreement or grant any licence relating to any Flu Group Intellectual Property Rights or rights to be licensed under the Purchaser Intellectual Property Licence Agreement, in each case that relate to material Products, material Pipeline Products or material Products Under Registration (save in respect of non-exclusive licences relating to the Seller’s research, development or Commercialisation of the Products) otherwise than in the ordinary course of business as it was conducted in the 3 years prior to the date of this Agreement. This Clause 5.1.2(xxviii) shall not apply to the disposal or termination of any rights to be licensed under the Purchaser Intellectual Property Licence Agreement or the grant by the Seller (or a member of the Seller’s Group) of any licence to any purchaser of all or any substantial part of the Seller’s Group Retained Business (including the Seller’s Group’s vaccines business (excluding the Business) and animal health business) provided that such disposal, termination or licence (as applicable) would not materially prejudice the rights of the Seller to validly enter into the Purchaser Intellectual Property Licence Agreement or Intellectual Property Assignment Agreements;

(xxix)acquire or dispose of any freehold or leasehold property with a fair market value in excess of US$1 million or grant any lease or third party right in respect of any of the Transferred Real Properties or agree a material increase to the rent paid in respect of any lease of any of the Transferred Real Properties as at the date of this Agreement (except in each case as contemplated by Part 4B of Schedule 3); or

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(xxx)allow any Registered Flu Group Intellectual Property Rights to lapse or be abandoned otherwise than in the ordinary course of business as it was conducted in the 3 years prior to the date of this Agreement.

5.1.3If the Seller requests, by written notice to the Purchaser, the consent of the Purchaser as contemplated by Clauses 5.1.1 and 5.1.2 and the Purchaser fails to respond by written notice to the Seller within 10 Business Days of the request being received or deemed received in accordance with Clause 15.11.4, the consent of the Purchaser shall be deemed to have been given in respect of the relevant action or matter.

5.2Exceptions to the Seller’s Obligations in Relation to the Conduct of Business

Clause 5.1 shall not operate so as to prevent or restrict:

5.2.1any action undertaken by any member of the Seller’s Group to facilitate or implement any Reorganisation in accordance with Clause 2.3.4 or otherwise pursuant to Clause 5.7.5;

5.2.2the entry into of any agreements or arrangements with the Seller’s Group Retained Business on arm’s length terms to facilitate or implement any separation of the Business from the Seller’s Group Retained Business or its activities;

5.2.3the completion or performance of actions which are reasonably necessary to discharge any obligations undertaken pursuant to any legal, statutory or regulatory obligation or pursuant to any contract, arrangement, commitment, licence or consent entered into by, issued, granted, amended or incurred, or relating to Novartis Vaccines Holdings Limited prior to the date of this Agreement or pursuant to any contract, arrangement, commitment, licence or consent entered into, issued, granted, amended or incurred after the date of this Agreement in the ordinary course of business or with or following the Purchaser’s express consent in respect thereto (if required) in accordance with Clause 5.1.2;

5.2.4the entry into of any agreements or arrangements on arm’s length terms with respect to the supply by the Flu Group of any products to Sandoz Inc. or its Affiliates;

5.2.5the technology transfer of the production lines in respect of the MF59® adjuvant between manufacturing sites, provided, however that such transfer does not materially adversely affect:

(i)the ability of the Business to operate in a substantially similar form as at the date of this Agreement; or

(ii)the Purchaser’s rights under this Agreement;

5.2.6any matter undertaken which is substantially consistent with the provisions of any capital expenditure plan, business plan or projection relating to the Flu Group which has been provided to the Purchaser prior to the date of this Agreement;

5.2.7the declaration, making or payment of any dividend or other distribution to shareholders;

5.2.8any action required to be undertaken to comply with Applicable Law or requests from, and any dealings or other arrangements with, any Governmental Entity including, for the avoidance of doubt, the tender for, entry into or re-negotiation of,

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Contracts with Governmental Entities in the ordinary course of business;

5.2.9any matter reasonably undertaken by any member of the Seller’s Group in an emergency or disaster situation with the intention of minimising any adverse effect of such situation in relation to the Flu Group, provided that the Seller shall notify the Purchaser as soon as reasonably practicable of any action taken or proposed to be taken as described in this Clause 5.2.9, provide to the Purchaser all such information as the Purchaser may reasonably request and use reasonable endeavours to consult with the Purchaser in respect of any such action; or

5.2.10any matter that is set out in Schedule 21.

5.3Post-Closing committee

With effect from Closing until the Parties agree otherwise, the Seller and the Purchaser shall meet on a regular basis and no less than four times a calendar year to discuss and resolve matters relating to, inter alia, the transition of the Business to the Purchaser, the operation of the Ancillary Agreements, the operations of the Delayed Businesses and the Purchaser’s progress to achieve closing of the Delayed Businesses and the Seller’s assistance with respect to achieving closing of the Delayed Businesses, all in accordance with the terms of this Agreement.

5.4Seller’s obligations in relation to insurance

Without prejudice to the generality of Clause 5.1.1, between the date of this Agreement and Closing or, in respect of the Delayed Businesses, the relevant Delayed Closing Date, the Seller shall or shall procure that the relevant members of the Seller’s Group shall maintain in full force and effect all Flu Group Insurance Policies and all Seller’s Group Insurance Policies with limits of indemnity for the benefit of the Flu Group Businesses and Flu Group Companies.

5.5Seller’s Obligations in Relation to Books and Records

Without prejudice to the generality of Clause 5.1.1, prior to Closing or, in respect of the Delayed Businesses, the relevant Delayed Closing Date, but with regard to minimising the disruption that may be caused to the operations of the Flu Group, the Seller shall, and shall procure that its Affiliates shall, allow the Purchaser and its agents, upon reasonable notice, reasonable access to the premises and employees of the Flu Group, and to take copies of, books, records and documents of or relating in whole or in part to the Flu Group (including in respect of the Reorganisation), in each case that are reasonably requested by the Purchaser, provided that the obligations of the Seller under this Clause shall not extend to allowing access to information which is: (i) regarded by the Seller as confidential to the activities of the Seller and the Seller’s Group otherwise than in relation to the Flu Group; or (ii) commercially sensitive or other information relating to the Flu Group if such information cannot be shared with the Purchaser prior to Closing or, in respect of the Delayed Businesses, the relevant Delayed Closing Date, in compliance with Applicable Law.

5.6Affiliate Contracts

5.6.1Other than as provided in the Ancillary Agreements and subject to Clauses 8.7 and 8.8, the Seller and the Purchaser shall procure that:

(i)the Cash Pooling Arrangements; and

(ii)each Affiliate Contract in force immediately prior to Closing other than any

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Surviving Affiliate Contract,

shall terminate prior to Closing and each counterparty thereto shall, effective as of Closing, settle all outstanding financial obligations arising out of such Affiliate Contracts and unconditionally release and irrevocably discharge each other party thereto from: (i) any and all further obligations to perform or any further performance of the various covenants, undertakings, warranties and other obligations contained in such Affiliate Contract; and (ii) any and all claims and Liabilities whatsoever arising out of, in any way connected with, as a result of or in respect of such Affiliate Contract.

5.6.2Subject to Clause 5.6.3, if, following Closing, the Parties determine, acting reasonably, that any Affiliate Contract which has survived Closing by virtue of romanette (vii) of the definition of Surviving Affiliate Contract is no longer required, the Purchaser and the Seller shall procure that such Surviving Affiliate Contract is terminated in accordance with Clause 5.6.1. Without prejudice to the generality of the foregoing, the Parties agree that the manufacturing agreement between Novartis Influenza Vaccines Marburg GmbH and Novartis Influenza Vaccines AG shall terminate upon the Delayed Closing of the German Business.

5.6.3The Parties acknowledge and agree that nothing in this Clause 5.6 shall prevent the Purchaser from terminating any Surviving Affiliate Contract following the Delayed Closing of the relevant Delayed Business to which the relevant Surviving Affiliate Contract exclusively relates (such termination to be undertaken in accordance with Clause 5.6.1), except to the extent such Surviving Affiliate Contract is required in connection with the transitional arrangements contemplated under any of the Ancillary Agreements, in which case, the Purchaser shall be permitted to terminate such Surviving Affiliate Contract:

(i)upon expiry of the relevant Ancillary Agreements;

(ii)upon expiry or termination of the relevant service under the Ancillary Agreements in respect of which the relevant Surviving Affiliate Contract was required; or

(iii)as otherwise agreed between the Parties.

5.7Other Pre-Closing Obligations

Subject to Applicable Law, unless otherwise agreed in writing between the parties:

5.7.1the Seller shall provide the Purchaser with:

(i)a copy of the 2014 Accounts;

(ii)a statement of sales by the Flu Group for each full calendar month between the date of this Agreement and 31 December 2014; the first statement being for the month ending 30 November 2014;

(iii)the unaudited carve out profit and loss account of the Flu Group for the quarter starting on 1 January 2015 and ending on 31 March 2015;

(iv)the unaudited carve out profit and loss account of the Flu Group for each full calendar month between 1 April 2015 and Closing, the first statement being for the month ending 30 April 2015;

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(v)the unaudited carve out balance sheet of the Flu Group as at 31 December 2014 and each as at 30 June and 31 December thereafter until Closing;

(vi)an estimated unaudited carve out balance sheet of the Flu Group as of the Closing Date and an estimated unaudited carve out profit and loss account of the Flu Group for the period starting on 1 January of the year in which Closing occurs to the Closing Date,

in each case without unreasonable delay and promptly after such accounts are finalised;

5.7.2the Seller shall provide the Purchaser with a copy of the business plan of the Flu Group for the year commencing on 1 January 2015 before 31 December 2014;

5.7.3the Seller shall use its reasonable endeavours, in good faith, to procure the entering into of binding amendments to the agreements entered into with the Argentinian Ministry of Health, which form part of the Sinergium Arrangements, to agree and document:

(i)that a pilot plant for the development and manufacture of cell culture based flu vaccines will be constructed;

(ii)the necessary technology transfer from the Seller’s Group in connection therewith;

5.7.4with respect to: (i) the remaining stages of the FCC technology transfer; and (ii) the MF59® technology transfer, in each case, from the Seller’s Group’s facilities at Marburg, Germany to the Holly Springs Site, the Seller shall use commercially reasonable endeavours to progress such transfer in accordance with the timeline set out in the management presentation on the Business given to the Purchaser in June 2014 (as contained in the Data Room at 9.1.1.2.20);

5.7.5the Seller shall use its reasonable endeavours to ensure that any excess cash available in the Flu Group Companies is extracted on or prior to Closing taking account of the obligations set out in Clause 5.1.1 and any associated obligations to have or expend cash prior to Closing so that at Closing excess cash within the Flu Group Companies is as close to zero as practicable whether by way of dividend or such other means as the Seller deems appropriate, in any case in accordance with Applicable Law;

5.7.6the Seller shall carry out the Reorganisation;

5.7.7the Seller agrees that it shall procure: (i) that, prior to Closing, Novartis Vaccines and Diagnostics AG shall assign all of its rights and obligations under the Lek Filling and Packaging Agreement to a Flu Group Company or that the rights and obligations of Novartis Vaccines and Diagnostics AG under the Lek Filling and Packaging Agreement are novated to a Flu Group Company; and (ii) that the member of the Seller’s Group which is party to the Lek Filling and Packaging Agreement shall not exercise its rights under the Lek Filling and Packaging Agreement to agree to any change to the Effective Date (as defined in the Lek Filling and Packaging Agreement), other than to align the Effective Date with the Closing Date; and (iii) that, prior to Closing, there shall be no material amendments to the terms of the Lek Filling and Packaging Agreement without the prior written consent of the Purchaser, such consent not to be unreasonably withheld or

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delayed; and

5.7.8the Seller shall provide the Purchaser with:

(i)an updated statement of net assets of the Flu Group as of 31 May 2015 (including the FCC Operations);

(ii)an updated statement of net assets of the Flu Group as of 30 June 2015 (including the FCC Operations), and

(iii)an updated statement of net assets of the Flu Group as of 30 June 2015 (excluding the FCC Operations) (the “Illustrative Statement of Net Assets”),

in each case, prepared in accordance with Schedule 20 (or, in the case of the Illustrative Statement of Net Assets, prepared in accordance with Schedule 20 save for the exclusion of the FCC Operations) without unreasonably delay and promptly after such accounts are finalised; the Illustrative Statement of Net Assets setting out:

(a)in the column entitled “Flu Group Statement of Net Assets” the accounting line items reflecting the Business Assets and Assumed Liabilities of the Flu Group Companies and the Flu Group Businesses which would transfer (or, in the case of the Delayed Businesses be deemed to transfer) to the Purchaser; and

(b)in the column entitled “Excluded items (not included in the transaction perimeter)” the accounting line items reflecting the Excluded Assets and Excluded Liabilities to be retained by Seller and certain of the Seller’s Affiliates,

in each case as if Closing occurred on and with effect from 30 June 2015 in respect of the Flu Group (including the Delayed Businesses).

6Closing

6.1Date and Place

Save where otherwise provided in this Agreement in relation to the Delayed Jurisdictions (including Schedule 24), Closing shall take place at 12.00 p.m. (London Time) at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ (other than in respect of any Local Transfer Documents agreed between the parties to be executed in another jurisdiction) on 31 July 2015.

6.2Closing Events

6.2.1On Closing, the Seller shall transfer to the Purchaser and the Purchaser shall accept the Shares and all of the Business Assets and Assumed Liabilities which exist in respect of the Flu Group Companies and the Flu Group Businesses (other than the Delayed Businesses) as at the Closing Date and the parties shall otherwise comply with their respective obligations specified in Schedule 13. The Seller may waive some or all of the obligations of the Purchaser as set out in Schedule 13 and the Purchaser may waive some or all of the obligations of the Seller as set out in Schedule 13.

6.2.2The parties acknowledge that the transfer of Product Approvals, Pipeline Product

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Approvals and Product Applications to the Purchaser or other members of the Purchaser’s Group may be subject to the approval of applicable Governmental Entities, and that, notwithstanding anything in this Agreement to the contrary, each Product Approval, Pipeline Product Approvals and Product Application shall continue to be held by the relevant member of the Seller’s Group from the Closing Date (or Delayed Closing Date as the case may be) until the relevant PA Transfer Date.

6.2.3The parties shall perform their respective obligations with respect to:

(i)the transfer of the Product Approvals, Product Applications and Pipeline Product Approvals as set out in Schedule 7;

(ii)the transfer of Contracts (other than US Government Contracts, Product Approvals, Product Applications and Pipeline Product Approvals) and the Transferred Intellectual Property Contracts and the treatment of Shared Business Contracts as set out in Schedule 8;

(iii)the transfer of US Government Contracts as set out in Schedule 15; and

(iv)the Delayed Businesses as set out in Schedule 24.

6.3Payment on Closing

6.3.1On Closing, the Purchaser shall procure the payments by the Relevant Payors in accordance with Clause 3.2 of an amount in cleared funds, to the relevant Purchase Price Bank Accounts of the Seller, in aggregate which is equal to the sum of:

(i)the Headline Price;

plus

(ii)the Estimated Flu Group Companies’ Cash Balances;

minus

(iii)the Estimated Third Party Indebtedness;

minus

(iv)the Estimated Tax Adjustment.

6.3.2The amounts payable in accordance with Clause 6.3.1 shall, in each case, include all such amounts payable in respect of the Delayed Businesses.

6.4Notifications to determine payments on Closing

6.4.1Not later than 5 Business Days prior to Closing, the Seller shall notify the Purchaser of:

(i)the Estimated Flu Group Companies’ Cash Balances;

(ii)the Estimated Third Party Indebtedness; and

(iii)the Estimated Tax Adjustment,

and shall at the same time provide to the Purchaser reasonable supporting calculations and information to enable the Purchaser to review the basis on which the estimates have been prepared.

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6.5Delayed Local Payments

In respect of each Delayed Business, the Purchaser shall procure that, if required pursuant to relevant local law, on the relevant Delayed Closing Date, either a local entity designated by the Purchaser or an Affiliate of the Purchaser (a “Designated Purchaser”) shall, subject to the terms of the relevant Local Transfer Agreement (and, for the avoidance of doubt, in partial satisfaction of the Purchase Price), pay to the relevant Business Seller set out in column 2 of the table set out in Schedule 25, the US Dollars amount in respect of that Delayed Business to be determined by the Seller in accordance with Clause 3.3 (each a “Delayed Local Payment Amount”) converted into the relevant currency by applying the Delayed Local Payments Conversion Rate on the relevant Delayed Closing Date, in accordance with the terms of the relevant Local Transfer Document.

6.6Repayment of Delayed Local Payments

Where a Delayed Local Payment Amount is received by a member of the Seller’s Group pursuant to Clause 6.5, the Seller shall as soon as reasonably practicable pay to Seqirus UK Limited in US Dollars a sum equal to the relevant Delayed Local Payment Amount by way of repayment of the amount paid by the relevant member of the Purchaser’s Group at Closing on behalf of the Designated Purchaser who has paid the relevant Delayed Local Payment Amount.

6.7Breach of Closing Obligations

If any party fails to comply with any material obligation in Clauses 6.2, 6.3 or 5.7.7 or Schedule 13 in relation to Closing, the Purchaser, in the case of non-compliance by the Seller, or the Seller, in the case of non-compliance by the Purchaser, shall be entitled (in addition to and without prejudice to all other rights or remedies available) by written notice to the Seller or the Purchaser, as the case may be:

6.7.1to effect Closing so far as practicable having regard to the defaults which have occurred; or

6.7.2to fix a new date for Closing which, except as agreed by the parties, shall be the last day of the month next ending or, if that day is not a Business Day, the first Business Day falling after that day, in which case the provisions of Schedule 13 shall apply to Closing as so deferred, but provided such deferral may only occur once (the “Deferred Closing Date”).

6.7.3If Closing does not occur on the Deferred Closing Date, either party may terminate this Agreement by written notice given to the other.

The parties agree that compliance with paragraph 1.1.1 (to the extent it relates to the Transitional Services Agreement, the Global Transitional Distribution Services Agreement and any Local Transitional Distribution Services Agreement and the MF59® Manufacturing and Supply Agreement) and paragraph 1.1.6 of Schedule 13 shall be deemed to be a material obligation for the purposes of this Clause 6.7.

7Post-Closing Adjustments

7.1Closing Statements

7.1.1The Seller shall procure that as soon as practicable following Closing there shall be drawn up a draft of the Closing Statement (the “Draft Closing Statement”) in accordance with Schedule 14 in relation to the Flu Group Companies and Flu

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Group Businesses, on a combined basis.

7.1.2The Closing Statement shall be drawn up as at the Effective Time and shall include the Delayed Businesses which shall be deemed to have transferred to the Purchaser with effect from the Effective Time for the purposes of this Clause 7.

7.2Determination of Closing Statement

7.2.1The Draft Closing Statement as agreed or determined pursuant to paragraph 1 of Part 1 of Schedule 14:

(i)shall constitute the Closing Statement for the purposes of this Agreement; and

(ii)shall be final and binding on the parties.

7.2.2The Flu Group Companies’ Cash Balances, the Tax Adjustment and the Third Party Indebtedness shall be derived from the Closing Statement.

7.3Adjustments to Purchase Price

7.3.1Flu Group Companies’ Cash Balances

(i)If the Flu Group Companies’ Cash Balances are less than the Estimated Flu Group Companies’ Cash Balances, the Seller shall repay to the Purchaser an amount equal to the deficit; or

(ii)if the Flu Group Companies’ Cash Balances are greater than the Estimated Flu Group Companies’ Cash Balances, the Purchaser shall pay to the Seller an additional amount equal to the excess.

7.3.2Third Party Indebtedness

(i)If the Third Party Indebtedness is greater in magnitude than the Estimated Third Party Indebtedness, the Seller shall repay to the Purchaser an amount equal to the excess; or

(ii)if the Third Party Indebtedness is less in magnitude than the Estimated Third Party Indebtedness, the Purchaser shall pay to the Seller an additional amount equal to the deficit.

7.3.3Tax Adjustment

(i)If the Tax Adjustment is greater than the Estimated Tax Adjustment, the Seller shall repay to the Purchaser an amount equal to the difference; or

(ii)if the Tax Adjustment is less than the Estimated Tax Adjustment, the Purchaser shall pay to the Seller an additional amount equal to the difference.

7.3.4Netting

To the extent each of the Seller and the Purchaser are required to pay an amount pursuant to Clause 7.3, the amount payable by the Seller to the Purchaser shall first be set off against the amount payable by the Purchaser to the Seller. If the amount due from the Seller is less than the amount due from the Purchaser, the Purchaser shall pay the Seller an amount equal to such excess. If the amount due from the Seller is more than the amount due from the Purchaser, the Seller shall

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pay the Purchaser an amount equal to such excess.

7.4Interest

Any payment to be made in accordance with Clause 7.3 shall include interest thereon calculated from the Closing Date to the date of payment at a rate per annum of USD LIBOR for the period corresponding to the period between the Closing Date and the payment of the purchase price adjustment.

7.5Payment

7.5.1Any payments pursuant to Clause 7.3, and any interest payable pursuant to Clause 7.4, shall be made on or before the Final Payment Date.

7.5.2Where any payment is required to be made pursuant to Clause 7.3 or Clause 7.4 (in relation to a payment pursuant to Clause 7.3) the payment made on account of the Purchase Price shall be reduced or increased accordingly.

8Post-Closing Obligations

8.1Assumed Liabilities and Purchaser Indemnity

8.1.1“Assumed Liabilities” means all Liabilities to the extent referable to the Business (including, for the avoidance of doubt, any Delayed Businesses), but excluding:

(i)the Excluded Liabilities;

(ii)the Relevant Pension and Employment Liabilities (which are dealt with separately under Schedule 9); and

(iii)any Liabilities of the Seller’s Group in respect of Tax (other than Tax which has been assumed by the Purchaser’s Group under an express provision of this Agreement).

8.1.2The Seller agrees to procure the transfer (to the extent it is able to do so) and the Purchaser agrees to accept (or procure the acceptance by another member of the Purchaser’s Group of), with effect from Closing and with reference only to periods after the Effective Time, the transfer of, and to assume, pay, satisfy, discharge, perform or fulfil (or procure that another member of the Purchaser’s Group will assume, pay, satisfy, discharge, perform or fulfil) the Assumed Liabilities.

8.1.3The Purchaser hereby undertakes to the Seller (for itself and on behalf of each other member of the Seller’s Group and their respective directors, officers, employees and agents) that, with effect from Closing, the Purchaser will indemnify on demand and hold harmless each member of the Seller’s Group and their respective directors, officers, employees and agents against and in respect of any and all:

(i)Assumed Liabilities;

(ii)Liabilities arising out of the US Government Contracts (including any modifications, amendments or extensions thereto) which are referable to the period after the Effective Time, or the Purchaser’s performance of any such US Government Contracts;

(iii)Liabilities arising out of the [***] (including any modifications, amendments or extensions thereto or any changes to or reorganisation of the [***]) which

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are referable to the period after the Effective Time, or the Purchaser’s performance of any aspect of the [***];

(iv)Liabilities arising out of the Seller making the US Government Representations, irrespective of whether such Liabilities are referable to the period before or after the Effective Time; and

(v)Losses which the Seller or any other member of the Seller’s Group may suffer by reason of any member of the Seller’s Group taking any reasonable action to avoid, resist or defend against any Liability referred to in (i), (ii), (iii) and (iv) in this Clause 8.1.3.

8.2Excluded Liabilities and Seller Indemnity

8.2.1“Excluded Liabilities” means:

(i)all Liabilities referable to the Business to the extent such liabilities have arisen or arise (whether before or after the Effective Time) as a result of an act, omission, fact, matter, circumstance or event undertaken, occurring, in existence or arising before the Effective Time, including all Liabilities in respect of Tax of the Seller’s Group (other than the Flu Group Companies, for which the provisions of the Tax Indemnity shall apply), other than:

(a)any such Liabilities provided for or reflected in the Statement of Net Assets, the Accounts, the 2013 Carve Out Accounts, the Stub Period Carve Out Accounts or taken into account for the purposes of the Post-Closing Adjustments but only, in each case, to the extent so provided for therein or taken into account; and

(b)any Liabilities In The Nature of Working Capital irrespective of the extent provided for or reflected in the Closing Statement, provided that the Closing Statement has been drawn up and determined in accordance with Clause 7 and Schedule 14;

(ii)all Liabilities referable to any business or asset not acquired by the Purchaser pursuant to this Agreement;

(iii)all Liabilities referable to the Seller’s Group Retained Business;

(iv)all Liabilities which arise from the Reorganisation; and

(v)all Liabilities arising out of the Community Economic Development Agreements of 18 July 2006 (2006-10) and 22 December 2010 (Grant No. 2010-10) which are referable to the period before the Effective Time, or the Seller’s performance of any aspects of such agreements before the Effective Time,

save, in the case of sub-Clauses (i) and (v), for any issues in relation to Pension and Liabilities relating to Employees which are dealt with separately in Schedule 9.

8.2.2The Purchaser shall not be obliged to accept (or procure the acceptance by another member of the Purchaser’s Group of), the transfer of or to assume, pay, satisfy, discharge, perform or fulfil, or procure that another member of the Purchaser’s Group will assume, pay, satisfy, discharge, perform or fulfil any Excluded Liabilities.

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8.2.3The Seller hereby undertakes to the Purchaser (for itself and on behalf of each other member of the Purchaser’s Group and their respective directors, officers, employees and agents) that, with effect from Closing and for a period of 6 years from Closing, the Seller will indemnify on demand and hold harmless each member of the Purchaser’s Group and their respective directors, officers, employees and agents against and in respect of any and all:

(i)Excluded Liabilities;

(ii)subject to the Purchaser complying with its obligations in Clause 8.2.5, Liabilities arising out of the US Government Contracts (including any modifications, amendments or extensions thereto) which are referable to the period prior to the Effective Time, or Seller’s Group’s performance of any such US Government Contracts;

(iii)Losses which the Purchaser or any other member of the Purchaser’s Group may suffer by reason of any member of the Purchaser’s Group taking any reasonable action to avoid, resist or defend against any Liability referred to in sub-Clause (i);

(iv)Losses arising from any Employee Inventor Payments or Intellectual Property Litigation (including, without limitation, any Losses arising from settlements, royalty payments or injunctions);

(v)Liabilities, whether arising prior to or after Closing, under Environmental Laws arising from or relating to the incidents described in the Disclosure Letter against warranty 2.19.1 relating to the presence of mercury in excess of applicable discharge limits in waste water at the Liverpool Site; and

(vi)Liabilities, whether arising prior to or after Closing, under Environmental Laws arising from or relating to odour emissions broadly of the type described more particularly in the Liverpool Part A notification dated 8 January 2014 at the Liverpool Site and their sources, impacts and effects) as contained in the Data Room at 3.5.1.2.6,

in each case, to the extent that:

(i)a provision or reserve in respect of such Losses or Liabilities has not been made, or such Losses or Liabilities were not reflected in, the Statement of Net Assets, the Accounts, the 2013 Carve Out Accounts or the Stub Period Carve Out Accounts;

(ii)such Losses or Liabilities were not taken into account for the purposes of the Post-Closing Adjustments; or

(iii)in the case of paragraph 8.2.3(i) only, such Losses or Liabilities do not constitute Liabilities In The Nature Of Working Capital.

8.2.4Notwithstanding anything in this Agreement to the contrary:

(i)the Seller (or relevant member of the Seller’s Group) shall, at its cost (including legal and professional costs and expenses), have the exclusive right to take whatever action it deems appropriate in its sole discretion for the defence or enforcement, as applicable, of any Employee Inventor Payments or Intellectual Property Litigation; and

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(ii)the parties agree that any action taken by the Seller (or relevant member of the Seller’s Group) pursuant to this Clause 8.2.4 shall constitute a claim that is subject to Clauses 8.4.2 and 8.4.4 to 8.4.6, and in relation to any such action each party shall (as applicable) have the rights provided by, and be subject to the obligations arising under, Clauses 8.4.2 and 8.4.4 to 8.4.6.

8.2.5The Purchaser shall notify the Seller as soon as reasonably practicable of any changes to the US Government Contracts that would be likely to increase the Seller’s potential liability in connection therewith. The notice shall provide a summary of any changes in sufficient detail to allow the Seller to understand the impact of the changes and the increased potential liability.

8.3Conduct of Claims in respect of Assumed Liabilities

8.3.1If the Seller becomes aware after Closing of any claim which constitutes or may constitute an Assumed Liability, the Seller shall as soon as reasonably practicable:

(i)give written notice thereof to the Purchaser, setting out such information as is available to the Seller as is reasonably necessary to enable the Purchaser to assess the merits of the potential claim;

(ii)take all appropriate actions to preserve evidence; and

(iii)provide the Purchaser with periodic updates on the status of the claim upon reasonable request and shall not admit, compromise, settle, discharge or otherwise deal with such claim without the prior written agreement of the Purchaser (such agreement not to be unreasonably withheld or delayed).

8.3.2The Seller shall, and shall procure that each Share Seller and Business Seller shall:

(i)take such action as the Purchaser may reasonably request to avoid, dispute, resist, appeal, compromise, defend or mitigate any claim which constitutes or may constitute an Assumed Liability subject to the Seller and each Share Seller and Business Seller being indemnified to their reasonable satisfaction by the Purchaser against all Liabilities which may thereby be incurred. In connection therewith, the Seller shall make or procure to be made available to the Purchaser or its duly authorised agents on reasonable notice during normal business hours all relevant books of account, records and correspondence relating to the Flu Group Businesses which have been retained by the Seller’s Group (and shall permit the Purchaser to take copies thereof at its expense) and shall afford the Purchaser or its duly authorised agents reasonable access, on reasonable notice, during normal business hours to its premises and to its directors, officers, employees, consultants, agents and advisers for the purposes of enabling the Purchaser to ascertain or extract any information relevant to the claim; and

(ii)on reasonable notice from the Purchaser, give such assistance to the Purchaser as it may reasonably require in relation to such claim including providing the Purchaser or any member of the Purchaser’s Group and its representative and advisers with access to and assistance from directors, officers, managers, employees, advisers, agents or consultants of the

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Seller and/or of each other member of the Seller’s Group (collectively, the “Relevant Persons”) and the Seller will use its reasonable endeavours to procure that such Relevant Persons comply with any reasonable requests from the Purchaser and generally co-operates with and assists the Purchaser and other members of the Purchaser’s Group.

8.3.3In addition, where any claim or investigation which constitutes or may constitute an Assumed Liability involves a Governmental Entity, the Seller shall, subject to Applicable Law, the requirements of the relevant Governmental Entity and the Purchaser providing an appropriate confidentiality undertaking in favour of the Seller’s Group, provide to the Purchaser, at least 5 Business Days in advance (or, where not possible, as soon as reasonably possible), any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals they or their agents make or submit to a Governmental Entity. Without limiting the foregoing, the parties agree, subject to Applicable Law, and the requirements of the relevant Governmental Entity, and the Purchaser providing an appropriate confidentiality undertaking in favour of the Seller’s Group, to:

(i)give the Purchaser reasonable advance notice of all meetings with any Governmental Entity;

(ii)give the Purchaser an opportunity to participate in each of such meetings;

(iii)to the extent practicable, give the Purchaser reasonable advance notice of all substantive oral communications with any Governmental Entity;

(iv)if any Governmental Entity initiates a substantive oral communication, promptly notify the Purchaser of the substance of such communication;

(v)provide the Purchaser with a reasonable advance opportunity to review and comment upon all substantive written communications (including any substantive correspondence, analyses, presentations, memoranda, briefs, arguments, opinions and proposals) that the Seller or its agents intend to make or submit to a Governmental Entity in connection with such claim;

(vi)provide the Purchaser with copies of all substantive written communications to or from any Governmental Entity; and

(vii)not advance arguments with the Governmental Entity without the prior written agreement of the Purchaser that would reasonably be likely to have a significant adverse impact on the Purchaser, provided however, that the Seller shall not be required to comply with sub-clause (ii) above to the extent that the Governmental Entity objects to the participation of a party, or with sub-clause (v) or (vi) above to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis).

8.3.4The Purchaser shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Seller, to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest any claim which constitutes or may constitute an Assumed Liability (including making counterclaims or other claims against third parties) in the name of and on behalf of the Seller or other member of the Seller’s Group concerned and to have the conduct of any related proceedings, negotiations or appeals. In taking action on

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behalf of any member of the Seller’s Group as permitted by this Clause 8.3.4, the Purchaser shall, in good faith, take into account and have due regard to any reputational matters or issues arising out of the claim for any member of the Seller’s Group or any of their respective directors, officers, employees or agents which are brought to its attention by the Seller or a member of the Seller’s Group.

8.3.5The Purchaser shall be entitled at any stage and in its absolute discretion to settle any claim which constitutes or may constitute an Assumed Liability (but without any admission of wrongdoing) after giving reasonable advance written notice to the Seller or the relevant member of the Seller’s Group and provided that the Seller or the relevant member of the Seller’s Group is indemnified in full against all Losses arising in connection with such claim.

8.3.6When seeking assistance under Clause 8.3.4 the Purchaser, or any other relevant member of the Purchaser’s Group, shall use reasonable endeavours to minimise interference with the Seller and the Seller’s Group’s conduct of the relevant business or the performance by the relevant employees of their employment duties.

8.4Conduct of Claims in respect of Excluded Liabilities

8.4.1If the Purchaser becomes aware after Closing of any claim which constitutes or may constitute an Excluded Liability, the Purchaser shall as soon as reasonably practicable:

(i)give written notice thereof to the Seller, setting out such information as is available to the Purchaser as is reasonably necessary to enable the Seller to assess the merits of the potential claim;

(ii)take all appropriate actions to preserve evidence; and

(iii)provide the Seller with periodic updates on the status of the claim upon reasonable request and shall not admit, compromise, settle, discharge or otherwise deal with such claim without the prior written agreement of the Seller (such agreement not to be unreasonably withheld or delayed).

8.4.2The Purchaser shall, and shall procure that each member of the Purchaser’s Group shall:

(i)take such action as the Seller may reasonably request to avoid, dispute, resist, appeal, compromise, defend or mitigate any claim which constitutes or may constitute an Excluded Liability subject to the Purchaser and each member of the Purchaser’s Group, being indemnified to their reasonable satisfaction by the Seller against all Liabilities which may thereby be incurred. In connection therewith, without limitation to the Seller’s rights under Clause 8.4.2(ii), the Purchaser shall make or procure to be made available to the Seller or its duly authorised agents on reasonable notice during normal business hours all relevant books of account, records and correspondence relating to the Flu Group Businesses which are in the possession of the Purchaser’s Group (and shall permit the Seller to take copies thereof at its expense) and shall afford the Seller or its duly authorised agents reasonable access, on reasonable notice, during normal business hours to its premises and to its directors, officers, employees, consultants, agents and advisers for the purposes of enabling the Seller to

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ascertain or extract any information relevant to the claim; and

(ii)on reasonable notice from the Seller, give such assistance to the Seller as it may reasonably require in relation to such claim including providing the Seller or any member of the Seller’s Group and its representative and advisers with access to and assistance from directors, officers, managers, employees, advisers, agents or consultants of the Purchaser and/or of each other member of the Purchaser’s Group (collectively, the “Relevant Persons”) and the Purchaser will use its reasonable endeavours to procure that such Relevant Persons comply with any reasonable requests from the Seller and generally co-operates with and assists the Seller and other members of the Seller’s Group.

8.4.3In addition, where any claim or investigation which constitutes or may constitute an Excluded Liability involves a Governmental Entity, the Purchaser shall, subject to Applicable Law, the requirements of the relevant Governmental Entity and the Seller providing an appropriate confidentiality undertaking in favour of the Purchaser’s Group, provide to the Seller, at least 5 Business Days in advance (or, where not possible, as soon as reasonably possible), any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals they or their agents make or submit to a Governmental Entity. Without limiting the foregoing, the parties agree, subject to Applicable Law, and the requirements of the relevant Governmental Entity, and the Seller providing an appropriate confidentiality undertaking in favour of the Purchaser’s Group, to:

(i)give the Seller reasonable advance notice of all meetings with any Governmental Entity;

(ii)give the Seller an opportunity to participate in each of such meetings;

(iii)to the extent practicable, give the Seller reasonable advance notice of all substantive oral communications with any Governmental Entity;

(iv)if any Governmental Entity initiates a substantive oral communication, promptly notify the Seller of the substance of such communication;

(v)provide the Seller with a reasonable advance opportunity to review and comment upon all substantive written communications (including any substantive correspondence, analyses, presentations, memoranda, briefs, arguments, opinions and proposals) that the Purchaser or its agents intend to make or submit to a Governmental Entity in connection with such claim;

(vi)provide the Seller with copies of all substantive written communications to or from any Governmental Entity; and

(vii)not advance arguments with the Governmental Entity without the prior written agreement of the Seller that would reasonably be likely to have a significant adverse impact on the Seller, provided however, that the Purchaser shall not be required to comply with sub-clause (ii) above to the extent that the Governmental Entity objects to the participation of a party, or with sub-clause (v) or (vi) above to the extent that such disclosure may raise regulatory concerns (in which case, the disclosure may be made on an outside counsel basis).

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8.4.4The Seller shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Purchaser, to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest any claim which constitutes or may constitute an Excluded Liability (including making counterclaims or other claims against third parties) in the name of and on behalf of the Purchaser or other member of the Purchaser’s Group concerned and to have the conduct of any related proceedings, negotiations or appeals. In taking action on behalf of any member of the Purchaser’s Group as permitted by this Clause 8.4, the Seller shall, in good faith, take into account and have due regard to any reputational matters or issues arising out of the claim for any member of the Purchaser’s Group or any of their respective directors, officers, employees or agents which are brought to its attention by the Purchaser or a member of the Purchaser’s Group.

8.4.5The Seller shall be entitled at any stage and in its absolute discretion to settle any claim which constitutes or may constitute an Excluded Liability (but without any admission of wrongdoing) after giving reasonable advance written notice to the Purchaser or the relevant member of the Purchaser’s Group and provided that the Purchaser or the relevant member of the Purchaser’s Group is indemnified in full against all Losses arising in connection with such claim.

8.4.6When seeking assistance under Clauses 8.4.2 and 8.4.3, the Seller, or any other relevant member of the Seller’s Group, shall use reasonable endeavours to minimise interference with the Purchaser and the Purchaser’s Group’s conduct of the relevant business or the performance by the Relevant Persons of their employment duties.

8.4.7For the avoidance of doubt, Clauses 8.2.3(ii) to (vi), 8.3 and 8.4, with the exception of Clauses 8.3.1 and 8.4.1, shall apply not only to any claim or investigation of which either party becomes aware after Closing and which constitutes or may constitute an Assumed Liability or Excluded Liability, but also to any such claim or investigation that was in existence and of which either party was aware before Closing.

8.5Release of Guarantees

8.5.1The Purchaser shall use reasonable endeavours to procure as soon as reasonably practicable after Closing, the release of the Seller or any member of the Seller’s Group from any securities, guarantees or indemnities given by or binding upon the Seller or any member of the Seller’s Group in respect of the Assumed Liabilities or in connection with a liability of any of the Flu Group Companies (including, for this purpose, any Delayed Business, provided that, in respect of any Delayed Businesses, the Purchaser shall not be required to use its reasonable endeavours to procure such releases before the relevant Delayed Closing Date where not reasonably practicable to do so or where to do so would, in the reasonable opinion of the Purchaser, be in breach of Applicable Law), including any liability resulting from the novation of the US Government Contracts. Pending such release, the Purchaser shall indemnify the Seller and any member of the Seller’s Group against all amounts paid by any of them (acting reasonably) pursuant to any such securities, guarantees or indemnities in respect of such Assumed Liabilities or such liability of the Flu Group Companies (including, for this purpose, any Delayed Businesses).

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8.5.2The Seller shall use reasonable endeavours to procure by Closing or, to the extent not done by Closing, as soon as reasonably practicable after Closing, the release of the Flu Group Companies from any securities, guarantees or indemnities given by or binding upon the Flu Group Companies in respect of any liability of the Seller or any member of the Seller’s Group (excluding for this purpose any other Flu Group Company), provided that, in respect of any Delayed Businesses, the Seller shall not be required to use its reasonable endeavours to procure such releases before the relevant Delayed Closing Date where not reasonably practicable to do so or where to do so would, in the reasonable opinion of the Seller, be in breach of Applicable Law). Pending such release, the Seller shall indemnify the Flu Group Companies against all amounts paid by any of them (acting reasonably) pursuant to any such securities, guarantees or indemnities in respect of such liability of the Seller which arises after Closing.

8.6Intra-Group Non-Trade Payables and Receivables

Any Intra-Group Non-Trade Payables and Intra-Group Non-Trade Receivables shall be settled at or prior to Closing.

8.7Intra-Group Trading Balances

The Seller or the Purchaser, as applicable, shall procure that any Intra-Group Trading Balances shall be settled after Closing in the ordinary course of business and in any event within 60 days of Closing.

8.8Wrong Pockets Obligations

8.8.1Except as provided in Schedules 3, 7, 8 and 9, if any property, right or asset forming part of the Flu Group (other than any property, right or asset expressly excluded from the sale under this Agreement) has not been transferred to the Purchaser or to another member of the Purchaser’s Group and should have transferred pursuant to the terms of this Agreement, the Seller shall procure that such property, right or asset (and any related liability which is an Assumed Liability) is transferred to the Purchaser, or to such other member of the Purchaser’s Group as the Purchaser may nominate which is reasonably acceptable to the Seller, as soon as practicable and at no cost to the Purchaser.

8.8.2If, after Closing or, in respect of any Delayed Business, the relevant Delayed Closing, any property, right or asset not forming part of the Flu Group (other than any property, right or asset expressly included in the sale under this Agreement) is found to have been transferred to the Purchaser or to another member of the Purchaser’s Group and should not have transferred pursuant to the terms of this Agreement, the Purchaser shall procure that such property, right or asset is transferred to the transferor or another member of the Seller’s Group nominated by the Seller which is reasonably acceptable to the Purchaser as soon as practicable and at no cost to the Seller.

8.8.3If, after Closing or, in respect of any Delayed Business, the relevant Delayed Closing, any member of the Seller’s Group takes receipt of any assets or payments in respect of the Flu Group which are the entitlement of any member of the Purchaser’s Group under this Agreement, such member of the Seller’s Group shall hold such assets or payments on trust for such member of the Purchaser’s Group and shall remit such assets or payments to such member of the Purchaser’s Group

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within 5 Business Days following receipt.

8.8.4If, after Closing, any member of the Purchaser’s Group takes receipt of any assets or payments in respect of the Seller’s Group’s Retained Business which are the entitlement of any member of the Seller’s Group under this Agreement, such member of the Purchaser’s Group shall hold such assets or payments on trust for such member of the Seller’s Group and shall remit such assets or payments to such member of the Seller’s Group within 5 Business Days following receipt.

8.8.5If, after Closing or, in respect of any Delayed Business, the relevant Delayed Closing, any member of the Seller’s Group makes any payment or discharges any liability in respect of the Flu Group which is properly an obligation of the Purchaser or any member of the Purchaser’s Group (including any Flu Group Company), the Purchaser shall, or shall procure that a member of the Purchaser’s Group shall, reimburse the relevant member of the Seller’s Group within 5 Business Days of receipt of a demand (together with evidence of the relevant payment or discharge) for such payment or discharge.

8.8.6If, after Closing or, in respect of any Delayed Business, the relevant Delayed Closing, any member of the Purchaser’s Group makes any payment or discharges any liability in respect of the Seller’s Group’s Retained Business, the Seller shall, or shall procure that a member of the Seller’s Group shall, reimburse the relevant member of the Purchaser’s Group within 5 Business Days of receipt of a demand (together with evidence of the relevant payment or discharge) for such payment or discharge.

8.8.7For the avoidance of doubt, the parties acknowledge and agree that this Clause 8.8:

(i)shall apply to any property, right or asset which has:

(a)not been included in the Closing Statement and should have been so included pursuant to Clause 2.3.1, in which case:

(I)if and to the extent that such property, right or asset exists and has not been consumed, the Seller shall transfer or procure the transfer of such property, right or asset to the Purchaser or as directed by the Purchaser for no consideration; and

(II)if and to the extent that such property, right or asset has been consumed or no longer exists, the Seller shall indemnify the Purchaser accordingly on the basis set out in Clause 8.2.3; or

(b)has been included on the Closing Statement and should not have been included pursuant to Clause 2.3.2, in which case:

(I)if and to the extent that such property, right or asset exists and has not been consumed, the Purchaser shall transfer or procure the transfer of such property, right or asset to the Seller or as directed by the Seller for no consideration; and

(II)if and to the extent that such property, right or asset has been consumed or no longer exists, the Purchaser shall indemnify

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the Seller accordingly on the basis set out in Clause 8.1.3, and

(ii)shall apply mutatis mutandis to any Liability which has:

(a)not been included in the Closing Statement and should have been so included on the basis that such Liability was an Assumed Liability, in which case:

(I)if and to the extent that such Liability exists and has not been discharged, the Seller shall transfer or procure the transfer of such Liability to the Purchaser or as directed by the Purchaser for no consideration (and the Purchaser shall assume or procure the assumption of such Liability); and

(II)if and to the extent that such Liability has been discharged, the Purchaser shall indemnify the Seller accordingly on the basis set out in Clause 8.1.3); or

(b)been included on the Closing Statement and should not have been included on the basis that such Liability was an Excluded Liability, in which case:

(I)if and to the extent that such Liability exists and has not been discharged, the Purchaser shall transfer or procure the transfer of such Liability to the Seller or as directed by the Seller for no consideration (and the Seller shall assume or procure the assumption of such Liability); and

(II)if and to the extent that such Liability has been discharged, the Seller shall indemnify the Purchaser accordingly on the basis set out in Clause 8.2.3,

and which, in either case, is not otherwise dealt with by the adjustments for Flu Group Companies’ Cash Balances, the Tax Adjustment or the Third Party Indebtedness undertaken in accordance Schedule 14.

8.9Payables and Receivables Plan

Without prejudice to the provisions of Clauses 8.6, 8.7 and 8.8, the Parties shall, as soon as reasonably practicable after the Closing Date and in any event within one month of the Closing Date, discuss in good faith with a view to agreeing a written plan for: (i) the collection of Transferred Accounts Receivable received by the Seller (or its Affiliates) and the process and periodic timing of payment of such monies to the Purchaser (or its Affiliates), and (ii) the process for the settlement of any trade accounts and notes payable relating to the Business paid by the Seller (or its Affiliates) and the process and periodic timing of reimbursement of such monies by the Purchaser (or its Affiliates) to the Seller (or its Affiliates).

8.10The Purchaser’s Continuing Obligations

8.10.1Except as provided in the Ancillary Agreements, the Purchaser shall, and shall procure that the Purchaser’s Affiliates shall procure that, as soon as practicable after Closing, each of the Flu Group Companies shall change its name so that it does not contain the Seller Marks or any name which is likely to be confused with

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the same and shall provide the Seller with appropriate evidence of such change of name.

8.10.2Except as provided in the Ancillary Agreements, the Purchaser shall not, and shall procure that no member of the Purchaser’s Group shall, after Closing, use in any way whatsoever any of the Seller Marks or any confusingly similar name or mark, any extensions thereof or developments thereto in any business which competes with the Seller’s business, or any other business of the Seller or any member of the Seller’s Group in which the Seller Marks are used for a minimum period of five years following Closing and thereafter for so long as any member of the Seller’s Group continues to retain an interest in the name.

8.10.3The Purchaser shall, and shall procure that the relevant Flu Group Companies shall, retain for a period of 10 years from Closing, and not dispose of or destroy the books, records and documents of the Flu Group to the extent they relate to the period prior to Closing and shall, and shall procure that the relevant Flu Group Companies shall, if reasonably requested by the Seller, allow the Seller reasonable access to such books, records and documents (including the right to take copies at the Seller’s expense) and to the employees of the Flu Group or former employees of the Flu Group who are employees of any member of the Purchaser’s Group.

8.10.4During the 90 days following the Closing Date, the Purchaser shall provide and cause to be provided to the Seller the information reasonably required to enable Seller to prepare and audit the standard monthly reporting forms of the Seller’s Group, to the extent that such financial reporting relates to the Flu Group, in respect of the period prior to the Closing and in respect of the calendar month in which the Closing occurs.  The Purchaser shall provide such financial reporting in respect of the calendar month in which Closing occurs to the Seller within six Business Days of the last day of the relevant month.

8.11The Seller’s Continuing Obligations

8.11.1The Seller shall, and shall procure that the Seller’s Affiliates shall, retain for a period of 10 years from Closing, and not dispose of or destroy, the Business Information in the possession of the Seller or the Seller’s Affiliates relating to the Business which were not delivered to the Purchaser on Closing.

8.11.2For a period of 10 years from Closing, the Seller shall, or shall procure that the Seller’s Affiliates shall, on reasonable notice from the Purchaser and during ordinary business hours:

(i)make available to the Purchaser all relevant books, records and documents in the possession of the Seller or the Seller’s Affiliates and relating to the Business prior to Closing (other than any Tax Return of any member of the Seller’s Group) which were not delivered to the Purchaser on Closing (including the right to take copies thereof at the Purchaser’s expense); and

(ii)allow reasonable access, to the extent the Purchaser reasonably requires, to employees of the Seller’s Group who have relevant knowledge of any of the Business, provided that the Purchaser shall promptly reimburse the Seller and any relevant Seller’s Affiliate for any expenses incurred by the Seller or any such Seller’s Affiliate.

8.11.3Following Closing, the Seller shall, and shall procure that the Seller’s Affiliates shall,

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pass on to the Purchaser as soon as reasonably practicable all notices, correspondence, information, orders and enquiries to the extent that they relate to the Business received by any member of the Seller’s Group for a period of 10 years from Closing.

8.12Holly Springs Site

8.12.1The Seller and the Purchaser shall perform their respective obligations with respect to the transfer of the facility at the Holly Springs Site as set out in Part 2 of Schedule 15.

8.12.2The Seller shall, at its cost, comply with its obligations to the Town of Holly Spring by removing, or procuring the removal of, the trailer known as “T9” used as office space by the Holly Springs Site by 30 September 2015 or as soon as reasonably practicable thereafter. The Purchaser shall, and the Purchaser shall procure that any other member of the Purchaser’s Group shall, afford the Seller or its duly authorised agents access to the Holly Springs Site and give any other such assistance to the Seller as it may reasonably require for the purpose of complying with this Clause 8.12.2.

8.13Access to Documents and Employees: Compliance with Laws

8.13.1The exercise by any party or any of its Affiliates of any rights under this Agreement and/or any of the Ancillary Agreements, to access any books, records or documents in the possession or control of, or any directors, officers, employees, consultants, agents and advisers of the other party and/or any of its Affiliates shall at all times be subject to and be exclusively made in compliance with all Applicable Laws. A party or Affiliate shall be under no obligation to take any step in connection with any exercise of such rights that would, in its reasonable opinion, breach Applicable Laws (such as, but not limited to, confidentiality laws, data protection laws, sovereignty protection laws and so-called blocking statutes).

8.13.2Without limitation to Clause 8.13.1 above, the parties shall explore in good faith steps that could be taken to allow such rights to be exercised in compliance with Applicable Laws (including, but not limited to, entering into data transfer and confidentiality agreements, document redactions, obtaining waivers, following available legal and/or administrative assistance proceedings).

8.13.3Where a party or its Affiliate has received, or believes that it is reasonably likely to receive, an order by a court, tribunal or other Governmental Entity to produce books, records or documents that are in the possession or control of the other party or its Affiliate, and which it considers that it has rights to access under this Agreement and/or any of the Ancillary Agreements, it shall promptly notify the other party (providing a copy of any proposed or final order or any other relevant document) so as to permit the other party or its Affiliate diligently to assess the scope of the request, any steps necessary to comply with the request, and any conditions and limitations under Applicable Law. If having done so either party reasonably believes that compliance with such an order would breach any Applicable Law, then the party or its Affiliate against which such order is or may be made shall use all reasonable efforts to resist the order.

8.13.4Clause 8.13.3 above shall apply mutatis mutandis to any order or requirement by a court, tribunal or other Governmental Entity for access to any director, officer,

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employee, consultant, agent or adviser of either party or any of their Affiliates (including, without limitation, by way of deposition, witness summons or interview).

8.14Access to Documents and Employees: Costs

Other than access to those books, records or documents for tax purposes in respect of which the Tax Indemnity applies, without prejudice to any rights it may have under the indemnity provisions in Clause 8.1 or 8.2 of this Agreement, a party or its Affiliate exercising any right under this Agreement or any of the Ancillary Agreements to access any books, records or documents in the possession or control of, or any directors, officers, employees, consultants, agents and advisers of, the other party and/or any of its Affiliates shall bear all documented internal and external costs reasonably incurred by the other party or Affiliate in complying with the request for access. Such costs shall include expenses reasonably incurred by the other party or its Affiliate and/or each affected employee, where it is reasonably necessary for individual counsel to be retained, for the retention of individual counsel for the other party or its Affiliate and for each such affected employee. For the avoidance of doubt, in connection with such request for access, each Party or Affiliate may choose to instruct such external services provider or providers as it sees fit as its own discretion.

8.15Supplementary provisions relating to management of claims and investigations

8.15.1Subject to Clause 8.15.2, from Closing, the parties shall comply with their additional respective obligations specified in Schedule 26 in relation to the management of claims and investigations that constitute or may constitute an Excluded Liability or an Assumed Liability.

8.15.2Schedule 26 shall not apply in relation to any claims or investigations relating to or in respect of Tax.

8.16[***]

8.17MBASA

8.17.1If the Purchaser wishes to receive from the Seller a supply of the relevant product contemplated to be supplied under the Agreed Form MBASA, the Purchaser shall, on or before 5.00pm (London time) on 14 August 2015, provide to the Seller:

(i)a written notice of the Purchaser’s intention to enter into the Agreed Form MBASA; and

(ii)a Firm Order (as such term is defined under the Agreed Form MBASA) for the Northern Hemisphere 2016 / 2017 flu season,

(together, the “MBASA Confirmation”), in which case the Purchaser and the Seller shall execute the Agreed Form MBASA (the “Executed MBASA”).

8.17.2The Purchaser acknowledges and agrees that, if it fails to provide the MBASA Confirmation by the date and time specified in Clause 8.17.1 and to execute the Agreed Form MBASA, the Seller will be under no obligation to execute the Agreed Form MBASA, and accordingly that neither party will be bound by the respective obligations contemplated to be performed by the parties under the Agreed Form MBASA.

8.17.3If the Purchaser does not provide the MBASA Confirmation by the date and time specified in Clause 8.17.1, the Seller shall transfer as soon as reasonably

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practicable any remaining cells in the MDCK Cell Bank to such premises as may be nominated by the Purchaser in writing.

8.17.4If the Purchaser does provide the MBASA Confirmation by the date and time specified in Clause 8.17.1, the Seller shall be entitled to continue to use any remaining cells in the MDCK Cell Bank as “Materials” (as such term is defined in the Executed MBASA) pursuant to the Executed MBASA and shall, upon termination or expiry of the Executed MBASA, transfer as soon as reasonably practicable after such termination, any remaining cells in the MDCK Cell Bank to such premises as may be nominated by the Purchaser in writing.

8.18Pharmacovigilance Agreement and Quality Agreements

As soon as practicable after Closing to the extent not already agreed, the Seller and the Purchaser shall negotiate in good faith to agree the final forms of the Pharmacovigilance Agreement and the Quality Agreements and, as promptly as practicable once agreed:

8.18.1the Purchaser shall deliver or make available to the Seller the Pharmacovigilance Agreement and the Quality Agreements duly executed by the Purchaser and/or relevant member of the Purchaser’s Group; and

8.18.2the Seller shall deliver or make available to the Purchaser the Pharmacovigilance Agreement and the Quality Agreements duly executed by the Seller and/or relevant member of the Seller’s Group.

9Warranties

9.1Seller’s Warranties

9.1.1Subject to Clause 9.2, the Seller warrants (on behalf of the relevant Business Sellers or Share Seller as applicable) to the Purchaser and each member of the Purchaser’s Group to which Shares or other assets are transferred pursuant to this Agreement or any Local Transfer Document, that:

(i)the statements set out in Schedule 16 are now and will at Closing (by reference to the facts and circumstances existing at the relevant time) be true and accurate; and

(ii)the statements set out in paragraphs 1.1, 1.2, 2.3, 2.4.1, 2.4.2 and 2.5 of Schedule 16, in relation to the Delayed Businesses, will at the relevant Delayed Closing Date (by reference to the facts and circumstances existing at the relevant time) be true and accurate.

9.1.2Each of the Seller’s Warranties shall be separate and independent and shall not be limited by reference to any other paragraph of Schedule 16 or by anything in this Agreement or any Local Transfer Document or in the Tax Indemnity.

9.1.3The Seller does not give or make any warranty as to the accuracy of the forecasts, estimates, projections, statements of intent or statements of opinion provided to the Purchaser or any of its directors, officers, employees, agents or advisers on or prior to the date of this Agreement, including in the information book on the Business provided to the Purchaser dated May 2014, the management presentation on the Business given to the Purchaser in June 2014 or any document provided in the Data Room.

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9.1.4Any Seller Warranty qualified by the expression “so far as Seller is aware” or to “Seller’s Knowledge” or any similar expression shall, unless otherwise stated, be deemed to refer to the actual knowledge of the following persons: [***], [***], [***], [***], [***], [***], [***], [***], [***], [***] and [***] such persons having made reasonable enquiry, with no imputation of the knowledge of any other person.

9.1.5The Seller’s Warranties and any claim in respect of the Seller’s Warranties shall be subject to the limitations and other provisions set out in Clauses 10 and 11.

9.2Seller’s Disclosures

9.2.1The Seller’s Warranties are subject to all matters which are Disclosed in this Agreement, the Disclosure Letter or the Data Room.

9.2.2References in the Disclosure Letter to paragraph numbers shall be to the paragraphs in Schedule 16 to which the disclosure is most likely to relate. Such references are given for convenience only and, shall not limit the effect of any of the disclosures, all of which are made against Seller’s Warranties as a whole.

9.3Updating of Seller’s Warranties to Closing

No right to damages or compensation shall arise in favour of the Purchaser under Clause 9.1.1 in consequence of an event occurring or matter arising after the signing of this Agreement and before Closing which results or may result in any of the Seller’s Warranties being untrue or inaccurate at Closing (whether or not this Agreement is terminated in consequence thereof) unless the relevant event or matter has a material adverse effect (other than on a short term, temporary basis) on the Flu Group taken as a whole and which has not been mitigated or remedied to the reasonable satisfaction of the Purchaser on or prior to the Closing Date. For the purposes of this Clause 9.3 only, the breach of a Seller’s Warranty will be taken as having a “material adverse effect” only if the relevant fact, matter, event or circumstance constituting the breach, if it had been known to the Purchaser prior to the date of this Agreement, could reasonably have expected to have resulted in the Purchaser offering to acquire the Business on the terms of this Agreement at a discount to the Purchase Price of 10 per cent. or more.

9.4The Purchaser’s Warranties

The Purchaser warrants to the Seller that:

(i)the statements set out in Schedule 17 are as of the date of this Agreement, and will at Closing (by reference to the facts and circumstances existing at the relevant time) be, true and accurate; and

(ii)the statements set out in paragraphs 1.1 and 1.2 of Schedule 17, will at each Delayed Closing Date (by reference to the facts and circumstances existing at the relevant time) be true and accurate.

10Limitation of Liability

10.1Application

10.1.1In respect of the Tax Indemnity, the provisions of this Clause 10 shall operate to limit the liability of the Seller only in so far as any provision in this Clause 10 is expressed to be applicable to the Tax Indemnity, and the provisions of the Tax Indemnity shall further operate to limit the liability of Seller in respect of any claims

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thereunder.

10.1.2The Tax Indemnity shall operate to limit the liability of the Seller and to govern the claims procedure in respect of any claim under the Tax Warranties in respect of a liability for Tax as if such claim had been a claim in respect of a Tax Liability (as defined in the Tax Indemnity) under the Tax Indemnity.

10.2Time Limitation for Claims

The Seller shall not be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty or under the Tax Indemnity in respect of any claim unless a notice of the claim is given by the Purchaser to the Seller specifying the matters set out in Clause 11.2:

10.2.1in the case of a claim under paragraphs 1, 2.1 or 2.3 of Schedule 16, within 5 years from the Closing Date;

10.2.2in the case of a claim under the Tax Warranties or Tax Indemnity, the date falling 6 months after the expiry of the period specified by statute during which an assessment of that liability to Tax may be issued by the relevant Tax Authority (assuming the absence of fraud or wilful wrongdoing); and

10.2.3in the case of any other claim, within 18 months from the Closing Date.

10.3Minimum Claims

10.3.1The Seller shall not be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty in respect of any individual claim (or a series of claims arising from similar or identical facts or circumstances) where the liability agreed or determined (disregarding the provisions of this Clause 10.3) in respect of any such claim or series of claims does not exceed 0.1 per cent. of the Purchase Price.

10.3.2Where the liability agreed or determined in respect of any such claim or series of claims exceeds 0.1 per cent. of the Purchase Price, the Seller shall be liable for the amount of the claim or series of claims as agreed or determined and not just the excess.

10.4Aggregate Minimum Claims

10.4.1The Seller shall not be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty in respect of any claim unless the aggregate amount of all claims for which the Seller would otherwise be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty or under the Tax Indemnity (disregarding the provisions of this Clause 10.4) exceeds 1 per cent. of the Purchase Price.

10.4.2Where the liability agreed or determined in respect of all claims exceeds 1 per cent. of the Purchase Price, the liability of the Seller shall be liable for the aggregate amount of all claims as agreed or determined and not just the excess.

10.5Maximum Liability

The liability of the Seller:

10.5.1for any breaches of the Seller’s Warranties other than the Seller’s Warranties contained in paragraphs 1, 2.1 or 2.3 of Schedule 16 insofar as such Seller’s

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Warranties relate other than to the Delayed Businesses shall not exceed in aggregate an amount equal to US$44,000,000;

10.5.2for any breaches of the Seller’s Warranties other than the Seller’s Warranties contained in paragraphs 1, 2.1 or 2.3 of Schedule 16 insofar as such Seller’s Warranties relate to the Delayed Businesses shall not exceed in aggregate an amount equal to US$11,000,000;

10.5.3subject to Clause 10.5.4, for any breaches of Schedule 24 shall not exceed in aggregate an amount of US$44,000,000, save that this amount may be increased to the extent that the amount available for breach of the Seller’s Warranties set out in Clause 10.5.2 is not exhausted;

10.5.4for any breach of Schedule 24 or any other liability under this Agreement in each case in connection with the Seller’s obligations to continue the operation of any Stage 3 Delayed Business in respect of [***] after the [***] Date (as defined in Schedule 24) pursuant to paragraph 4.1 of Schedule 24, shall not exceed an amount equal to 100 per cent. of the aggregate charges deducted from the Economic Benefit Amount pursuant to paragraph 10.2.12 of Schedule 24 between the [***] Date and the [***] Termination Date (as defined in Schedule 24); and

10.5.5for any breaches of this Agreement (including the Seller’s Warranties contained in paragraphs 1, 2.1 or 2.3 of Schedule 16) shall not exceed in aggregate an amount equal to the Purchase Price.

For the avoidance of doubt, in no circumstances shall (a) the Seller’s aggregate liability for breach of the Seller’s Warranties (other than the Seller’s Warranties contained in paragraphs 1, 2.1 or 2.3 of Schedule 16) exceed US$55,000,000 and, (b) the Seller’s aggregate liability for breach of the Seller’s Warranties (other than the Seller’s Warranties contained in paragraphs 1, 2.1 or 2.3 of Schedule 16) and breach of Schedule 24 exceed US$99,000,000.

10.6Contingent Liabilities

The Seller shall not be liable under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty in respect of which the liability is contingent, unless and until such contingent liability becomes an actual liability and is due and payable (but the Purchaser has the right under Clause 11.1 to give notice of such claim before such time). For the avoidance of doubt, the fact that the liability may not have become an actual liability by the relevant date provided in Clause 10.2 shall not exonerate the Seller in respect of any claim properly notified before that date.

10.7Losses

The Seller shall not be liable under this Agreement or any Local Transfer Document or the Tax Indemnity in respect of any indirect or consequential losses.

10.8Provisions

The Seller shall not be liable under this Agreement or any Local Transfer Document in respect of any claim for breach of any Seller’s Warranty if and to the extent that any allowance, provision or reserve has been properly made in the Accounts for the matter giving rise to the claim.

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10.9Liability for Certificate

The certificate required to be delivered by the Seller pursuant to paragraph 1.1.4 of Schedule 13 is given solely for the purpose of establishing satisfaction of the condition in Clause 4.1.6 and does not and shall not constitute a separate warranty or representation by the Seller or the Purchaser and no liability shall arise solely as a result of delivery of that certificate.

10.10Matters Arising Subsequent to this Agreement

The Seller shall not be liable under this Agreement or any Local Transfer Document in respect of any claim for breach of any Seller’s Warranty in respect of any matter, act, omission or circumstance (or any combination thereof), to the extent that the same would not have occurred but for:

10.10.1Agreed matters

any matter or thing done or omitted to be done by the Seller or any member of the Seller’s Group before Closing pursuant to and in compliance with this Agreement or any Local Transfer Document or otherwise at the request in writing of the Purchaser or any action taken or not taken by the Seller, any member of the Seller’s Group or any Flu Group Company as a result of the Purchaser not approving any other action or omission which the Seller, any member of the Seller’s Group or any Flu Group Company proposed to take under Clause 5.1.2;

10.10.2Changes in legislation

the passing of, or any change in, after the Closing Date, any Applicable Law or administrative practice of any government, governmental department, agency or regulatory body having the force of the law including (without prejudice to the generality of the foregoing) any increase in the rates of Taxation or any imposition of Taxation or any withdrawal of relief from Taxation not in force at the Closing Date;

10.10.3Accounting and Taxation Policies

any change in accounting or Taxation policy, bases or practice of the Purchaser or any of the Flu Group Companies (including any change to the date to which any accounts are made up to) introduced or having effect on or after Closing; or

10.10.4Cessation or in any trade

any cessation or change in the nature or conduct of any trade carried on at Closing by the Purchaser, any member of the Purchaser’s Group or any of the Flu Group Companies, being a cessation or change introduced or having effect on or after Closing.

10.11Insurance

Without prejudice to Clause 13 and to the Purchaser’s duty to mitigate any loss in respect of any breach of the Seller’s Warranties, the Seller’s Liability under this Agreement for breach of any Seller’s Warranty shall be reduced by an amount equal to any loss or damage to which such claim related which has actually been recovered under a policy of insurance held by the Purchaser or a Flu Group Company.

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10.12Effect of Purchaser’s Knowledge

10.12.1Pre-Signing Knowledge

The Seller shall not be liable in respect of any claim for breach of any Seller’s Warranty to the extent that the Purchaser was actually aware on or before the date of this Agreement of the facts, matters or circumstances giving rise to the relevant claim. For these purposes the Purchaser’s awareness shall mean the actual knowledge of: [***], [***], [***], [***], [***], [***], [***], [***], [***], [***] and [***].

10.12.2Post-Signing Knowledge

The parties agree that no knowledge of the Purchaser or any of its directors, officers and employees (whether actual, constructive or imputed), to the extent arising following the date of this Agreement, shall in any way serve to reduce or extinguish any liability of the Seller or any of its Affiliates for any breach of a Seller’s Warranty when repeated at Closing or at any Delayed Closing.

10.13Mitigation

Nothing in this Agreement shall prejudice the Purchaser’s duty under common law to mitigate any Loss which is or could be the subject of a claim under this Agreement.

10.14Purchaser’s Right to Recover

If the Seller has paid an amount in discharge of any claim under this Agreement for breach of any Seller’s Warranty and subsequently the Purchaser recovers (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, the Purchaser shall pay to the Seller as soon as practicable after receipt an amount equal to: (i) the sum recovered from the third party less any costs and expenses incurred in obtaining such recovery and any Tax on any amounts recovered (or Tax that would have been payable on such amounts but for the availability of any Tax relief), or if less, (ii) the amount previously paid by the Seller to the Purchaser. Any payment made by the Purchaser to the Seller under this Clause shall be made or procured by way of further adjustment of the consideration paid by the Purchaser and the provisions of Clause 3.5 shall apply mutatis mutandis.

10.15No Double Recovery and no Double Counting

A party shall be entitled to make more than one claim under this Agreement arising out of the same subject matter, fact, event or circumstance but shall not be entitled to recover under this Agreement or any Local Transfer Document or the Tax Indemnity or otherwise more than once in respect of the same Losses suffered or amount for which the party is otherwise entitled to claim (or part of such Losses or amount), regardless of whether more than one claim arises in respect of it. No amount (including any relief) (or part of any amount) shall be taken into account, set off or credited more than once under this Agreement or any Local Transfer Document or the Tax Indemnity or otherwise, with the intent that there will be no double counting under this Agreement or any Local Transfer Document and the Tax Indemnity or otherwise.

10.16Fraud

None of the limitations contained in this Clause 10 shall apply to any claim to the extent that such claim which arises or is increased, or to the extent to which it arises or is

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increased, as the consequence of, or which is delayed as a result of, fraud by any director or officer of any member of the Seller’s Group.

11Claims

11.1Notification of Potential Claims

Without prejudice to the obligations of the Purchaser under Clause 11.2, if the Purchaser becomes aware of any fact, matter or circumstance that may give rise to a claim against the Seller under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty other than a Tax Warranty (ignoring for these purposes the application of Clause 11.2 or 11.3), the Purchaser shall as soon as reasonably practicable (and in any event within 30 days) give a notice in writing to the Seller of such facts, matters or circumstances as are then available regarding the potential claim. The Purchaser shall not be entitled to make the relevant claim under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty (other than a Tax Warranty) if:

11.1.1the Purchaser fails to give such notice; or

11.1.2the breach (if capable of remedy) is remedied in full at the cost of the Seller within 30 days after such notice is given.

11.2Notification of Claims under this Agreement

Notices of claims under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty (other than a Tax Warranty) shall be given by the Purchaser to the Seller within the time limits specified in Clause 10.2 and shall specify information (giving reasonable detail) in relation to the basis of the claim and setting out the Purchaser’s estimate of the amount of Losses which are, or are to be, the subject of the claim.

11.3Commencement of Proceedings

Any claim notified pursuant to Clause 11.2 shall (if it has not been previously satisfied, settled or withdrawn) be deemed to be irrevocably withdrawn 6 months after the relevant time limit set out in Clause 10.2 unless, at the relevant time, legal proceedings in respect of the relevant claim have been commenced by being both issued and served except:

11.3.1where the claim relates to a contingent liability, in which case it shall be deemed to have been withdrawn unless legal proceedings in respect of it have been commenced by being both issued and served with 6 months of it having become an actual liability; or

11.3.2where the claim is a claim for breach of a Seller’s Warranty of which notice is given for the purposes of Clause 10.2 at a time when the amount set out in Clause 10.4.2 has not been exceeded, in which case it shall be deemed to have been withdrawn unless legal proceedings in respect of it have been commenced by being both issued and served within 6 months of the date of any subsequent notification to the Seller pursuant to Clause 11.1 of one or more claims which result(s) in the total amount claimed in all claims notified to the Seller pursuant to Clause 10.2 exceeding the amount set out in Clause 10.4.2 for the first time.

11.4Conduct of Third Party Claims

If the matter or circumstance that may give rise to a claim against the Seller under this Agreement or any Local Transfer Document for breach of any Seller’s Warranty (other than

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a Tax Warranty) is a result of or in connection with a claim by a third party (a “Third Party Claim”) then:

11.4.1the Purchaser shall as soon as reasonably practicable give written notice thereof to the Seller and thereafter shall provide the Seller with periodic updates upon reasonable request and shall consult with the Seller so far as reasonably practicable in relation to the conduct of the Third Party Claim and shall take reasonable account of the views of the Seller in relation to the Third Party Claim;

11.4.2the Third Party Claim shall not be admitted, compromised, disposed of or settled without the written consent of the Seller (such consent not to be unreasonably withheld or delayed);

11.4.3subject to the Seller indemnifying the Purchaser or other member of the Purchaser’s Group concerned against all reasonable costs and expenses (including legal and professional costs and expenses) that may be incurred thereby, the Purchaser shall, or the Purchaser shall procure that any other members of the Purchaser’s Group shall, take such action as the Seller may reasonably request to avoid, dispute, deny, defend, resist, appeal, compromise or contest the Third Party Claim;

11.4.4the Seller shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Purchaser, to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest the Third Party Claim (including making counterclaims or other claims against third parties) in the name of and on behalf of the Purchaser or other member of the Purchaser’s Group concerned and to have the conduct of any related proceedings, negotiations or appeals, but shall not settle such Third Party Claim without the prior written consent of the Purchaser (such consent not to be unreasonably withheld or delayed); and

11.4.5if the Seller sends a notice to the Purchaser pursuant to Clause 11.4.4:

(i)the Purchaser shall, and the Purchaser shall procure that any other member of the Purchaser’s Group shall give, subject to their being paid all reasonable costs and expenses, all such information and assistance including access to premises and personnel, and the right to examine and copy or photograph any assets, accounts, documents and records, as the Seller may reasonably request, including instructing such professional or legal advisers as the Seller may nominate to act on behalf of the Purchaser or other member of the Purchaser’s Group concerned but in accordance with the Seller’s instructions; and

(ii)the Seller shall:

(a)consult with the Purchaser and take reasonable account of the views of the Purchaser before taking any action in relation to the Third Party Claim;

(b)keep the Purchaser informed of all relevant matters relating to the Third Party Claim and shall promptly forward or procure to be forwarded to the Purchaser copies of all correspondence and other written communications relating to the Third Party Claim; and

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(c)in good faith, take into account and have due regard to any reputational matters or issues arising out of the Third Party Claim for any member of the Purchaser’s Group or any of their respective directors, officers, employees or agents which are brought to its attention by the Purchaser or a member of the Purchaser’s Group.

12Confidentiality

12.1Announcements

No announcement, communication or circular concerning the existence or the subject matter of this Agreement shall be made or issued by or on behalf of any member of the Seller’s Group or the Purchaser’s Group without the prior written approval of Seller and the Purchaser (such consent not to be unreasonably withheld or delayed). This shall not affect any announcement, communication or circular required by law or any governmental or regulatory body or the rules of any stock exchange on which the shares of any party (or its holding company) are listed but the party with an obligation to make an announcement or communication or issue a circular (or whose holding company has such an obligation) shall consult with the other parties (or shall procure that its holding company consults with the other parties) insofar as is reasonably practicable before complying with such an obligation.

12.2Confidentiality

12.2.1The Confidentiality Agreement shall cease to have any force or effect from the date of this Agreement.

12.2.2Subject to Clause 12.1 and Clause 12.2.3, each of the parties shall treat as strictly confidential and not disclose or use any information received or obtained as a result of entering into this Agreement, the Ancillary Agreements or any agreement entered into pursuant to this Agreement which relates to:

(i)the existence and provisions of this Agreement, the Ancillary Agreements and of any other agreement entered into pursuant to this Agreement;

(ii)the negotiations relating to this Agreement, the Ancillary Agreements and any such other agreement;

(iii)(in the case of Seller) any information relating to the Flu Group Companies and Flu Group Businesses following Closing and any other information relating to the business, financial or other affairs (including future plans and targets) of the Purchaser’s Group; or

(iv)(in the case of the Purchaser) any information relating to the business, financial or other affairs (including future plans and targets) of the Seller’s Group including, prior to Closing, the Flu Group Companies and Flu Group Businesses.

12.2.3Clause 12.2.1 shall not prohibit disclosure or use of any information if and to the extent:

(i)the disclosure or use is required by law, any governmental or regulatory body or any stock exchange on which the shares of any party (or its holding company) are listed;

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(ii)the disclosure or use is required to vest the full benefit of this Agreement or the Ancillary Agreements in any party;

(iii)the disclosure or use is required for the purpose of any arbitral or judicial proceedings arising out of this Agreement, the Ancillary Agreements or any other agreement entered into under or pursuant to this Agreement or to enable a determination to be made by the Reporting Accountants under this Agreement;

(iv)the disclosure is made to a Tax Authority in connection with the Tax affairs of the disclosing party;

(v)the disclosure is made to a ratings agency on a confidential basis in connection with the affairs of the disclosing party;

(vi)the disclosure is made to professional advisers of any party on a need to know basis and on terms that such professional advisers undertake to comply with the provisions of Clause 12.2.1 in respect of such information as if they were a party to this Agreement;

(vii)the information was lawfully in the possession of that party without any obligation of secrecy prior to its being received or held, in either case as evidenced by written records;

(viii)the information is or becomes publicly available (other than by breach of this Agreement or the Confidentiality Agreement);

(ix)the other party has given prior written approval to the disclosure or use; or

(x)the information is independently developed,

provided that prior to disclosure or use of any information pursuant to Clause (i), (ii) or (iii), the party concerned shall, where not prohibited by law, promptly notify the other parties of such requirement with a view to providing the other parties with the opportunity to contest such disclosure or use or otherwise to agree the timing and content of such disclosure or use.

13Insurance

13.1No cover under Seller’s Group Insurance Policies

The Purchaser acknowledges and agrees that following Closing:

13.1.1neither the Purchaser nor any Flu Group Company shall have or be entitled to the benefit of any Seller’s Group Insurance Policy in respect of any event, act or omission that takes place after Closing (or, in relation to any Delayed Business, in respect of any event, act or omission that takes place after the relevant Delayed Closing Date) and it shall be the sole responsibility of the Purchaser to ensure that adequate insurances are put in place for those Flu Group Companies and Flu Group Businesses with effect from Closing (or in relation to any Delayed Business, only with effect from the relevant Delayed Closing Date);

13.1.2neither Seller nor any member of the Seller’s Group shall be required to maintain any Seller’s Group Insurance Policy for the benefit of the Flu Group (save as provided in Clause 5.4); and

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13.1.3no Flu Group Company shall make or shall be entitled to make or notify a claim under any Seller’s Group Insurance Policy in respect of any event, act or omission that occurred prior to the Closing Date.

13.2Existing claims under Seller’s Group Insurance Policies

With respect to any claim made before the Closing Date under any Seller’s Group Insurance Policy by or on behalf of any Flu Group Company or in relation to any Flu Group Business, or to any claim made before the relevant Delayed Closing Date under any Seller’s Group Insurance Policy in respect of any Delayed Business, to the extent that:

13.2.1neither the Purchaser nor the Flu Group Companies have been indemnified by Seller prior to the Closing Date in respect of the matter in respect of which the claim was made; or

13.2.2the Liability in respect of which the claim was made has not been provided for in the Accounts,

the Seller shall use reasonable endeavours after Closing (or Delayed Closing, as the case may be) to recover all monies due from insurers and shall pay any monies received (after taking into account any deductible under the Seller’s Group Insurance Policies and less any Taxation suffered on the proceeds and any reasonable out of pocket expenses suffered or incurred by Seller or any member of the Seller’s Group in connection with the claim) to the Purchaser or, at the Purchaser’s written direction, the relevant Flu Group Company as soon as practicable after receipt.

13.3During the period between Closing and the relevant Delayed Closing, with respect to any event, act or omission relating to any Delayed Employee or Delayed Business that occurred or existed prior to the relevant Delayed Closing Date that is covered by any Flu Group Insurance Policy or Seller’s Group Insurance Policy, a portion of the premium for which forms part of the calculation of the Economic Benefit Amount under Schedule 24 (the “Delayed Business Insurance Policies”), the Seller shall, at the written direction of the Purchaser:

13.3.1make all necessary notifications and claims under such Delayed Business Insurance Policy; and

13.3.2use reasonable endeavours to pursue any such claims.

provided that:

13.3.3the Seller shall not be required to undertake or threaten litigation or incur any expenditure or liability without being put in funds by the Purchaser prior to incurring any such expenditure or liability;

13.3.4the Purchaser shall be liable for any deductible or excess payable in respect of the claim to the extent such amounts have not already been included in the calculation of the Economic Benefit Amount under Schedule 24; and

13.3.5the Purchaser shall provide any assistance, information and co-operation reasonably requested by the Seller in relation to such claims.

13.4The parties acknowledge and agree that:

13.4.1any internal costs or expenses suffered or incurred by the Seller or any member of the Seller’s Group associated with making and pursuing the relevant claim shall

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form part of the Economic Benefit Amount and accordingly shall be recoverable by the Seller in accordance with the provisions of Schedule 24; and

13.4.2any claim made by the Seller under Clause 13.3 that is still in-progress at the relevant Delayed Closing Date, shall be treated in the same manner as the other Business Assets of the relevant Delayed Business under Schedule 24.

14Netherlands Business

14.1Notwithstanding any other provision of this Agreement, this Agreement shall not constitute a binding agreement to sell or purchase the Netherlands Business and:

(i)the provisions of Clauses 2 and 6 (the “Disapplied Provisions”) shall not apply to the Netherlands Business;

(ii)prior to the Netherlands Closing, the provisions of Schedules 9 and 10 (the “Suspended Provisions”) shall not apply to the Netherlands Business; and

(iii)in respect of the Disapplied Provisions and, prior to the Netherlands Closing, the Suspended Provisions only:

(a)the term “Business” shall be deemed to exclude the Netherlands Business;

(b)the term “Flu Group Businesses” shall be deemed to exclude the Netherlands Business;

(c)the term “Assumed Liabilities” shall be deemed to exclude the Netherlands Assumed Liabilities; and

(d)the term “Employees” shall be deemed to exclude the Netherlands Employees;

14.1.2with effect from the Netherlands Closing, the Suspended Provisions shall apply to the Netherlands Business mutatis mutandis save that in respect of the Suspended Provisions only (A) the term “Closing” shall be deemed to refer to the Netherlands Closing and (B) the term “Closing Date” shall be deemed to refer to the date of the Netherlands Closing; and

14.1.3the parties shall negotiate in good faith to agree any amendments to the Transaction Documents as are required in order to give effect to the principles set forth in this Clause 14.1 for the purposes of complying with the information and consultation requirements in respect of Onderdeelcommissie NV (being the relevant works council in respect of the Netherlands Business); and

14.1.4the provisions of Clause 10 shall apply to the Netherlands Business as if the remaining provisions of this Clause 14.1 did not have any force or effect.

15Other Provisions

15.1Further Assurances

Each of the parties shall, and shall procure that its Affiliates shall, and shall use reasonable endeavours to procure that any necessary third party shall, from time to time execute such documents and perform such acts and things as any party may reasonably require to transfer the Shares, Flu Group Businesses and Assumed Liabilities to the Purchaser and

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to give any party the full benefit of this Agreement and any Local Transfer Document.

15.2Whole Agreement

15.2.1This Agreement contains the whole agreement between the parties relating to the subject matter of this Agreement at the date hereof to the exclusion of any terms implied by law which may be excluded by contract and supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in this Agreement.

15.2.2The Purchaser acknowledges that, in entering into this Agreement, it is not relying on any representation, warranty or undertaking not expressly incorporated into it.

15.2.3Each of the parties agrees and acknowledges that its only right and remedy in relation to any representation, warranty or undertaking made or given in connection with this Agreement shall be for breach of the terms of this Agreement and each of the parties waives all other rights and remedies (including those in tort or arising under statute) in relation to any such representation, warranty or undertaking.

15.2.4In Clauses 15.2.1 to 15.2.3, “this Agreement” includes the Ancillary Agreements and all other documents entered into pursuant to this Agreement.

15.2.5Nothing in this Clause 15.2 excludes or limits any liability for fraud.

15.3No Assignment

No party may without the prior written consent of the other parties, assign, grant any security interest over, hold on trust or otherwise transfer the benefit of the whole or any part of this Agreement.

15.4Third Party Rights

15.4.1Subject to Clause 15.4.2, the parties to this Agreement do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.

15.4.2Certain provisions of this Agreement confer benefits on the Affiliates of the Purchaser and the Affiliates of Seller and, subject to Clause 15.4.3, are intended to be enforceable by each such Affiliate by virtue of the Contracts (Rights of Third Parties) Act 1999.

15.4.3Notwithstanding Clause 15.4.2, this Agreement may be varied in any way and at any time without the consent of the persons named in Clause 15.4.2.

15.5Variation or waiver

15.5.1No variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the parties.

15.5.2No failure or delay by a party in exercising any right or remedy provided by Applicable Law or under this Agreement or any Ancillary Agreement shall impair such right or remedy or operate or be construed as a waiver or variation of it or preclude its exercise at any subsequent time and no single or partial exercise of any such right or remedy shall preclude any further exercise of it or the exercise of any other remedy.

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15.6Method of Payment and set off

15.6.1Payments (including payments pursuant to an indemnity, compensation or reimbursement provision) made or expressed to be made or received by the Purchaser (or the Relevant Payor or an Affiliate of the Purchaser) and Seller (or an Affiliate of the Seller) pursuant to this Agreement or any claim for breach of this Agreement shall, insofar as the payment or claim relates to or affects any Shares (including the underlying Flu Group Companies transferred (directly or indirectly) by reason of the transfer of those Shares), assets or liabilities, transferred pursuant to this Agreement and the Local Transfer Documents, be made or received (as the case may be) by:

(i)Seller (or an Affiliate of the Seller), for itself or as agent on behalf of the relevant Share Seller or Business Seller (each in respect of the Shares and/or assets and liabilities to be transferred by it pursuant to this Agreement and the Local Transfer Documents); and

(ii)the Purchaser (or the Relevant Payor or an Affiliate of the Purchaser), for itself or as agent on behalf of the relevant members of the Purchaser’s Group (each in respect of Shares and/or the assets and liabilities to be transferred by it pursuant to this Agreement and the Local Transfer Documents).

15.6.2Except as otherwise provided for in this Agreement, any payments pursuant to this Agreement shall be made in full, without any set-off, counterclaim, restriction or condition and without any deduction or withholding (save as may be required by law or as otherwise agreed).

15.6.3Any payments pursuant to this Agreement shall be effected by crediting for same day value the account specified by Seller or the Purchaser (as the case may be) on behalf of the party entitled to the payment (reasonably in advance and in sufficient detail to enable payment by telegraphic or other electronic means to be effected) on or before the due date for payment.

15.6.4Payment of a sum in accordance with this Clause 15.6 shall constitute a payment in full of the sum payable and shall be a good discharge to the payer (and those on whose behalf such payment is made) of the payer’s obligation to make such payment and the payer (and those on whose behalf such payment is made) shall not be obliged to see to the application of the payment as between those on whose behalf the payment is received.

15.7Costs

15.7.1Subject to Clause 15.8, the Seller shall bear all costs incurred by it and its Affiliates in connection with the preparation and negotiation of, and the entry into, this Agreement, the Local Transfer Documents, the Tax Indemnity and the sale of the Flu Group.

15.7.2The Purchaser shall bear all such costs incurred by it and its Affiliates in connection with the preparation and negotiation of, and the entry into, this Agreement, the Local Transfer Documents, the Tax Indemnity and the purchase of the Flu Group.

15.8Notarial Fees, Registration, Stamp and Transfer Taxes and Duties

The Purchaser or the relevant member of the Purchaser’s Group:

15.8.1shall bear the cost of all notarial fees and all registration, stamp and transfer taxes

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and duties or their equivalents in all jurisdictions where such fees, taxes and duties are payable as a result of the transactions contemplated by this Agreement;

15.8.2shall be responsible for arranging the payment of all such fees, taxes and duties, including fulfilling any administrative or reporting obligation imposed by the jurisdiction in question in connection with such payment; and

15.8.3shall indemnify the Seller or any other member of the Seller’s Group against any Losses suffered by the Seller or that member of the Seller’s Group as a result of the Purchaser failing to comply with its obligations under this Clause 15.8.

15.9Interest

If any party defaults in the payment when due of any sum payable under this Agreement, the Local Transfer Documents or the Tax Indemnity the liability of that party shall be increased to include interest on such sum from the date when such payment is due until the date of actual payment (as well after as before judgment) at a rate of two per cent. above USD LIBOR. Such interest shall accrue from day to day.

15.10Grossing-up

15.10.1Subject to Clauses 15.10.2 and 15.10.3, all sums payable under this Agreement, the Local Transfer Documents and the Tax Indemnity shall be paid free and clear of all deductions, withholdings, set-offs or counterclaims whatsoever save only as may be required by law. If any deductions or withholdings are required by law the party making the payment shall (except in the case of any interest payable under Clause 7.4 or Clause 15.9) be obliged to pay to the other party such sum as will after such deduction or withholding has been made leave the other party with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding, provided that if either party to this Agreement shall have transferred (whether by way of legal or equitable assignment, declaration of trust, novation or otherwise) the benefit in whole or in part of this Agreement or shall, after the date of this Agreement, have changed its tax residence or the permanent establishment to which the rights under this Agreement are allocated then the liability of the other party under this Clause 15.10 shall be limited to that (if any) which it would have been had no such transfer or change taken place.

15.10.2Clause 15.10.1 shall not apply to any payment of the Purchase Price or Economic Benefit Payment (including, in either case, any part thereof) to the Seller, or to any payment of the Reverse Payment to the Purchaser, in each case where the requirement to make the deduction or withholding has arisen otherwise than as a result of a connection of the payor with any relevant jurisdiction.

15.10.3If a party receives and uses a credit for, or receives a refund of, any Tax by reason of any deduction or withholding or gross up on account of tax made pursuant to Clause 15.10.1, that party shall reimburse to the other party such amount as will leave it (after such reimbursement) in the same position it would have been if that other party had not been required to make payment under Clause 15.10.1. Each party shall use all reasonable endeavours to obtain and utilise any available credit or obtain any refund.

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15.11Notices

15.11.1Any notice or other communication in connection with this Agreement (each, a “Notice”) shall be:

(i)in writing in English; and

(ii)delivered by hand, fax, or by courier using an internationally recognised courier company.

15.11.2A Notice to the Seller shall be sent to such party at the following address, or such other person or address as the Seller may notify to the Purchaser from time to time:

Novartis AG
Postfach
CH-4002 Basel
Switzerland

Fax: +41 613244 300

Attention: Head of M&A Legal

with a copy to the Seller’s Lawyers, marked for the urgent attention of [***] (delivery of such copy shall not in itself constitute valid notice).

15.11.3A Notice to the Purchaser shall be sent to such party at the following address, or such other person or address as the Purchaser may notify to Seller from time to time:

CSL Limited

For the care of:
CSL Behring
1020 First Avenue
King of Prussia, PA 19406

Fax: +1 610.878.4221

Attention: [***] EVP, Legal and CSL Group General Counsel.

with a copy to the Purchaser’s Lawyers, marked for the urgent attention of Baker & McKenzie LLP Ref JXH at the following address: Baker & McKenzie, 100 New Bridge Street, EC4V 6JA, London, UK (delivery of such copy shall not in itself constitute valid notice).

15.11.4A Notice shall be effective upon receipt and shall be deemed to have been received:

(i)at the time of delivery, if delivered by hand or courier; or

(ii)at the time of transmission in legible form, if delivered by fax.

15.12Invalidity or Conflict

15.12.1If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, the provision shall apply with whatever deletion or modification is necessary so that the provision is legal, valid and enforceable and gives effect to the commercial intention of the parties.

15.12.2To the extent it is not possible to delete or modify the provision, in whole or in part,

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under Clause 15.12.1, then such provision or part of it shall, to the extent that it is illegal, invalid or unenforceable, be deemed not to form part of this Agreement and the legality, validity and enforceability of the remainder of this Agreement shall, subject to any deletion or modification made under Clause 15.12.1, not be affected.

15.12.3If there is any conflict between the terms of this Agreement and any of the Ancillary Agreements this Agreement shall prevail (as between the parties to this Agreement and as between any member of the Seller’s Group and any member of the Purchaser Group) unless (i) such Ancillary Agreement expressly states that it overrides this Agreement in the relevant respect (it being acknowledged and agreed that a general precedence clause shall not be sufficient for this purpose) and (ii) the Seller and the Purchaser are either also parties to that Ancillary Agreement or otherwise expressly agree in writing that such Ancillary Agreement shall override this Agreement in that respect.

15.13Counterparts

This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any party may enter into this Agreement by executing any such counterpart. Delivery of a counterpart of this Agreement by email attachment shall be an effective mode of delivery.

15.14Governing Law and Submission to Jurisdiction

15.14.1This Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, and any non-contractual obligations arising out of or in connection with the Agreement and such documents shall be governed by and construed in accordance with English law.

15.14.2Each of the parties irrevocably agrees that the courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein, and that accordingly any proceedings arising out of or in connection with this Agreement and the documents to be entered into pursuant to it shall be brought in such courts. Each of the parties irrevocably submits to the jurisdiction of such courts and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

15.15Appointment of Process Agent

15.15.1The Seller hereby irrevocably appoints Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the Seller.

15.15.2The Seller agrees to inform the Purchaser in writing of any change of address of such process agent within 28 days of such change.

15.15.3If such process agent ceases to be able to act as such or to have an address in England and Wales, the Seller irrevocably agrees to appoint a new process agent in England and Wales and to deliver to the Purchaser within 14 days a copy of a written acceptance of appointment by the process agent.

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15.15.4The Purchaser hereby irrevocably appoints Baker & McKenzie LLP of 100 New Bridge St, London EC4V 6JA as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the Purchaser.

15.15.5The Purchaser agrees to inform the Seller in writing of any change of address of such process agent within 28 days of such change.

15.15.6If such process agent ceases to be able to act as such or to have an address in England and Wales, the Purchaser irrevocably agrees to appoint a new process agent in England and Wales and to deliver to the Seller within 14 days a copy of a written acceptance of appointment by the process agent.

15.15.7Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law.

This Agreement has been entered into on the date stated at the beginning.

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SIGNED by AND
for and on behalf of NOVARTIS AG:
SIGNED by
for and on behalf of CSL LIMITED:

Schedule 1
Details of the Share Sellers, Shares, etc.
(Clause 2.1)

(1) Name of Share Seller	(2) Name of Company	(3) Shares
Novartis Pharma AG	Novartis Vaccines Holdings Limited	522 shares (100%)
Novartis Pharma AG	Novartis Vaccines Influenza Srl	10,000 shares (100%)
Novartis Pharma AG	Novartis Influenza Vaccines AG	1,000 shares (100%)

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Schedule 2
Flu Group Companies

1Particulars of Novartis Vaccines Holdings Limited

Name of Company:	Novartis Vaccines Holdings Limited
Registered Number:	4679458
Registered Office:	C/O Novartis Pharmaceuticals UK Limited, Frimley Business Park, Frimley, Camberley, GU16 7SR, United Kingdom
Date and place of incorporation:	26 February 2003, England and Wales
Issued share capital:	GBP 522 divided into 522 shares of GBP 1 each
Shareholders and shares held:	Novartis Pharma AG	522 (100%)

2Particulars of Novartis Vaccines Influenza Srl

Name of Company:	Novartis Vaccines Influenza Srl
Registered Number:	01391810528
Registered Office:	Via Fiorentina No.1, 53100, Siena, Italy
Date and place of incorporation:	07 November 2014, Siena, Italy
Issued share capital:	EUR 10,000 divided into 10,000 shares of EUR 1 each
Shareholders and shares held:	Novartis Pharma AG	10,000 (100%)

3Particulars of Novartis Influenza Vaccines AG

Name of Company:	Novartis Influenza Vaccines AG
Registered Number:	CHE-106.052.527
Registered Office:	Lichtstrasse 35, 4056 Basel, Switzerland
Date and place of incorporation:	30 October 2014, Basel, Switzerland
Issued share capital:	CHF 100,000 divided into 1,000 shares of CHF 100 each
Shareholders and shares held:	Novartis Pharma AG	1,000 (100%)

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4Particulars of the Subsidiary

Name of Subsidiary:	Novartis Vaccines and Diagnostics Limited
Registered Number:	3970089
Registered Office:	C/O Seller Pharmaceuticals UK Ltd, Frimley Business Park, Frimley, Camberley, Surrey, GU16 7SR, United Kingdom
Date and place of incorporation:	11 April 2000, England and Wales
Issued share capital:	GBP 100 divided into 100 shares of GBP 1 each
Shareholders and shares held:	Novartis Vaccines Holdings Limited	100 (100%)

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Schedule 3
The Properties
Part 1
(Company Real Property)

[***]

90

Schedule 3
The Properties
Part 2
(Transferred Real Property)

[***]

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Schedule 3
The Properties
Part 3
Terms relating to the Company Real Property

Deliberately blank.

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Schedule 3
The Properties
Part 4A
Terms relating to the Transferred Real Property (United States)

1General Provisions Relating to the Transferred Real Property (United States)

1.1Interpretation

The following further definitions apply in this Part 4A of Schedule 3:

“Documents” means the documents listed as such in Part 2 of this Schedule 3;

“Landlord” means the person identified as such in the Leases and their successors and assignees;

“Leases” means the leases, licences or tenancy agreements under which the Transferred Leased Real Properties are held or leased by the relevant member of the Seller’s Group as either Landlord or tenant all of which are identified in Part B of Part 2 of this Schedule 3, and “Lease” means any one of them;

“Property Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from any Landlord, superior landlord and/or other third party, including any consents, licences, approvals, permits, authorisations or waivers required by any legislation or regulation or by any statutory, governmental, state, provincial or municipal bodies or authorities for or in connection with the transfer of a Transferred Real Property by the Business Sellers to the Purchaser;

“Required Endorsements” means the following endorsements with respect to each Transferred Owned Real Property: (i) Owner’s Comprehensive; (ii) Zoning; (iii) Restrictions, Encroachments and Minerals; (iv) Access; (v) Tax Lot; (vi) Contiguity; (vii) Creditors Rights; (viii) Location; (ix) Survey, and (x) such other endorsements as Purchaser may reasonably require;

“Survey” shall have the meaning set forth in paragraph 1.4 hereof;

“Title Amount” shall mean the amount of title insurance for each Transferred Owned Real Property equal to the amount allocated to such Transferred Owned Real Property pursuant to Clause 3.3 of the Agreement;

“Title Commitments” shall have the meaning set forth in paragraph 1.4 hereof;

“Title Company” means Commonwealth Land Title Insurance Company;

“Title Policies” means the title policies for each Transferred Owned Real Property to be issued by the Title Company, dated as of the date of the recording of the deed for said Transferred Owned Real Property in an amount equal to the Title Amount and: (i) insuring the Purchaser as the holder of fee simple title to said Transferred Owned Real Property, subject only to the Permitted Encumbrances; and (ii) containing the Required Endorsements;

“transfer”, for the purposes of this Part 4A of Schedule 3 only, means in respect of a Transferred Leased Real Property, the transfer or assignment of the relevant Lease or Leases, and in the case of a Transferred Owned Real Property the transfer thereof, and “a

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transfer” means and includes any instruments, deeds or agreements effecting such transfer;

“Transferred Leased Real Properties” means the leasehold properties held by a Business Seller and identified in Part B of Part 2 of this Schedule 3 and “Transferred Leased Real Property” means any one of them; and

“Transferred Owned Real Properties” means:

(i)the owned Properties more particularly identified in Part A of Part 2 of this Schedule 3 together with all improvements, buildings and structures, and, to the extent constituting the Business Assets, all fixed plant, fixed machinery and fixed equipment located thereon;

(ii)any and all rights and easements appurtenant to the owned Properties and the improvements including, without limitation, all permits, approvals, licenses, signage rights, access rights, rights of way, roadways, streets, sidewalks, utilities and sewers located on or about the owned Property and used in connection therewith;

(iii)the owned Property lying in the bed of any street or highway in front of or adjoining the owned Property and all other appurtenances to the owned Property and the improvements, and all right, title and interest of the Seller’s Group in, to and under any award to be made in lieu thereof, any unpaid award for damages to the owned Property and the improvements by reason of change of grade of any street, all water, ditch, reservoir and well rights, interests and priorities, decreed or undecreed, tributary and non-tributary, customarily used with or upon the owned Properties or appurtenant thereto, any mineral rights affecting the owned Properties and any development rights affecting the owned Properties; and

(iv)all plans and specifications and as built drawings pertaining to the owned Property and the improvements, all scale models, utility contracts and deposits pertaining to the owned Property and the improvements, and all warranties, guaranties, licenses, permits, operation and maintenance manuals and job site records relating to the owned Property;

but excluding Excluded Assets, and “Transferred Owned Real Property” means any one of them.

1.2Each of the Transferred Real Properties and/or the Leases thereof shall be transferred subject to the terms set out in this Part 4A of Schedule 3 and all other applicable terms of this Agreement.

1.3Pre-Closing

1.3.1This paragraph 1.3.1 of Part 4A of Schedule 3 applies to those Transferred Real Properties in relation to which a Property Third Party Consent is required. If any Property Third Party Consents are required:

(i)the Seller or relevant Business Seller shall make an application for, and shall use reasonable endeavours to obtain each Property Third Party Consent for the transfer of the Transferred Real Property prior to the Closing and shall keep the Purchaser reasonably informed of progress in obtaining such Property Third Party Consents; and

(ii)the Purchaser shall supply such information and references as may

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reasonably be required by a Landlord, any superior landlord or other relevant third party in connection with a Property Third Party Consent.

1.3.2Each party shall give written notice to the other party as soon as reasonably practicable after obtaining any Property Third Party Consents which shall be accompanied by a copy of such consent.

1.4Title Policies; Surveys

1.4.1The Seller’s Group shall convey and the Purchaser shall accept fee simple title to the Transferred Owned Real Property in accordance with the terms of this Agreement.

1.4.2The Purchaser shall promptly after the date hereof, at its sole cost and expense, order (i) commitments (the “Title Commitments”) for each Transferred Owned Real Property in the respective Title Amount for a Title Policy for each Transferred Owned Real Property and (ii) current ALTA surveys or updates of any existing ALTA surveys for each Transferred Owned Real Property certified to the Purchaser, its lender, if applicable, and the Title Company (the “Surveys”), and shall cause copies thereof to be delivered to Seller’s attorneys within 5 Business Days after receipt by the Purchaser.

1.4.3The Seller shall, and shall procure that its Affiliates shall, use reasonable endeavours and cooperate with the Purchaser to remove of record and otherwise cure any Encumbrances that appear in the Title Commitments or the Surveys or any bringdown or updates thereof, other than Permitted Encumbrances.

1.4.4The Seller shall, and shall procure that its Affiliates shall, execute and deliver to the Title Company mechanic’s lien, possession, and gap affidavits in such form and containing such terms and conditions as may reasonably be required by the Title Company.

1.5Closing

1.5.1The transfer of the Transferred Real Property shall take place on the Closing Date.

1.5.2Completion of the transfer of the Transferred Real Property shall take place at such place (or places) as the parties may agree.

1.6General Transfer Provisions

1.6.1The Seller shall procure that the relevant members of the Seller’s Group shall transfer the Transferred Real Property to the Purchaser subject to the terms set out in this Part 4A of Schedule 3 and all other applicable terms of this Agreement on the Closing Date.

1.6.2The Transferred Real Property is sold subject to the Leases (if any) but otherwise with vacant possession together with all buildings, structures, fixed plant, fixed machinery and fixed equipment thereon except as excluded in Clause 2.3.2.

1.6.3The transfer of each Transferred Real Property shall contain covenants with the relevant Business Seller by the Purchaser to comply with:

(i)the obligations arising under the Documents that are to be performed by Purchaser post closing;

(ii)the obligations on the part of the landlord arising under the Leases (if any)

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that are to be performed by Purchaser post closing; and

(iii)the obligations on the part of the tenant arising under the Leases,

insofar as the relevant Business Seller may remain liable directly or indirectly for them after the Closing Date and to indemnify the relevant member of the Seller’s Group against any non-compliance.

1.6.4At the Closing, the Seller’s Group shall deliver or cause to be delivered to the Purchaser:

(i)with respect to the Transferred Owned Real Properties, deeds in a form to be agreed between the parties (acting reasonably), duly executed and acknowledged by the relevant company in the Seller’s Group;

(ii)with respect to the Transferred Leased Real Properties, an assignment and assumption agreement in a form to be agreed between the parties (acting reasonably) duly executed and acknowledged by the relevant company in the Seller’s Group;

(iii)a duly executed certificate dated as of the Closing Date and substantially in the form set forth in United States Treasury Regulations Section 1.1445-2(b)(2)(iv), stating that the relevant company in the Seller’s Group is not a “foreign person” within the meaning of Section 1445 of the Code; and

(iv)copies of any reasonably required transfer tax forms or waiver forms duly executed and acknowledged by the relevant company in the Seller’s Group.

1.6.5The Purchaser shall procure that all transfers are duly stamped, filed or registered at the relevant registries on a timely basis and within the statutory period (if any) and the relevant Business Seller shall promptly assist the Purchaser with any requisitions or enquiries raised in relation thereto.

1.7Subjections

Notwithstanding anything contained in this Agreement:

1.7.1Each of the Transferred Real Properties is transferred subject to and (where appropriate) with the benefit of the Permitted Encumbrances.

1.7.2The Purchaser is deemed to acquire with full knowledge of the matters referred to in paragraph 1.7.1 of this Part 4A of Schedule 3.

1.7.3The Business Sellers do not give any warranty as to the area of any of the Transferred Real Properties and shall not be required to define the boundaries of any of the Transferred Real Properties.

1.7.4On the date on which the transfer of each Transferred Real Property is completed, the Seller shall deliver, to the Purchaser (or such other third party as the Purchaser may reasonably direct) all of the original documents in the possession of the Business Sellers or relevant member of the Seller’s Group in respect of each of the Transferred Real Properties and certified copies of any documents that are not originals which are in the possession of the Business Sellers or relevant member of the Seller’s Group.

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1.8Insurance

The Business Sellers shall maintain their existing insurance (if any) on the Transferred Real Properties and shall cancel such insurance with effect from the Closing Date unless agreed otherwise with the Purchaser.

1.9Obligations on the Business Sellers

In this Part 4A of Schedule 3, any reference to an obligation on the part of the Business Sellers (or any of them, as the case may be) shall be read as if it were an obligation on the part of the Seller to procure performance of such obligation by the Business Seller or Business Sellers in question.

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Schedule 3
The Properties
Part 4B
Terms relating to the German Carve-out Leases

1General Provisions Relating to the German Carve-out Leases

1.1Interpretation

The following further definitions apply in this Part 4B of Schedule 3:

“German Carve-out Leases” means the lease dated 5 May 2000 between (1) PharmaServ GmbH (originally PharmaServ GmbH & Co. KG) and Novartis Vaccines and Diagnostics GmbH (original contractual party Chiron Behring GmbH & Co.) in respect of Building H12 (amongst others) at Behringwerke, Emil-von-Behring-Straße 76, 35041 Marburg, Germany and any other lease(s) at Marburg (Germany) where the premises demised by such lease(s) are occupied in whole or in part by the Flu Group for the manufacture of MF59® adjuvant (the “Unidentified German Carve-out Lease(s)”);

“German Flu Lease(s)” has the meaning set out in paragraph 1.2.1 of this Part 4B of Schedule 3;

“Landlord” means the person for the time being entitled to the reversion immediately expectant on the termination of the term granted by a Lease;

“Leases” means the German Carve-out Leases, including all documents supplemental to them, and “Lease” means any one of them;

“Property Longstop Date” means a date being 15 months after the Closing Date or such other date as the parties may agree;

“Property Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from any Landlord, superior landlord and/or other third party, including any consents, licences, approvals, permits, authorisations or waivers required by any legislation or regulation or by any statutory, governmental, state, provincial or municipal bodies or authorities for or in connection with the Separation and includes Sublease Consents and, where appropriate, any consents required in relation to any change of control, shareholders or directors in a Flu Group Company;

“Separation” has the meaning given to it in paragraph 1.2.1 of this Part 4B of Schedule 3;

“Sublease Consent” has the meaning given to it in paragraph 1.9.2 of this Part 4B of Schedule 3; and

“Tenant”, for the purposes of this Part 4B of Schedule 3 only, means any tenant under any Lease;

1.2Separation of the German Carve-out Lease(s)

1.2.1The Seller shall use reasonable endeavours to procure, subject to paragraph 1.2.5 below, prior to Closing the contemporaneous surrender of the German Carve-out Leases and the grant of replacement leases, certain of which shall relate exclusively to those parts of the premises demised by the German Carve-out Leases which are used by the Flu Group for the manufacture of MF59® adjuvant,

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including where appropriate (joint) use of ancillary parts and common facilities and comprise the Marburg MF59® Premises (the “German Flu Lease(s)” (the “Separation”).

1.2.2If the Seller is able to procure the surrender of the German Carve-out Leases and the grant of the German Flu Lease(s) prior to Closing, subject to paragraph 1.2.5 below, the German Flu Lease(s) shall be entered into by, or assigned prior to Closing to, a Flu Group Company designated by the Purchaser and the parties acknowledge that such Flu Group Company may be acquired by the Purchaser thereby vesting the German Flu Lease(s) within the ownership of the Purchaser.

1.2.3If and to the extent that the Seller determines that it will not be able to procure the surrender of the German Carve-out Leases and the grant of the German Flu Lease(s) prior to Closing, the Seller shall with the co-operation of the Purchaser use reasonable endeavours to give practical effect to the Separation as from the Closing or as soon as reasonably practicable following Closing, and shall consider (without limitation):

(i)continued negotiations with the relevant Landlords to achieve a separation of each German Carve-out Lease into a German Flu Lease (amongst others), which shall be entered into by, or immediately assigned to, a Flu Group Company designated by the Purchaser; or

(ii)a sub-lease of those parts of the premises demised by the German Carve-out Leases which are used by the Flu Group to a Flu Group Company designated by the Purchaser and any consequential transfer documents required.

1.2.4The Seller shall not agree to any terms of any German Flu Lease(s) or any sublease pursuant to paragraph 1.2.3(ii) which are not substantially similar to the equivalent terms of the relevant underlying German Carve-out Lease without the consent of the Purchaser (not to be unreasonably withheld or delayed).

1.2.5The Seller shall not enter into any German Flu Lease(s) or any sublease pursuant to paragraph 1.2.3(ii) relating to (an) Unidentified German Carve-out Lease(s) without the prior consent of the Purchaser (not to be unreasonably withheld or delayed).

1.2.6Prior to Closing, the Seller and the Purchaser shall agree (acting reasonably) the form of all documents necessary for effecting the Separation.

1.3Dispute resolution

1.3.1Any dispute arising out of or connected with this Part 4B of Schedule 3 which is not resolved by agreement between the parties within nine months of such dispute arising shall be referred for and resolved by expert determination as follows:

(i)either the Seller or the Purchaser may initiate an expert reference under this provision by proposing to the other party the appointment of an expert (the “Expert”);

(ii)the Expert shall either be the nearest equivalent to a chartered surveyor in the relevant jurisdiction or (in relation to legal issues) an expert attorney for lease and condominium law (Fachanwalt für Miet- und Wohnungseigentumsrecht), in each case with no less than 15 years’ post-

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qualification experience in commercial real estate in the relevant jurisdiction chosen by agreement between the Seller and the Purchaser or, failing agreement within 14 days of the initiation of the reference, by the President for the time being of the relevant professional body to which the Expert belongs (the “President”) on the application of either the Seller or the Purchaser;

(iii)the Seller and the Purchaser shall request that the Expert determines the referred dispute within 10 days of receiving the reference;

(iv)if the Expert has been appointed but is unable or unwilling to complete the reference, another Expert shall be appointed by agreement between the Seller and the Purchaser or, failing agreement within 7 days of the parties being notified that the Expert is unable or unwilling to complete the reference, by the President on the application of either party;

(v)the Expert shall act as an expert and not as an arbitrator;

(vi)the Seller and the Purchaser shall have the right to make representations and submissions to the Expert, but there will be no formal hearing;

(vii)the Seller and the Purchaser shall make all relevant documents and information within their control available to the Expert;

(viii)the costs of the Expert shall be borne equally by the Seller and the Purchaser; and

(ix)the decision of the Expert shall, in the absence of fraud or manifest error, be final and binding on the parties.

1.4Property Third Party Consents

1.4.1This paragraph 1.4 of Part 4B of Schedule 3 applies if any Property Third Party Consent is required to effect the Separation and shall continue to apply until the relevant Property Third Party Consent shall have been obtained or until the Property Longstop Date.

1.4.2If any Property Third Party Consents are required:

(i)the Seller shall use reasonable endeavours to procure that the relevant Tenant makes an application for, and uses all reasonable endeavours to obtain, each Property Third Party Consent required for the Separation and shall, at all times, keep the Purchaser informed of progress in obtaining such Property Third Party Consents;

(ii)the Purchaser shall:

(a)supply such information and references as may reasonably be required by a Landlord, any superior landlord or other relevant third party in connection with a Property Third Party Consent;

(b)in respect of the period after the German Flu Leases are vested in the ownership of the Purchaser only, enter into such covenants for the payment of the rent in respect of the German Flu Leases and for the observance and performance of the covenants and conditions on the part of the lessee contained in any German Flu Lease as may

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reasonably be required by the Landlord, any superior landlord or other relevant third party; and

(c)if reasonably required by the Landlord, any superior landlord or other relevant third party, provide a rent deposit or procure that a surety acceptable to such person guarantees the Purchaser’s obligations under the German Flu Lease following any transfer of a relevant German Flu Lease.

1.4.3Each party shall give written notice to the other party as soon as reasonably practicable after obtaining any Property Third Party Consents which shall be accompanied by a copy of such consent.

1.4.4The Seller shall bear the professional and other fees of any Landlord, any superior landlord or other relevant person (including any Tax or disbursements in respect of such fees but excluding any Tax on the actual net income, profit or gains of the Landlord, any superior landlord or other relevant person) properly incurred in connection with any application for Property Third Party Consents, whether or not such Property Third Party consents are given.

1.4.5Subject to the Purchaser complying with its obligations under paragraphs 1.4.2(ii)(b) to (c) of this Part 4B of Schedule 3, the Seller shall pay, or shall procure that a member of the Seller’s Group pays, any moneys or provide or procure the giving of any guarantees or other security, in each case as may be lawfully required by a Landlord, superior landlord or other relevant third party in connection with the obtaining of the Property Third Party Consents, provided that the Purchaser shall indemnify and keep indemnified the Seller in an amount equal to any Liabilities under any guarantees or other security given or procured by the Seller pursuant to this paragraph and arising out of, or in connection with, an act or omission on the part of the Purchaser.

1.5Closing

1.5.1The Separation shall only take place on or prior to Closing to the extent that all necessary Property Third Party Consents in respect of the Separation have been obtained prior to the Closing Date.

1.5.2The Purchase Price shall be paid on the Closing Date in accordance with this Agreement even if any necessary Property Third Party Consents have not then been obtained and the Separation is not completed on the Closing Date.

1.5.3Completion of the Separation shall take place at such place (or places) as the parties may agree.

1.6General Transfer Provisions

1.6.1The transfer of any German Flu Lease shall contain covenants with the Seller by the transferee to comply with the obligations of the tenant under each German Flu Lease insofar as the Seller may remain liable directly or indirectly for them after the transfer date.

1.7Subjections

Notwithstanding anything contained in this Agreement;

1.7.1Each German Flu Lease shall be transferred subject to and (where appropriate)

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with the benefit of the following matters:

(i)all exceptions, reservations, rights, easements, quasi-easements, wayleaves, rent charges, covenants, conditions, declarations, leases, tenancies (including statutory tenancies), licences and agreements affecting the same;

(ii)the rents, covenants and conditions reserved by or contained in the German Flu Lease under which the same is respectively held;

(iii)all notices served and orders, demands, proposals, or requirements made by any local or other public or competent authority; and

(iv)all actual or proposed orders, directions, plans, notices, instruments, charges, restrictions, conditions, agreements or other matters arising under any statute relating to town and country planning and any laws and regulations intended to control or regulate the construction, demolition, alteration or change of use of land or buildings or to preserve or protect the environment.

1.8Insurance

The Seller shall procure that the relevant Tenants maintain their existing insurance (if any) on the German Carve-out Leases and shall cancel such insurance with effect from the Closing Date or, if later, until the Separation is completed.

1.9Grant of Sublease

Where the provisions of paragraph 1.2.3(ii) of this Part 4B of Schedule 3 apply:

1.9.1where a Lease permits a sublease to be granted without the requirement for any Property Third Party Consent from the Landlord, the Seller shall procure the grant to a Flu Group Company designated by the Purchaser of a sublease on terms which are substantially similar to the equivalent terms of the relevant German Carve-out Lease with such changes as are appropriate (in particular regarding the areas to be sub-let); and

1.9.2where a Lease is held by the relevant Tenant from a Landlord on terms which require the consent of the Landlord to:

(i)the grant of a sublease; or

(ii)the terms on which a sublease is granted,

the Seller shall use all reasonable endeavours to procure that the relevant Tenant obtains such consent (“Sublease Consent”) from the relevant Landlord. Where the Tenant is able to obtain the appropriate Sublease Consent, the Seller shall use all reasonable endeavours to procure that a Flu Group Company designated by the Purchaser is granted a sublease of the relevant German Carve-out Lease on terms which are substantially similar to the equivalent of the relevant German Carve-out Lease with such changes as are appropriate (in particular regarding the areas to be sub-let).

1.10Failure to Obtain Property Third Party Consents

If a Property Third Party Consent is refused or otherwise not obtained by the Property Longstop Date such that the Separation and vesting of the Marburg MF59® Premises

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(whether by grant or transfer of the German Flu Lease(s) or a sublease) in the Purchaser has not been effected, then either the Seller or the Purchaser may serve written notice on the other to the intent that the Marburg MF59® Premises shall not become vested in the Purchaser under the Agreement and the Seller and the Purchaser shall each bear fifty per cent. of any Losses of the Seller and the Purchaser arising out of or in connection with the failure to obtain such Property Third Party Consents (and no adjustment shall be made to the Purchase Price).

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Schedule 4
Flu Group Intellectual Property Rights and Flu Group Intellectual Property Contracts
(Clause 2.3)

Part 1

Flu Group Intellectual Property Rights

[***]

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Part 2

Flu Group Intellectual Property Contracts

[***]

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Schedule 5
Excluded Contracts
(Clause 1.1)

[***]

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Schedule 6
Permitted Encumbrances
(Clause 1.1)

[***]

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Schedule 7
Product Approvals, Pipeline Product Approvals and Product Applications
Part 1
Terms relating to the Product Approvals, Pipeline Product Approvals and Product Applications

1General Provisions

1.1For the purposes of Part 1 of this Schedule 7, the term “Product Approvals” shall be deemed to include Pipeline Product Approvals and Product Applications.

1.2Where any Product Approval is held by any Business Seller at the Closing Date (or Delayed Closing Date as the case may be) (“Transferred Product Approvals”), the Purchaser shall take such steps as are necessary to effect the transfer of each Transferred Product Approval, including complying with requirements and reasonable requests of Governmental Entities with respect to the transfer of each Transferred Product Approval.

1.3This Part 1 of this Schedule 7 operates in addition to the processes that have been agreed in the Global Transitional Distribution Services Agreement or any Local Transitional Distribution Services Agreement and is not intended to limit or modify the rights or obligations of the parties under that document.

2Transfer Applications

2.1The Purchaser shall file or cause to be filed applications for the transfer of each Transferred Product Approval in each country or territory in which such transfer is required to be submitted as soon as practicable after the Closing Date (or Delayed Closing Date as applicable).

2.2Pending the transfer following Closing or Delayed Closing, as the case may be, of each Transferred Product Approval pursuant to this Agreement or the Global Transitional Distribution Services Agreement and any Local Transitional Distribution Services Agreement, the Seller shall, and shall cause the relevant members of the Seller’s Group to:

2.2.1if required under Schedule 24, the Global Transitional Distribution Services Agreement or any Local Transitional Distribution Services Agreement:

(i)retain legal title in and be permitted to use such Transferred Inventory as is required to supply the Products;

(ii)invoice customers for the Products;

2.2.2upon reasonable request from the Purchaser and at the Purchaser’s expense, reasonably cooperate and coordinate with the Purchaser in relation to the transfer of the Transferred Product Approvals, including by providing the Purchaser with regulatory documentation concerning the Products, Pipeline Product Approvals and Products Under Registration owned or controlled by the Seller or any of its Affiliates and general assistance for (but not to undertake) the transfer of the Transferred Product Approvals; and

2.2.3not initiate any withdrawals of, or additional variations or amendments to, the Product Approvals, except in the event such withdrawals, variations or amendments are necessary for the continuation of the Business, as are provided in

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paragraph 3, or upon the Purchaser’s written request or otherwise in accordance with Schedule 24.

2.3The Purchaser shall be solely responsible for applying for, and neither the Seller nor any of its Affiliates shall be required to apply for any new tenders provided that, with respect to any Product Approvals that have not been transferred to the Purchaser, the parties will discuss in good faith commercially reasonable terms pursuant to which Seller shall cooperate with the Purchaser to respond to any new tenders to the extent necessary as the holders of any such Product Approvals, in each case provided that:

2.3.1the Seller or the relevant Affiliate of the Seller is able to transfer any liabilities associated with such tenders to the Purchaser upon transfer of such Product Approval;

2.3.2any new tender does not postpone or interfere with the transfer of the Product Approval to the Purchaser or create additional liability for the Seller or its Affiliates;

2.3.3nothing in this paragraph 2.3 or otherwise in this Agreement shall oblige the Seller nor any of its Affiliates to enter into discussions in relation to new tenders to the extent that such new tenders are in or relate to the business of a Stage 3 Delayed Business or Stage 4 Delayed Business other than as contemplated in Schedule 24.

3Maintenance of Product Approvals

From the Closing Date until completion of the transfer of the Product Approvals to the Purchaser, its Affiliates or to a [***], the Seller shall or shall procure that the relevant members of the Seller’s Group shall maintain in force (or procure that there is maintained in force) each Product Approval and shall not voluntarily amend, cancel or surrender any Product Approval unless in accordance with Schedule 24 or requested to do so by the Purchaser or required to do so by any Applicable Law or any Governmental Entity or with the consent of the Purchaser, such consent not to be unreasonably withheld or delayed. For the avoidance of doubt, Seller does not warrant in respect of, and shall not be responsible for, the successful maintenance or renewal of the Product Approvals after the Closing Date or the Delayed Closing Date, as the case may be, except and only to the extent that a Governmental Entity cancels a Product Approval or refuses its renewal as a result of the Seller’s wilful misconduct or gross negligence, and the Seller and its Affiliates shall not be responsible for conducting any studies, including clinical and stability studies, concerning the Products which may be requested by the relevant Governmental Entities after the Closing Date or the Delayed Closing Date, as the case may be, regardless of whether the PA Transfer Date has occurred or not.

4Fees and expenses

Except in respect of Marketing Authorisations within the scope of the services under the Global Transitional Distribution Services Agreement and any Local Transitional Distribution Services Agreement, from and after the Closing Date, the Purchaser shall promptly reimburse the relevant members of the Seller’s Group for (i) all maintenance, renewal fees and similar fees paid; (ii) any deregistration or similar fees where a Product Approval is cancelled or surrendered in accordance with Schedule 24, and (iii) all out of pocket expenses reasonably incurred in connection with the satisfaction of any commitments or obligations by such members of the Seller’s Group with respect to each Product Approval in accordance with this Agreement (the “Charges”). The Parties acknowledge and agree that the Purchaser shall pay, or procure the payment of, the Charges plus a margin of 10%.

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5Notification

As soon as the Seller or the Purchaser or any of their respective Affiliates receives notification, if any, of impending approval or approval of the transfer of a Product Approval from a Governmental Entity, the notified party or the party whose Affiliate or, in the case of the Purchaser, the [***] was notified shall inform the other party of the expected date of appointment or transfer and actual date of appointment or transfer of that Product Approval.

6Responsibility for transfer

Notwithstanding any other provision of this Agreement, neither the Seller nor any of its Affiliates shall have any Liability to the Purchaser, its Affiliate or any [***] in the event that the transfer of any Product Approval results in any further obligations, commitments or Liabilities in relation to a Product Approval

The Seller shall use all reasonable endeavours to procure the transfer of the Marketing Authorisations as promptly as practicable, unless otherwise agreed in writing by the Purchaser including as part of the process for services provided under Schedule 24, the Global Transitional Distribution Services Agreement or and Local Transitional Distribution Services Agreement.

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Schedule 7
Product Approvals, Pipeline Product Approvals and Product Applications
Part 2
List of Products, Products Under Registration and Pipeline Products

[***]

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Schedule 8
Transferred Contracts
(Clause 2.3)

1Delayed transfers

1.1Any Transferred Contract, Transferred Intellectual Property Contract, Relevant Part of a Shared Business Contract, Relevant Part of a Mixed Contract or Relevant Part of a GSK Mixed Contract relating to a Delayed Business (“Delayed Business Contracts”) shall not be transferred to the relevant member of the Purchaser’s Group until the relevant Delayed Closing Date and references in this Schedule 8 to “Closing”, “Closing Date” or “Effective Time” shall be deemed to be to “Delayed Closing Date” insofar as they relate to such Delayed Business Contracts.

2Shared Business Contracts

2.1The Seller shall use all reasonable efforts to maintain relationships under the Shared Business Contracts and continue to operate the Shared Business Contracts, including fulfilling all its obligations under the Shared Business Contracts, in the same manner as it has for the twelve months prior to this Agreement, it being acknowledged and agreed that nothing in this Agreement shall prevent the Seller from being entitled to terminate a Shared Business Contract and seek services from an alternate supplier or otherwise vary the terms on which any services under the relevant Shared Business Contract are provided (including at any time after any election has been made by the Purchaser pursuant to paragraph 2.2 below) so long as any such change does not have a disproportionately adverse affect on the Flu Group as compared with the Seller’s Group Retained Business, and wherever possible, the Seller shall use its reasonable endeavours to provide prior notice of termination of any Shared Business Contract to the Purchaser.

2.2The Purchaser may, by notice to the Seller at any time prior to the date falling 90 days after the Closing Date (the “Relevant Election Date”), request that the rights and obligations of the Relevant Part of any Shared Business Contract be made available to it.

2.3If the Purchaser makes a request under paragraph 2.2 above, the Seller and the Purchaser shall use their respective reasonable endeavours to procure that an arrangement is entered into with the relevant counterparty to the relevant Shared Business Contract, the effect of which shall be that, with effect from the date of the relevant arrangement, the benefit and burden of the Relevant Part is severed from such Shared Business Contract and an agreement or arrangement equivalent to such Shared Business Contract is entered into between the relevant counterparty and a member of the Purchaser’s Group (or the Relevant Part of the Shared Business Contract is sub-licensed or sub-contracted, as appropriate, to such Purchaser) (a “Shared Business Contracts Separation”). For the avoidance of doubt, no part of any such Shared Business Contract shall be severed and transferred to the Purchaser in so far as it relates to the Seller’s Group Retained Business, any product other than the Products or any Excluded Asset. If no request is made by the Purchaser under paragraph 2.2 by the Relevant Election Date, the provisions of this Schedule 8 shall have no further effect and the Seller shall not be obliged to take any further action with respect to such Shared Business Contract.

3Mixed Contracts

3.1The Seller and the Purchaser shall use their respective reasonable endeavours to procure

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that an arrangement is entered into with the relevant counterparty to each Mixed Contract, the effect of which shall be that, with effect from the date of the relevant arrangement, the Mixed Contract is split such that the benefit and burden of the Retained Part is assumed by a member of the Seller’s Group and the Relevant Part is assumed by a member of the Purchaser’s Group (a “Mixed Contracts Separation”).

3.2From Closing, pending the splitting of the Mixed Contracts as described in paragraph 4.2 below, the Seller shall, in the case of the Mixed Contracts held by Business Sellers, and the Purchaser shall, in the case of the Mixed Contracts held by the Flu Group Companies use all reasonable efforts to maintain relationships under the Mixed Contracts and continue to operate the Mixed Contracts, including fulfilling all the obligations under the Mixed Contracts, in the same manner as it has for the twelve months prior to this Agreement.

4Obligation to obtain Third Party Consents

4.1For the purposes of this Schedule 8, “Transferred Contract” excludes any US Government Contract, Product Approval, Pipeline Product Approval or Product Application and, for the avoidance of doubt, includes any Sinergium Arrangement.

4.2Subject to paragraph 5, in relation to any Transferred Contract, Transferred Intellectual Property Contract, Co-Owned Flu Group Intellectual Property Right or Transferred Plant or Equipment which is not assignable or sub-licensable without a Third Party Consent, and any Mixed Contract or any Shared Business Contract which is not separable without a Third Party Consent, this Agreement shall not be construed as an assignment, an attempted assignment, a sub-licensing or an attempted sub-licensing and the Seller and the Purchaser shall each use reasonable endeavours both before and after Closing to obtain all necessary Third Party Consents as soon as possible and shall keep each other informed of progress in obtaining such Third Party Consents. The Seller shall deliver to the Purchaser, on Closing or, if later, as soon as possible after receipt, any Third Party Consent.

4.3In connection with the obtaining of any Third Party Consent referred to in paragraph 4.2, the Purchaser shall supply to the Seller such information as may be reasonably requested by the Seller or any relevant third party.

4.4The cost of any fee demanded by the third party as consideration for giving the Third Party Consent shall be borne by the Seller.

5Obligations until Third Party Consents are obtained/where Third Party Consents are refused

5.1Subject to paragraph 5.2 below, the Purchaser shall assume, carry out, perform and discharge the Seller’s and the Business Seller’s obligations arising under the Transferred Contracts, Transferred Intellectual Property Contracts, Co-Owned Flu Group Intellectual Property Rights, Transferred Plant and Equipment, the Relevant Part of the Shared Business Contracts and the Relevant Part of the Mixed Contracts held by the Seller or a member of the Seller’s Group as from Closing and shall indemnify and keep indemnified the Seller and the Business Sellers against any liability incurred by the Seller or the Business Sellers arising from the failure by the Purchaser to assume, carry out, perform or discharge such obligations, provided that, subject to Schedule 24, nothing in this Agreement shall:

5.1.1require the Purchaser to perform any obligation falling due for performance, or which should have been performed, on or before Closing; or

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5.1.2make the Purchaser liable for any act, neglect, default or omission of the Seller and/or the Business Sellers in respect of any such contracts on or before Closing.

5.2In respect of any Transferred Contract, Transferred Intellectual Property Contract, Co-Owned Flu Group Intellectual Property Right, Transferred Plant and Equipment, Relevant Part of any Shared Business Contract or Relevant Part of any Mixed Contract from Closing until the relevant Third Party Consent has been obtained as contemplated by paragraph 6.2 or where the Third Party Consent has been refused:

5.2.1the relevant Business Seller shall hold on trust to the extent it is lawfully able to do so or, where it is not lawfully able to do so or where holding on trust is not possible under local law or otherwise impracticable, the relevant Business Seller and the Purchaser shall make such other arrangements between themselves to provide to the Purchaser the benefits of the Contract (other than amounts corresponding to any Tax liability of the relevant Business Seller), in each case in respect of amounts due under or in respect of the Transferred Contract, Transferred Intellectual Property Contract, Co-Owned Flu Group Intellectual Property Right, Transferred Plant and Equipment, Relevant Part of any Shared Business Contract, or Relevant Part of any Mixed Contract, including the enforcement at the cost and for the account of the Purchaser of all rights of the relevant Business Seller against any other party thereto;

5.2.2to the extent that the Purchaser is lawfully able to do so, the Purchaser shall perform or procure the performance of the relevant Business Seller’s obligations under the Transferred Contract, Transferred Intellectual Property Contract, Transferred Plant and Equipment, Relevant Part of any Shared Business Contract, or Relevant Part of any Mixed Contract as agent or sub-contractor and shall indemnify the Seller and the relevant Business Seller if the Purchaser fails to do so;

5.2.3to the extent that the Purchaser is not lawfully able to perform or procure the performance of such obligations, the Seller shall procure that the relevant Business Seller shall, (subject to being indemnified by the Purchaser for any Losses, costs, expenses and other liabilities incurred in connection therewith) do all such things as the Purchaser may reasonably require to enable due performance of the Transferred Contract, Transferred Intellectual Property Contract, Transferred Plant and Equipment, Relevant Part of any Shared Business Contract or Relevant Part of any Mixed Contract;

5.3In respect of the Retained Part of any Mixed Contract held by a Flu Group Company from Closing until the relevant Mixed Contracts Separation:

5.3.1the relevant Flu Group Company shall hold on trust to the extent it is lawfully able to do so or, where it is not lawfully able to do so or where holding on trust is not possible under local law or otherwise impracticable, the Purchaser and the Seller shall make such other arrangements between themselves to provide to the Seller the benefits of the Contract (other than amounts corresponding to any Tax liability of the relevant Flu Group Company in respect of amounts due under or in respect of the Relevant Part of such Mixed Contract), including the enforcement at the cost and for the account of the Purchaser of all rights of the relevant Business Seller against any other party thereto;

5.3.2to the extent that the Seller (or relevant member of the Seller’s Group) is lawfully able to do so, the Seller shall perform the obligations of the relevant Flu Group

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Company relating to the Retained Part of the relevant Mixed Contract as agent or sub-contractor and shall indemnify the Purchaser if the Seller fails to do so;

5.3.3to the extent that the Seller is not lawfully able to perform such obligations, the Purchaser shall procure that the relevant Flu Group Company shall, (subject to being indemnified by the Seller for any Losses, costs, expenses and other liabilities incurred in connection therewith) do all such things as the Seller may reasonably require to enable due performance of the Retained Part of the relevant Mixed Contract.

6Failure to Obtain Third Party Consents

6.1If a Third Party Consent is refused or otherwise not obtained on terms reasonably acceptable to the Purchaser within 9 months of Closing, or in the case of a Shared Business Contract, 9 months of the Relevant Election Date, the parties shall use reasonable endeavours to put in place alternative arrangements so as to give the Purchaser equivalent rights or benefits as the Purchaser would have received if the Third Party Consent had been obtained. If no such alternative arrangement has been validly put in place within 6 months of the relevant Third Party Consent having been refused or otherwise not obtained, then:

6.1.1the Seller shall be entitled to procure the termination of the Transferred Contract, Transferred Intellectual Property Contract, Transferred Plant and Equipment, Relevant Part of the Shared Business Contract or Relevant Part of the Mixed Contract and the obligations of the parties under this Agreement in relation to such Transferred Contract, Transferred Intellectual Property Contract, Transferred Plant and Equipment, Relevant Part of the Shared Business Contract or Relevant Part of the Mixed Contract shall cease forthwith; and

6.1.2references in this Agreement to the Transferred Contract, Transferred Intellectual Property Contracts, Transferred Plant and Equipment, Relevant Part of the Shared Business Contract or Relevant Part of the Mixed Contract and the Flu Group Businesses (other than in this paragraph 6) shall be construed as excluding such Transferred Contract, Transferred Intellectual Property Contract, Transferred Plant and Equipment, Relevant Part of the Shared Business Contract or Relevant Part of the Mixed Contract.

6.2Provided that the Seller has reasonably consulted with the Purchaser in good faith in relation to any proposed termination, prior to such termination, the cost of any break or termination fee which becomes payable to the relevant the third party as a result of termination of the Transferred Contract, Transferred Intellectual Property Contract, Transferred Plant and Equipment, Relevant Part of the Shared Business Contract or Relevant Part of the Mixed Contract shall be borne by the Seller and the Purchaser in equal portions.

6.3To the extent that, at Closing, any Contract exists which is Predominantly Related to the Business but is not a Transferred Contract by virtue of the fact that neither party to such contract is a member of the Seller’s Group, the Seller shall use all reasonable efforts to obtain the consent of the parties to the relevant Contract to transfer such Contract to the Purchaser or a Flu Group Company, and for the purposes of this Schedule 8 only such Contract shall be deemed to be a Transferred Contract to the extent practicable taking into account that neither the Seller nor any member of the Seller’s Group is a party to the relevant Contract.

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7GSK Mixed Contracts

7.1In respect of any GSK Mixed Contracts which have not been split before Closing, from Closing until the relevant GSK Mixed Contract has been split:

7.1.1the Seller shall use its reasonable endeavours to procure that an arrangement is entered into with the relevant counterparty to each GSK Mixed Contract, the effect of which shall be that, with effect from the date of the relevant arrangement, the GSK Mixed Contract is split such that the benefit and burden of the Relevant Part is assumed by a member of the Purchaser’s Group (the “GSK Mixed Contract Separation”).

7.1.2if it is not legally possible for the Relevant Part of the GSK Mixed Contract to be immediately assumed by a member of the Purchaser’s Group upon a GSK Mixed Contract Separation:

(i)the Seller shall hold the Relevant Part of the GSK Mixed Contract on trust to the extent it is lawfully able to do so or, where it is not lawfully able to do so or where holding on trust is not possible under local law or otherwise impracticable, the Purchaser and the Seller shall make such other arrangements between themselves to provide to the Purchaser the benefits of the Relevant Part of the GSK Mixed Contract, including the enforcement at the cost and for the account of the Purchaser of all rights of the relevant Business Seller against any other party thereto;

(ii)to the extent that the Purchaser is lawfully able to do so, the Purchaser shall perform or procure the performance of the obligations of relating to the Relevant Part of the relevant GSK Mixed Contract as agent or sub-contractor and shall indemnify the Seller if the Purchaser fails to do so; to the extent that the Purchaser is not lawfully able to perform such obligations, the Seller shall, (subject to being indemnified by the Purchaser for any Losses, costs, expenses and other liabilities incurred in connection therewith) do all such things as the Purchaser may reasonably require to enable due performance of the Relevant Part of any GSK Mixed Contract.

8[***] Agreement

The parties acknowledge and agree that the [***] shall not transfer to the Purchaser or a member of the Purchaser’s Group unless and until:

the employees of Novartis Vaccines and Diagnostics, Inc. or its Affiliates engaged in the  supervision of the outsourced clinical trials under the [***] and are able to continue the supervision of such outsourced clinical trials; or, if sooner,

the Purchaser has received written confirmation from [***] that it is able to ensure the conduct and performance of the outsourced clinical trials under the [***].

At such time that the [***] Agreement transfers, the Seller agrees it will procure that Novartis Vaccines and Diagnostics, Inc. will transfer (and the Purchaser or a member of the Purchaser’s Group agrees it will assume) the benefit and burden of the [***] Agreement, as far as possible as if the [***] Agreement had transferred at Closing.

The Seller undertakes to procure that between Closing and the transfer of the [***] Agreement or its expiry in accordance with its terms, Novartis Vaccines and Diagnostics, Inc or any of its Affiliates shall continue to perform their obligations under the [***] Agreement, including any

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obligations to conduct and perform the outsourced clinical trials under the [***] Agreement in accordance with the current development plans associated with those trials (subject to Novartis Vaccines and Diagnostics, Inc and its Affiliates being indemnified by the Purchaser for any costs, expenses and other liabilities incurred in performing the relevant obligations under the [***] Agreement, it being acknowledged and agreed that such indemnity from the Purchaser shall not prejudice the indemnity given by the Seller in paragraph 8.5 below).

The Seller and the Purchaser further acknowledge and agree that any assets, including, Intellectual Property Rights, laboratory notebooks and research and development information, arising out of work performed, developed, prepared produced or created under the [***] Agreement to which the Purchaser would have been entitled to had the [***] Agreement been transferred on Closing, are for the full benefit of the Purchaser and the Seller shall or shall procure transfer to the Purchaser on (i) transfer of the [***] Agreement in accordance with 8.1 and 8.2; or if sooner, (ii) on expiry of the term of the [***] Agreement.

The Seller shall indemnify on demand and hold harmless the Purchaser (for itself and on behalf of each other member of the Purchaser’s Group and their respective directors, officers, employees and agents) for any Liabilities (whether incurred by the Purchaser or any member of the Purchaser’s Group and whether incurred directly or indirectly) arising out of or in connection with the employment or termination of employment of any of the [***].

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Schedule 9
Employees
(Clause 2.4.1)

1Employee Transfer

1.1The Purchaser shall (subject to paragraph 5 in relation to Flu Business Employees located in the USA and paragraph 11 in relation to the Delayed Employees) cause:

1.1.1the Flu Group Companies to continue to employ all Flu Group Company Employees immediately after the Closing Date; and

1.1.2a member of the Purchaser’s Group to employ each Flu Business Employee immediately after the Closing Date (where employment transfers and continues automatically by operation of Applicable Law) or, where the Seller and Purchaser agree in advance that the employment of any Flu Business Employee will not automatically transfer to a member of the Purchaser’s Group by operation of Applicable Law, offer, or cause a member of the Purchaser’s Group (or, in the case of Flu Business Employees employed in [***], a third party proposed employer (“Third Party Employer”)) to offer, at least 15 calendar days before the Closing Date or, if earlier, on or before the date by which the Relevant Employer would be required to serve notice to terminate such employee’s employment, but contingent on Closing and the employee continuing to be a Flu Business Employee until the Closing Date, employment to each of those Flu Business Employee on terms and conditions that are no less favourable in the aggregate (but subject to paragraph 2.1 below and specifically excluding, for the avoidance of doubt, the obligation to provide defined benefit pension benefits, but recognising the value to certain Flu Group Company Employees of defined benefit pension benefits while not being obliged to assess the value of those benefits) than those on which such Flu Business Employee was employed by the Relevant Employer when the offer was made (where employment does not transfer and continue automatically by operation of Applicable Law). The Purchaser shall keep the Seller updated throughout the offer process on when offers are made and accepted or rejected. The Seller shall, where requested, offer such reasonable assistance to the Purchaser (or relevant member of the Purchaser’s Group) to encourage such Flu Business Employee to accept any offer of employment made by the Purchaser or relevant member of the Purchaser’s Group, pursuant to this paragraph 1.1.2.

1.2If it is found or alleged that any contract of employment with any person who is not a Transferred Employee has effect at any time on or after the Closing Date as if originally made between the Purchaser (or any relevant member of the Purchaser’s Group) and such person as a result of the operation of any Applicable Law or otherwise then (without prejudice to any other rights or remedies which may be available to the Purchaser (or relevant member of the Purchaser’s Group)):

1.2.1the Purchaser shall promptly notify the Seller of that finding or allegation. In consultation with the Purchaser, the Seller or relevant member of the Seller’s Group shall at the Purchaser’s request or if it so chooses within ten Business Days of such notification, make to that person an offer in writing to employ him or her under a new contract of employment subject to, and to take effect upon, the termination referred to below;

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1.2.2the offer to be made will be on the same terms and conditions (including as to period of continuous employment) as were provided to that person immediately prior to the Closing Date;

1.2.3after the expiry of the ten Business Days referred to at paragraph 1.2.1 above (whether or not an offer of employment is made) the Purchaser or relevant member of the Purchaser’s Group may terminate the employment of such person and the Seller shall be responsible for and shall indemnify and keep indemnified the Purchaser (for itself and as trustee for any relevant member of the Purchaser’s Group) against all Losses made, suffered or incurred by the Purchaser (or any other member of the Purchaser’s Group) as a result of:

(i)the actual or alleged transfer to a member of the Purchaser’s Group and (regardless of whether there has been such a transfer) any employment liabilities relating to such person;

(ii)employing such person on and from the Closing Date until such termination (up to the time reasonably expected to have achieved such termination in accordance with the terms of the contract of employment and applicable Law) but subject to a maximum period of 6 months unless prevented by the terms of the contract of employment or Applicable Law; and

(iii)such termination; and

1.2.4the parties agree to co-operate in good faith to minimise the Losses which are subject to the indemnity referred to in paragraph 1.2.3 above.

1.3The parties acknowledge and agree that:

1.3.1any Deferred Employee shall be treated for all purposes under this Agreement as if such Deferred Employee were a Flu Business Employee or a Flu Group Company Employee (as appropriate); and

1.3.2the Purchaser’s obligations under this Schedule 9 shall apply in respect of each Deferred Employee in the same way as they do to each Flu Business Employee or Flu Group Company Employee (as appropriate); and

1.3.3if any Deferred Employee accepts an offer of employment made by the Purchaser under paragraph 1.1.2 above or becomes an employee of a Flu Group Company after the Closing Date, such Deferred Employee shall further be treated for all purposes under this Agreement as a Transferred Employee.

1.4Where any Flu Business Employee accepts such an offer of employment (pursuant to paragraph 1.1 above), the Seller will procure that the Relevant Employer will release such employee from its employment with effect from the Closing Date.

1.5The Purchaser shall (for itself and for each member of the Purchaser’s Group) be responsible for and shall indemnify and keep indemnified the Seller (for itself and on behalf of each member of the Seller’s Group) from any and all Losses and claims of any kind:

1.5.1arising out of the employment, or termination of employment, whether actual or constructive, of any Transferred Employee following the Effective Time, save to the extent that such Losses arise from the Seller’s, or a member of the Seller’s Group’s, acts or omissions (or alleged acts or omissions), including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of

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termination and similar obligations;

1.5.2which are attributable to any act or omission (or alleged act or omission) by the Purchaser or any member of the Purchaser’s Group in relation to any of the Flu Business Employees, Flu Group Company Employees or Transferred Employees relating to any failure by the Purchaser or any member of the Purchaser’s Group to comply with obligations under Applicable Law to provide information to the relevant members of the Seller’s Group in order to allow them to comply with their information and consultation obligations; and/or

1.5.3arising from any finding or allegation that the terms and conditions of employment provided or to be provided by the Purchaser or a member of the Purchaser’s Group (or, in the case of Flu Business Employees employed in [***], a Third Party Employer) to any Flu Business Employee would constitute a repudiatory breach of his contract.

1.6The Seller shall (for itself and on behalf of each member of the Seller’s Group) be responsible for and shall indemnify and keep indemnified the Purchaser (for itself and on behalf of each member of the Purchaser’s Group and any Third Party Employer) from any and all Losses and claims of any kind:

1.6.1arising out of the employment of any Employee at any time prior to the Effective Time (excluding any transferred Employee Benefit Liabilities (as defined in Schedule 10) which the Purchaser agrees to assume in accordance with Schedule 10), save to the extent that such Losses arise from the Purchaser’s, or a member of the Purchaser’s Group’s, acts or omissions (or alleged acts or omissions);

1.6.2subject to paragraph 1.5.3 above, arising out of any termination of employment, whether actual or constructive, of any Employee prior to the Effective Time including, but not limited to, all claims relating to severance, termination pay, pay in lieu of notice of termination and similar obligations;

1.6.3which are attributable to any act or omission (or alleged act or omission) by the Seller or any member of the Seller’s Group in relation to any of the Flu Business Employees, Flu Group Company Employees or Transferred Flu Business Employees relating to any failure by the Seller or any member of the Seller’s Group to comply with its obligations (under Applicable Law, trade union agreement or otherwise) to inform and consult (other than as a result of any failure by the Purchaser or any member of the Purchaser’s Group to comply with its obligations under Applicable Law to provide information and assistance to the Seller to enable such compliance); and/or

1.6.4the employment or termination of employment by the Seller or any member of the Seller’s Group of any person who is an Excluded Employee at any time.

2Terms of employment

2.1[***]

2.2[***]

2.3[***]

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3Severance arrangements

3.1[***]

3.2[***]

4Benefits arrangements/service continuity

4.1Each Transferred Employee shall have their service with the Seller’s Group and their respective predecessors recognised under any employee benefit plans or arrangements of the Purchaser’s Group for all purposes of eligibility, vesting and accrual of benefits to the extent past service was recognised for such Transferred Employees under a comparable benefit plan immediately prior to the Closing Date. Notwithstanding the foregoing, nothing in this paragraph 4.1 shall be construed to require recognition of service for the purposes of calculation of benefits or that would result in:

4.1.1duplication of benefit;

4.1.2recognition of service for any purposes under any plans for which participation, service and/or benefits accrual is frozen or any post-retirement medical plan; or

4.1.3recognition of service under a newly established plan for which prior service is not taken into account for employees of the Purchaser’s Group generally.

Without limiting the foregoing, with respect to the Transferred Employees, the Purchaser shall, or shall cause such other member of the Purchaser’s Group to, be responsible for all paid time off benefits, including vacation pay, sick pay, banked leave, flexitime and other payments for time off of normal work hours accrued by the Transferred Employees up to the Closing Date.

4.2With respect to any welfare plan maintained by the Purchaser or any other member of the Purchaser’s Group in which Transferred Employees are eligible to participate after the Closing Date, the Purchaser shall:

4.2.1waive all limitations as to pre-existing conditions, exclusions, evidence of insurability provisions, waiting periods with respect to such participation and coverage requirements or similar provisions under a Purchaser’s benefit plans that are welfare plans (as defined in section 3(1) of ERISA or any equivalent Applicable Law) applicable to such employees to the extent such conditions, exclusions and waiting periods or other provisions were satisfied or did not apply to such employees under welfare plans maintained by the Seller or other members of the Seller’s Group prior to the Closing Date; and

4.2.2provide each Transferred Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any analogous deductible or out-of-pocket requirements to the extent applicable under any such plan in the year in which Closing occurs, to the extent credited under the welfare plans maintained by the Seller or other members of the Seller’s Group prior to the Closing Date.

5US Transferred Employees

5.1The Parties acknowledge that from Closing the Relevant Flu Business Employees located in the USA will be seconded to the Purchaser on terms set out in the US Secondment Agreement and that the obligations on the Purchaser set out in paragraph 1.1.2 of this Schedule shall apply in relation to the US Contract Employees (as defined in the US

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Secondment Agreement) by reference to the Expiration Date (as defined in the US Secondment Agreement) (the “US Transfer Date”) rather than the Closing Date. The US Contract Employees immediately prior to the US Transfer Date shall be Flu Business Employees for the purposes of this Agreement

5.2The Transferred Employees who are employed in the United States and/or covered by US Benefit Plans (“US Transferred Employees”) shall, as of the US Transfer Date, become eligible to participate in a US tax-qualified defined contribution plan sponsored by the Purchaser or another member of the Purchaser’s Group. The Purchaser agrees that such plan will accept rollovers of the account balances of US Transferred Employees (including participant loan promissory notes) from the Relevant Employer’s tax-qualified retirement plans, provided that the Seller makes available to the Purchaser at the Purchaser’s request a copy of the relevant IRS determination letter.

5.3With effect on and from the US Transfer Date, the Purchaser shall, or shall procure that such other members of the Purchaser’s Group shall, assume the responsibility and obligation to provide COBRA continuation coverage to all M&A Qualified Beneficiaries. “M&A Qualified Beneficiary” means an individual whose COBRA qualifying event occurred prior to the US Transfer Date.

6Consultation

The Seller and the relevant member of the Seller’s Group (as the case may be) shall comply with its obligations under the Transfer Regulations and any other relevant information negotiation and/ or consultation process or requirements in connection with the transactions contemplated by this Agreement. The parties shall, and shall cause such other relevant members of the Seller’s Group or the Purchaser’s Group (as the case may be) to, provide the other with such information and assistance at such times as the parties may reasonably request or as may be reasonably necessary for them or any other relevant member of the Seller’s Group or the Purchaser’s Group (as the case may be) to comply with any requirements to consult with any affected employees, the Novartis Euroforum, a relevant trade union or any other employee representatives, in connection with the transactions contemplated by this Agreement. The Purchaser shall, and shall cause such other relevant members of the Purchaser’s Group to, at the reasonable request of the Seller, cooperate with and participate in any information, negotiation and/or consultation process which the Seller or such other member of the Seller’s Group undertakes with employees or their representatives in connection with the transactions contemplated by this Agreement.

7International Assignees

Where Applicable Law does not provide for the automatic transfer of employment of any International Assignee and/or the other terms governing their international assignment, the Purchaser shall assume and agree to be bound by the individual contract of employment and such other terms governing their international assignment including any tax equalisation agreement entered into between an International Assignee and a member of the Seller’s Group provided that such employee becomes a Transferred Employee.

8Liability for retention arrangements

8.1[***]

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8.2The provisions of paragraph 9 below shall not apply to the share-based retention awards made pursuant to this paragraph, which will vest in accordance with their terms.

9Share incentive plans

9.1This paragraph 9 applies notwithstanding any other provision of this Agreement, except paragraph 8 above and paragraph 11.4 below.

9.2Share-based awards held by Transferred Employees pursuant to a share-based incentive scheme operated by the Seller or another member of the Seller’s Group (“Relevant Awards”) shall be treated in accordance with the rules of the relevant share based incentive scheme and, where possible shall be afforded ‘good leaver treatment’. Where Relevant Awards are subject to performance (or other) conditions and it is not possible to determine whether or not such conditions have been met at the applicable early vesting date (or within a reasonable period thereafter), the Seller and Purchaser agree that performance shall be deemed “on target”.

Without limitation:

(a)where necessary and subject to (b), the Seller shall rely on and procure the exercise of existing discretions in the relevant plan rules to afford the “good leaver treatment”; and

(b)the Seller (or relevant member of the Seller’s Group) shall not take any action which would require shareholder approval or which could trigger any significant legal, Tax or operational issues for the relevant Transferred Employee (including the loss of any Tax-favourable treatment), the Seller’s Group or the Purchaser’s Group.

For the purposes of this paragraph 9.2, and subject to the rules of the relevant share based incentive scheme the “good leaver treatment” shall be that:

(c)Relevant Awards shall not lapse or be forfeited as a result of Closing except to the extent that they do not vest in accordance with (d) and/or (e) below;

(d)Relevant Awards shall vest early as a result of Closing and shall (subject to (f) below) be time pro-rated to take account of the reduced period of time, as a proportion of the original vesting period, that the relevant Transferred Employee worked within the Seller’s Group (calculated on the basis of the number of years of service as at the Closing Date, where part years of service are rounded up to the next whole year of service);

(e)Relevant Awards that vest after the Closing Date shall remain subject to any relevant performance (or other) conditions, adjusted as necessary to take account of Closing and measured up to the applicable early vesting date; and

(f)The Seller shall procure that any restricted shares or restricted stock units (or any part of an award of restricted shares or restricted stock units) granted under the Employee Share Ownership Plan, Restricted Stock Plans for Switzerland, the Restricted Stock Plan for the Rest of the World or the 2007 Restricted Stock Unit Plan, shall not lapse or be forfeited on Closing and will vest on the Closing Date.

The Seller retains the discretion to provide more favourable treatment for Relevant Awards in accordance with the rules of the relevant share based incentive scheme and, in particular but without limiting this general discretion, for the purposes of this paragraph 9.2,

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“on target” performance may be construed as permitting share-based awards to vest in full.

9.3The Seller agrees to indemnify the Purchaser (or relevant member of the Purchaser’s Group) for any Liabilities borne by the Purchaser’s Group in connection with the Relevant Awards and any payments made by the Seller in accordance with paragraph 9.9, including any Tax (which, for the avoidance of doubt and without limitation to the definition of Tax, in this paragraph 9 includes any UK secondary Class 1 National Insurance contributions, US FICA and any other amounts of employer and employee social security contributions arising in any jurisdiction, any income tax and any state, cantonal or other local taxes in any jurisdiction). The Purchaser agrees to use its best endeavours to obtain and utilise any applicable Tax relief in respect of the Relevant Awards as soon as reasonably practicable and pay (or procure payment) to the Seller of an amount equal to any reduction in the Tax Liabilities of the Purchaser’s Group arising as a result of or by reference to such Tax relief by way of adjustment to the Purchase Price, provided always that the Seller provides the Purchaser with any information that the Purchaser may reasonably request in this respect in a timely manner.

9.4The Seller undertakes to inform the Purchaser of the vesting or exercise (as applicable) of the Relevant Awards (or cash payments made by the Seller in accordance with paragraph 9.9) and to provide, in a timely manner, details of the Relevant Awards that so vest or are exercised (or cash payments made) so that the Purchaser’s Group can make any applicable withholdings for Tax and pay any Tax for which the Purchaser’s Group is liable in respect of the Relevant Awards to the relevant Tax Authority within any applicable timescale.

9.5To the extent permitted under the relevant plan rules and any Applicable Law, the Seller undertakes to sell such number of the shares underlying the Relevant Awards as may be necessary for the sale proceeds to satisfy any applicable Tax required to be withheld or accounted for by the Purchaser’s Group and to pay such amounts to the Purchaser in sufficient time for the Purchaser to pay such Tax to the relevant Tax Authority within any applicable timescale, provided always that the Purchaser provides the Seller with any information that the Seller may reasonably request in this respect in a timely manner.

9.6The Seller undertakes to complete all relevant filings, tax reporting obligations and notifications in relation to Relevant Awards in all relevant jurisdictions.

9.7This paragraph shall apply where restricted stock units granted under the 2011 Stock Incentive Plan for North American Employees lapse or are forfeited (or will lapse or be forfeited) either in whole or in part as a result of Closing (“RSU Awards”). As soon as practicable following Closing (and, in any event, by the later of 30 days from the Closing Date and 30 days from the first date after the Closing Date when the granting of share-based awards is not prevented by dealing restrictions, subject in both cases to the relevant plan rules and any Applicable Law), the Purchaser (or member of the Purchaser’s Group) shall grant each relevant Transferred Employee a share-based award referable to shares in the capital of the Purchaser substantially equal in value (valued as at the grant date) to the value of the portion of their RSU Awards which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing (valued as at the Closing Date), where relevant, disregarding any loss (or expected loss) of Tax-favourable treatment (each a “Compensation Award”). Such Compensation Awards shall be granted pursuant to the rules of whichever incentive plan operated by the Purchaser’s Group at the time of grant the Purchaser considers most closely aligned to the share-based incentive plan operated by the Seller’s Group (which may, for the avoidance of doubt, include a plan which may or

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must be settled in cash) pursuant to which the related RSU Award had been granted but will vest according to a vesting schedule substantially similar to the vesting schedule that would have otherwise applied to the related RSU Award if Closing had not occurred.

For the purposes of this paragraph 9.7:

(a)the portion of a RSU Award which lapsed or was forfeited (or will lapse or be forfeited) as a result of Closing shall be valued on the basis of the average price of an ordinary share in the capital of the Seller over the five trading days immediately prior to Closing;

(b)the value of a Compensation Award to be granted shall be valued on the basis of the average price of an ordinary share in the capital of the Purchaser over the five trading days immediately prior to the date of grant; and

(c)any currency conversion shall be made in accordance with Clause 1.11 of this Agreement.

9.8To the extent that any payment to a Transferred Employee (whether by the Seller’s Group or by the Purchaser’s Group) would trigger Liabilities to Tax under section 280G of the United States Internal Revenue Code (“Section 280G”), the relevant Transferred Employee shall be allowed to choose whether to accept the full payment (and pay any relevant Section 280G Tax) or to receive such lower payment as may be necessary in order to fall below the Section 280G threshold for Tax. To the extent that any similar Tax would arise pursuant to any Applicable Law in another jurisdiction, this paragraph 9.8 shall apply mutatis mutandis.

9.9This paragraph shall apply where: (i) a Transferred Employee would, in the ordinary course of business, have been granted a share-based award pursuant to a share-based incentive scheme operated by the Seller or another member of the Seller’s Group on the basis of performance criteria linked to the Seller’s Group’s 2015 financial year (which may, for the avoidance of doubt, be business and/or individual performance criteria and assessment) (each a “2015 Performance Award”); and (ii) Closing occurs prior to the grant of such 2015 Performance Award. As soon as practicable following Closing (and, in any event, by the later of 30 days from the Closing Date and 30 days from the date when the value of each 2015 Performance Award has been determined), the Seller shall notify the Purchaser in writing of the value of each 2015 Performance Award and under which share-based incentive plan operated by the Seller’s Group the related 2015 Performance Award would have been granted. As soon as practicable following the receipt of such notice (and, in any event, by the later of 30 days from the receipt of such notice and 30 days from the first date following the receipt of such notice when the granting of share-based awards is not prevented by dealing restrictions, subject in both cases to the relevant plan rules and any Applicable Law), the Purchaser (or member of the Purchaser’s Group) shall grant each relevant Transferred Employee a share-based award referable to shares in the capital of the Purchaser substantially equal in value (valued as at the date of grant) to two-thirds of the value of the 2015 Performance Award which would have been granted but for the occurrence of Closing (“2016 Grant Award”). Such 2016 Grant Awards shall be granted pursuant to the rules of whichever share-based incentive plan operated by the Purchaser’s Group (which may, for the avoidance of doubt, include a plan which may or must be settled in cash) at the time of grant the Purchaser considers most closely aligned to the share-based incentive plan operated by the Seller’s Group pursuant to which the related 2015 Performance Award would have been granted.

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The Seller shall pay, in cash, the remaining one-third of the value of the 2015 Performance Award which would have been granted but for the occurrence of Closing to each relevant Transferred Employee on, or as soon as practicable following, Closing.

The grant of a 2016 Grant Award to a Transferred Employee shall be taken into account by the Purchaser when determining the extent to which that Transferred Employee shall participate in incentive arrangements (other than any Compensation Award) operated by the Purchaser’s Group following Closing.

For the purposes of this paragraph 9.9:

(a)the value of a 2015 Performance Award to be granted shall: (i) be determined by the Seller acting reasonably and in good faith; (ii) be consistent with past practice and with the level of similar awards granted to employees remaining in service within the Seller’s Group; (iii) take into account the relevant business and/or individual performance criteria linked to the Seller’s Group’s 2015 financial year, and (iv) if Closing occurs before 31 December 2015, be time pro-rated to take account of the reduced period of time, as a proportion of the Seller’s Group’s 2015 financial year, that the relevant Transferred Employee worked within the Seller’s Group (calculated on the basis of the number of complete months of service as at the Closing Date);

(b)the number of shares by reference to which a 2016 Grant Award is granted shall be valued on the basis of the average price of an ordinary share in the capital of the Purchaser over the five trading days immediately prior to the date of grant; and

(c)any currency conversion shall be made in accordance with Clause 1.11 of this Agreement.

9.10Costs in relation to satisfying the Compensation Awards and the 2016 Grant Awards shall be shared equally between the Seller and Purchaser, provided that the Purchaser shall bear costs in relation to satisfying the Compensation Awards and the 2016 Grant Awards only to the extent that the aggregate costs of satisfying the Compensation Awards and the 2016 Grant Awards do not exceed a maximum value of US$5m. In the event that the costs of satisfying the Compensation Awards and 2016 Grant Awards exceed US$10m (as shared between the Purchaser and Seller equally), any costs in respect of satisfying the Compensation Awards and/or the 2016 Grant Awards in excess of US$10m shall be at the cost of the Seller only. In the event that Compensation Awards and/or 2016 Grant Awards are satisfied in cash, for the purposes of this paragraph 9.10 the costs involved in that satisfaction shall be equal to the gross cash payments made in satisfaction of those awards. In the event that Compensation Awards and/or 2016 Grant Awards are satisfied in shares, the Seller and Purchaser shall use their reasonable endeavours to agree the quantum of the costs of satisfaction.

10Marburg

[***]

11Delayed Employees

11.1In this Schedule:

“Controlled Business Instruction” has the meaning given to it in Schedule 24; and

“Delayed Employees” means (i) the Relevant Flu Business Employees who immediately

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prior to the Closing Date work in any of the Delayed Businesses, and (ii) any employees of any member of the Seller’s Group who are appointed to their position (whether by internal or external hire) on or after the Closing Date to work wholly or substantially in the Business (as carried on by the Flu Group) in accordance with a Controlled Business Instruction, and in each case for so long as they are assigned to work wholly or substantially in the Business (as carried on by the Flu Group).

11.2The parties intend and agree that:

11.2.1the employment of the Delayed Employees shall not be transferred by the Seller or another member of the Seller’s Group to a member of the Purchaser’s Group (or in the case of Flu Business Employees employed in [***], a Third Party Employer) on and from the Closing Date but shall transfer on and from the Delayed Closing Date which relates to the Delayed Business associated with that Delayed Employee (and in the case of a Stage 3 Delayed Business, Delayed Closing Date shall mean the [***] Date (as defined in Schedule 24 of this Agreement) and reference to Delayed Closing Date in this Schedule 9, with the exception of paragraph 11.2.5, shall be construed accordingly);

11.2.2notwithstanding the intention at paragraph 11.2.1 above, if the contract of employment of any Delayed Employee is found or alleged to have effect at any time prior to the Delayed Closing Date as if originally made with the Purchaser or another member of the Purchaser’s Group (including any Flu Group Company) as a consequence of this Agreement, paragraph 1.2 of this Schedule shall not apply in relation to that Delayed Employee and as a result the parties shall in good faith seek to agree as soon as reasonably practicable how best to deal with such unintended transfer or allegation of transfer having regard to the reason why the individual’s transfer to the Purchaser or another member of the Purchaser’s Group (including any Flu Group Company) was delayed but provided that, if the parties are unable to reach such agreement within a reasonable period and if it is agreed that such Delayed Employee’s contract of employment has so transferred, then such Delayed Employee shall be treated from the time he actually became so employed as a “Transferred Employee” (and no longer a Delayed Employee) for the purposes of this Agreement;

11.2.3no provisions in paragraph 1.1.2 of this Schedule shall require the Purchaser or another member of the Purchaser’s Group (including any Flu Group Company) to employ, or make an offer to employ, a Delayed Employee, on and from the Closing Date;

11.2.4paragraph 1.1.2 of this Schedule shall be amended to the extent required so that it applies to Delayed Employees and, in respect of such Delayed Employees, references to the “Closing Date” shall be replaced with references to the “Delayed Closing Date which relates to the Delayed Business associated with that Delayed Employee”;

11.2.5paragraph 1.2 of this Schedule shall be amended to the extent required so that it applies on each Delayed Closing Date in respect of any person who is not at that time a Delayed Employee and any references to the “Closing Date” or “Closing” shall be replaced with references to that “Closing Date or Delayed Closing Date” or “Closing or Delayed Closing” or in the case of the Transferred Employees working in the Netherlands, “Closing Date or Netherlands Closing Date” or “Closing or

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Netherlands Closing”; and

11.3Notwithstanding the provisions of paragraph 11.2 above, the parties agree that each Delayed Employee shall, with effect from and including the Closing Date, be treated for economic purposes as if he is employed by a member of the Purchaser’s Group, and as a consequence will be deemed to be a “Transferred Employee” (meaning that the Purchaser will be economically responsible for all costs and liabilities relating to his employment or termination of his employment from the Closing Date) and the indemnity in paragraph 1.5 above shall apply accordingly but will cease to be a Transferred Employee from the applicable Deferred Closing Date if their employment does not transfer to the Seller or a member of the Seller’s Group or a Third Party in accordance with paragraph 1 of this Schedule. Notwithstanding such treatment the Seller shall (for itself and on behalf of each member of the Seller’s Group) be responsible for and shall indemnify and keep indemnified the Purchaser (for itself and on behalf of each member of the Purchaser’s Group and any Third Party Employer) from any and all Losses and claims of any kind arising in relation to any Delayed Employee out of or in connection with:

11.3.1any failure by the relevant member of the Seller’s Group prior to a Delayed Employee’s Delayed Closing Date, without good reason, to comply with any Controlled Business Instruction in relation to that Delayed Employee;

11.3.2the conduct by the Seller (or any member of the Seller’s Group) of any consultation process, save to the extent that any failing in such consultation process arises from the act or omission of the Purchaser or a member of the Purchaser’s Group;

11.3.3the Purchaser following or instructing any Delayed Employee to follow, or any Delayed Employee following, a policy in relation to employees put in place by a member of the Seller’s Group and which is unlawful; or

11.3.4any of the matters referred to in paragraphs 8.15.1, 8.15.2 or 8.15.3 of Schedule 24.

For the avoidance of doubt, no provision of this paragraph 11.3 shall entitle the Seller or any member of the Seller’s Group to recover any amount under the indemnity in paragraph 1.5 above in respect of any Delayed Employee if that would entitle that Seller or member of the Seller’s Group to recover more than once in respect of the same amount under this Agreement or any Ancillary Agreement or if the amount has actually been recovered under any policy of insurance held by the Seller or any member of the Seller’s Group.

11.4For the purposes of paragraphs 9.2, 9.7 and 9.9 of this Schedule, references to “Closing” shall be construed as references to the relevant Closing, Delayed Closing, US Transfer or Netherlands Closing and references to the “Closing Date” shall be construed as references to the relevant Closing Date, Delayed Closing Date, US Transfer Date or Netherlands Closing Date which applies to each of the relevant Transferred Employees.

11.5For the purposes of paragraph 1.4, references to the “Closing Date” shall be construed as references to the Delayed Closing Date applicable to Delayed Employees or US Transfer Date applicable to US Transfer Employees.

11.6If a Flu Business Employee located in [***] does not receive an offer of employment from the Purchaser or a member of the Purchasers Group and refuses to accept an offer from a Third Party Employer on or after the [***] Date (as defined in Schedule 24 of this Agreement), then the relevant member of the Seller’s Group may terminate the employment of the employee and the Purchaser will reimburse the Seller for:

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11.6.1the cost of providing severance benefits to that employee in accordance with the usual severance arrangements of the relevant member of the Seller’s Group for employees in that jurisdiction; and

11.6.2the cost of employing the employee up to such termination, not to exceed the cost of employing the employee for the minimum period reasonably required to follow a legally compliant dismissal procedure starting promptly after the employee communicates his rejection of the offer; and

11.6.3the reasonable costs of obtaining legal advice in relation to the dismissal.

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Schedule 10
Group Retirement Benefit Arrangements
(Clause 2.4.2)

In this Schedule 10:

“Employee Benefits” means benefits to or in respect of any current or former employee, including without limitation, any pension, early retirement, disability, death benefit, long service awards, termination indemnity or post-retirement medical benefits or deferred compensation linked to retirement, disability or death benefits or old age part-time benefits and jubilee payments;

“Employee Benefit Liabilities” means liabilities and obligations (whether funded or unfunded) in respect of any employee benefit promise, scheme, plan, fund, program, policy, practice or other individual or collective arrangement providing Employee Benefits;

“DB Temporary Period of Participation” has the meaning given to it in paragraph 8.1 of this Schedule;

“DC Temporary Period of Participation” has the meaning given to it in paragraph 16.1 of this Schedule;

“Transferred Employee Benefit Liabilities” has the meaning given to it in paragraph 2 of this Schedule.

1Except to the extent otherwise agreed by the Seller and the Purchaser before Closing, Employee Benefit Liabilities in respect of the Flu Group shall transfer to the Purchaser or the relevant member of the Purchaser’s Group.

2Where Employee Benefit Liabilities transfer to or remain with the Purchaser and/or its Affiliates (which for the avoidance of doubt in the period from Closing includes any Flu Group Company) (such Employee Benefit Liabilities being the “Transferred Employee Benefit Liabilities”), the Purchaser shall, or shall procure that its relevant Affiliate shall, assume, with a full discharge for Seller and its Affiliates, the Transferred Employee Benefit Liabilities.

3Without limiting the provisions of paragraph 1 above, the Purchaser agrees and acknowledges the pension liabilities in respect of the Flu Group (including, for the avoidance of doubt, in Germany, Italy, India, Switzerland, the United Kingdom and the USA) other than the Chiron UK Pension Scheme will transfer to the Purchaser.

4Without limiting the provisions of paragraph 1 above, the Purchaser agrees and acknowledges the post-retirement medical healthcare plan to which it admits US Transferred Employees who immediately before Closing were members of such a plan will take account of periods of employment with the Seller’s Group to the extent previously recognised under the equivalent Seller’s Group plan for the purposes of determining eligibility, contributions, and vesting; provided, however, that, unless otherwise agreed between the Seller and the Purchaser, the Seller shall retain liability for post-retirement medical liabilities for employees who became eligible for such benefits under the Seller’s plans prior to the Closing Date and the Seller shall retain liability or unfunded non-qualified deferred compensation liabilities accrued through the date of Closing. If the Seller requests, the Purchaser shall enter into discussions to discuss a transfer of these liabilities in good faith.

5Notwithstanding any general provision to the contrary in Schedule 9, the US Transferred

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Employees shall, as of the Closing Date, become eligible to participate in a US tax-qualified defined contribution plan to the extent such plan is sponsored by the Purchaser or a relevant member of the Purchaser’s Group. The Purchaser will use all reasonable efforts to cause such plan to accept rollovers of the account balances of the US Transferred Employees from the relevant employer’s tax-qualified retirement plans provided that the Seller provides reasonable evidence of the Relevant Employer’s tax qualified retirement plans compliance with applicable regulatory requirements.

6Where any US Transferred Employee has accrued defined contribution benefits prior to the US Transfer Date in a Seller’s Group arrangement, the Seller shall use commercially reasonable efforts to procure the vesting of those benefits on or before the US Transfer Date (if they would otherwise lapse as a result of the termination of the US Secondment Agreement).

The Chiron UK Pension Scheme

7The Seller shall procure that, with effect from on or before the Closing Date, a member of the Seller’s Group shall replace Novartis Vaccines Holdings Limited as Principal Employer of the Chiron UK Pension Scheme;

8The Seller and Purchaser shall each use their respective best endeavours to procure that Novartis Vaccines Holdings Limited and its Subsidiary:

8.1continue to participate in the Chiron UK Pension Scheme for a period of three months beginning on the Closing Date (the “DB Temporary Period of Participation”); and

8.2cease to participate in the Chiron UK Pension Scheme at the end of the DB Temporary Period of Participation;

9The Seller shall reimburse the Purchaser (by way of a reduction in the Purchase Price attributable to the relevant Shares in Novartis Vaccines Holdings Limited or the particular part of the Flu Group to which the payment relates) for all contributions due from Novartis Vaccines Holdings Limited and its Subsidiary to the Chiron UK Pension Scheme which are attributable to the participation of Novartis Vaccines Holdings Limited and its Subsidiary in the Chiron UK Pension Scheme during the DB Temporary Period of Participation, less the amount of the notional cost, during the DB Temporary Period of Participation, of pension provision for employees of the Subsidiary had they been provided with defined contribution pension benefits from the Closing Date on the terms applicable under the pension scheme which the Purchaser will establish (for the avoidance of doubt this notional cost will include an employer contribution based on the percentage of pensionable salary which the Purchaser decides will apply to the generality of members of the new pension scheme and a reasonable estimate (agreed between the Seller and Purchaser) of expenses under this scheme) (such reimbursement to take account of any tax deduction obtainable by the employer in respect of the payment of employer contributions to a registered pension scheme).

10If either the Purchaser or Seller requests, the DB Temporary Period of Participation may be extended with the consent of the other party, such consent not to be unreasonably withheld or delayed. However, the DB Temporary Period of Participation may not be extended beyond 31 December 2015.

11If the DB Temporary Period of Participation is extended at the request of the Purchaser in accordance with paragraph 10 above, the Purchaser shall, notwithstanding paragraph 9

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above and paragraph 15 below, pay employer contributions (including expenses) due from Novartis Vaccines Holdings Limited and its Subsidiary to the Chiron UK Pension Scheme which are attributable to the participation of Novartis Vaccines Holdings Limited and its Subsidiary in the Chiron UK Pension Scheme during the extended period in accordance with the schedule of contributions in force from time to time and the Seller shall not reimburse the Purchaser in respect of such contributions.

12During the DB Temporary Period of Participation, the Purchaser shall:

12.1ensure that Novartis Vaccines Holdings Limited and its Subsidiary observe all the provisions of the Chiron UK Pension Scheme; and

12.2take no action which could increase the liabilities of Novartis Vaccines Holdings Limited or its Subsidiary (including, but not limited to, increasing the pensionable salary of, or granting discretionary benefits to, employees who are members of the Chiron UK Pension Scheme).

13The Purchaser authorises the Seller to exercise all powers, rights and discretions conferred on the Purchaser under the Pensions Act 1995 and the Pensions Act 2004 by virtue of the participation of Novartis Vaccines Holdings Limited and its Subsidiary in the Chiron UK Pension Scheme. The Purchaser shall take any steps required by the Seller to give effect to this authorisation.

14The Chiron UK Pension Scheme shall be retained by the Seller at the end of the DB Temporary Period of Participation. The Seller shall procure that (and the Purchaser shall co-operate with the Seller in good faith to ensure that), on or before the end of the DB Temporary Period of Participation, Novartis Vaccines Holdings Limited and its Subsidiary shall cease to participate in the Chiron UK Pension Scheme and shall have no further liability to contribute to the Chiron UK Pension Scheme.

15The Seller shall indemnify the Purchaser against any Liabilities that are incurred in relation to the imposition of a debt on the Flu Group Companies under Section 75 or 75A of the Pensions Act 1995 or otherwise in respect of the Chiron UK Pension Scheme.

The Novartis UK Pension Scheme

16The Seller and Purchaser shall each use their respective best endeavours to procure that the Subsidiary:

16.1continues to participate in the Novartis UK Pension Scheme for a period of three months beginning on the Closing Date (the “DC Temporary Period of Participation”); and

16.2ceases to participate in the Novartis UK Pension Scheme at the end of the DC Temporary Period of Participation;

17If either the Purchaser or Seller requests, the Temporary Period of Participation may be extended with the consent of the other party, such consent not to be unreasonably withheld or delayed. However, the Temporary Period of Participation may not be extended beyond 31 December 2015.

18During the DC Temporary Period of Participation, the Purchaser shall:

18.1ensure that the Subsidiary observes all the provisions of the Novartis UK Pension Scheme; and

18.2pay employer contributions and expenses at the rate applicable under the payment

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schedule in force from time to time to the Novartis UK Pension Scheme;

19The Purchaser authorises the Seller to exercise all powers, rights and discretions conferred on the Purchaser under the Pensions Act 1995 and the Pensions Act 2004 by virtue of the participation of the Subsidiary in the Novartis UK Pension Scheme. The Purchaser shall take any steps required by the Seller to give effect to this authorisation.

20Indemnity for underfunded transferred pension liabilities

20.1To the extent liability to fund a pension arrangement transfers to the Purchaser in accordance with the provisions of this Schedule 10, and the relevant arrangement is underfunded (calculated using the methods and assumptions used by the relevant member of the Seller’s Group for IFRS accounting purposes at Closing) at Closing, the Seller will indemnify the Purchaser, by way of a reduction in the Purchase Price attributable to the relevant Shares or the particular part of the Flu Group to which the payment relates.

20.2The provisions of paragraph 20.1 of this Schedule 10 shall apply In relation to Switzerland with the following modifications:

20.2.1the methods and assumptions used in the calculation will be modified by:

(i)replacing any assumed “cash balance” annuity conversion rate with a conversion rate representing a reasonable estimate of the likely effective overall blended conversion rate which will apply, having regard to the changes to the rate which can reasonably be expected to occur during the expected service lives of the relevant individuals, and weighting the impact of those changes by reference to the ages of the relevant employees (and so the extent to which the changes will in fact operate to reduce the effective liability on the Purchaser); and

(ii)removing any reserve for death or disability benefits to the extent that it constitutes a reserve for liabilities in respect of the relevant individuals which could reasonably be externally insured by the Purchaser; and

20.2.2the calculation of any underfunding shall, if partial liquidation occurs in relation to any of the Swiss pension liabilities before the period ending 12 months after Closing, make allowance for the assets thereby transferred.

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Schedule 11
Allocation of Purchase Price
(Clause 3.3)

[***]

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Schedule 12
VAT
(Clause 3.4)

1VAT: Records

1.1The Seller may, on or before the date of Closing, obtain a direction from the relevant Tax Authority for the retention and preservation by it of any VAT records relating to its period of ownership of the relevant part of the Flu Group and, where any such direction is obtained, the Seller shall:

1.1.1preserve the records to which that direction relates in such a manner and for such period as may be required by the direction or by Applicable Law; and

1.1.2allow the Purchaser, upon the Purchaser giving reasonable notice, reasonable access to and copies of such records where reasonably required by the Purchaser for its Tax purposes.

1.2If no such direction as is referred to in paragraph 1.1 above is obtained or before the date of Closing and any documents in the possession or control of a member of the Seller’s Group are required by law to be preserved by the Purchaser, the Seller shall, as soon as reasonably practicable after Closing, deliver such documents to the Purchaser.

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Schedule 13
Closing Obligations
(Clause 6)

1General Obligations

1.1Seller’s Obligations

On Closing, the Seller shall deliver or make available to the Purchaser the following:

1.1.1the following documents duly executed by the Seller and/or relevant member of the Seller’s Group:

(i)Local Transfer Document (including, where relevant, any notarial deeds referred to in this Agreement) relating to the transfer of the US and Australian Businesses and the Shares;

(ii)the US Government Subcontracts;

(iii)the Tax Indemnity;

(iv)the Global Transitional Services Agreement;

(v)the Global Transitional Distribution Services Agreement

(vi)the Local Transitional Distribution Services Agreement relating to the US Business;

(vii)the MF59® Manufacturing and Supply Agreement;

(viii)the Purchaser Intellectual Property Licence Agreement,

(ix)the Intellectual Property Assignment Agreement;

(x)the Transitional Trademark Licence;

(xi)the Netherlands Services Agreement;

(xii)the US Secondment Agreement;

(xiii)the Novartis Share Incentives Plans Record of Terms

(xiv)the Retirement Benefit Arrangements Purchase Price Adjustment Record of Terms; and

(xv)a novation agreement for each of the GSK Ancillary Agreements transferring the Seller’s rights and obligations under the relevant agreement to the Purchaser, duly executed by GSK or its representatives and by the Seller,

1.1.2a valid power of attorney or such other evidence that the Seller, and each of its relevant Affiliates, are authorised to execute the documents listed in paragraph 1.1.1 above, in each case to the extent that they are parties thereto;

1.1.3a certificate, dated the Closing Date and signed by person a duly authorised by the Seller, to the effect that the condition set forth in Clause 4.1.6 has been satisfied;

1.1.4if required, a written resignation of each director and secretary of each of the Flu Group Companies in respect of his or her position as director or secretary, as the

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case may be, in each case taking effect on Closing;

1.1.5the statutory books of each Flu Group Company (written up to, but not including, the Closing) and the certificate of incorporation, share certificates and common seal (if any) of each Flu Group Company;

1.1.6a confirmation that the Seller has sent the notice required under each novation agreement for each of the GSK Ancillary Agreements (other than the GSK Support Services Agreement) in order for the novation to become effective; and

1.1.7to the extent they have been obtained, all Property Third Party Consents.

1.2The Purchaser’s Obligations

On Closing, the Purchaser shall deliver or make available to the Seller the following:

1.2.1the following documents duly executed by the Purchaser and/or relevant member of the Purchaser’s Group:

(i)Local Transfer Document (including, where relevant, any notarial deeds referred to in this Agreement) relating to the transfer of the US and Australian Businesses and the Shares;

(ii)the US Government Subcontracts;

(iii)the Tax Indemnity;

(iv)the Global Transitional Services Agreement;

(v)the Global Transitional Distribution Services Agreement

(vi)the Local Transitional Distribution Services Agreement relating to the US Business;

(vii)the MF59® Manufacturing and Supply Agreement;

(viii)the Purchaser Intellectual Property Licence Agreement,

(ix)the Intellectual Property Assignment Agreement;

(x)the Transitional Trademark Licence;

(xi)the Netherlands Services Agreement;

(xii)the US Secondment Agreement;

(xiii)the Novartis Share Incentives Plans Record of Terms

(xiv)the Retirement Benefit Arrangements Purchase Price Adjustment Record of Terms; and

(xv)a novation agreement for each of the GSK Ancillary Agreements transferring the Seller’s rights and obligations under the relevant agreement to the Purchaser, duly executed by GSK or its representatives and by the Seller,

1.2.2a valid power of attorney or such other evidence that the Purchaser, and each of its relevant Affiliates, are authorised to execute the documents listed in paragraph 1.2.1 above, in each case to the extent that they are parties thereto; and

1.2.3if required, letters of appointment of each person proposed to be appointed as a

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director and secretary of each of the Flu Group Companies, as the case may be.

2Transfer of the Shares and Flu Group Businesses

2.1General Transfer Obligations

On Closing, the Seller shall procure that the Share Sellers and Business Sellers shall, and the Purchaser shall, execute and/or deliver and/or make available Local Transfer Documents and take such steps as are required to transfer the Shares and Flu Group Businesses in accordance with this Agreement.

2.2Specific Transfer Obligations

For the purposes of compliance with paragraph 2.1, the Seller and the Purchaser shall, between the date of this Agreement and Closing, negotiate in good faith any and all Local Transfer Documents and other such steps as are required to transfer the Shares and Flu Group Businesses in accordance with this Agreement.

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Schedule 14
Post-Closing Adjustments
(Clause 7)

Part 1

Preparation of Closing Statement

1Preparation

1.1No later than 60 days following Closing, the Seller shall deliver to the Purchaser the Draft Closing Statement. Prior to such delivery, the Seller shall so far as is practicable consult with the Purchaser with a view to reducing the potential areas of disagreement.

1.2In order to enable the Seller to prepare the Draft Closing Statement, the Purchaser shall, to the extent it has the relevant books and records within its possession or control relating to the Flu Group, keep up-to-date and, subject to reasonable notice, make available to the Seller’s representatives and to the Seller’s accountants all books and records relating to the Flu Group during normal office hours and co-operate with them with regard to the preparation, review and agreement or determination of the Draft Closing Statement. The Purchaser agrees to make available the services of the employees of the Flu Group to assist the Seller in the preparation, review and agreement or determination of the Draft Closing Statement. In order to allow the Purchaser to review the Draft Closing Statement, the Seller shall, subject to reasonable notice, make available to the Purchaser’s representatives and to the Purchaser’s accountants all books and records relating to the Flu Group during normal office hours and co-operate with them with regard to their review of the Draft Closing Statement. The Seller agrees to make available the services of the employees of the Seller and its Affiliates to assist the Purchaser in its review of the Draft Closing Statement.

1.3If the Purchaser does not within 60 days of presentation to it of the Draft Closing Statement give notice to the Seller that it disagrees with the Draft Closing Statement or any item thereof, such notice stating the reasons for the disagreement in reasonable detail and specifying the adjustments which, in the Purchaser’s opinion should be made to the Draft Closing Statement (the “Purchaser’s Disagreement Notice”), the Draft Closing Statement shall be final and binding on the parties for all purposes. If the Purchaser gives a valid Purchaser’s Disagreement Notice within such 60 days, the Seller and the Purchaser shall attempt in good faith to reach agreement in respect of the Draft Closing Statement and, if they are unable to do so within 30 days of such notification, the Seller or the Purchaser may by notice to the other require that the Draft Closing Statement be referred to the Reporting Accountants (an “Appointment Notice”).

1.4Within 30 days of the giving of an Appointment Notice, the Seller may by notice to the Purchaser indicate that, in the light of the fact that the Purchaser has not accepted the Draft Closing Statement in its entirety, it wishes the Reporting Accountants to consider matters relating to the Draft Closing Statement in addition to those specified in the Purchaser’s Disagreement Notice, provided that such matters as are related to the matters specified in the Purchaser’s Disagreement Notice and that the notice states in reasonable detail the reasons why and in what respects the Seller believes that the Draft Closing Statement should be altered in respect of such matters (the “Seller’s Disagreement Notice”).

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1.5The Reporting Accountants shall be engaged jointly by the Seller and the Purchaser on the terms set out in this paragraph 1 and otherwise on such terms as shall be agreed; provided that neither the Seller nor the Purchaser shall unreasonably (having regard, inter alia, to the provisions of this paragraph 1) refuse its agreement to terms proposed by the Reporting Accountants or by the other party. If the terms of engagement of the Reporting Accountants have not been settled within 45 days of their identity having been determined (or such longer period as the Seller and the Purchaser may agree) then, unless the Seller or the Purchaser is unreasonably refusing its agreement to those terms, those accountants shall be deemed never to have become the Reporting Accountants and new Reporting Accountants shall be selected in accordance with the provisions of this Agreement.

1.6Except to the extent that the Seller and the Purchaser agree otherwise, the Reporting Accountants shall determine their own procedure but:

1.6.1apart from procedural matters and as otherwise set out in this Agreement shall determine only:

(i)whether any of the arguments for an alteration to the Draft Closing Statement put forward in the Purchaser’s Disagreement Notice or the Seller’s Disagreement Notice is correct in whole or in part; and

(ii)if so, what alterations should be made to the Draft Closing Statement in order to correct the relevant inaccuracy in it;

1.6.2shall apply the accounting principles, policies, procedures, practices and estimation techniques as set out in Part 2 of this Schedule;

1.6.3shall make their determination pursuant to paragraph 1.6.1 as soon as is reasonably practicable;

1.6.4the procedure of the Reporting Accountants shall:

(i)give the Seller and Purchaser a reasonable opportunity to make written and oral representations to them;

(ii)require that each party supply the other with a copy of any written representations at the same time as they are made to the Reporting Accountants;

(iii)permit each party to be present while oral submissions are being made by the other party; and

(iv)for the avoidance of doubt, the Reporting Accountants shall not be entitled to determine the scope of their own jurisdiction.

1.7The Reporting Accountants shall send the Seller and the Purchaser a copy of their determination pursuant to paragraph 1.6.1 within one month of their appointment. Such determination:

1.7.1shall be made available to the Seller and the Purchaser in writing; and

1.7.2unless otherwise agreed by the Seller and the Purchaser, shall include reasons for each relevant determination.

1.8The Reporting Accountants shall act as experts and not as arbitrators and their determination of any matter falling within their jurisdiction shall be final and binding on the Seller and the Purchaser save in the event of manifest error (when the relevant part of their

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determination shall be void and the matter shall be remitted to the Reporting Accountants for correction). In particular, their determination shall be deemed to be incorporated into the Draft Closing Statement.

1.9The expenses (including amounts in respect of VAT) of the Reporting Accountants shall be borne as they shall direct at the time they make any determination under paragraph 1.6.1(i) or, failing such direction, equally between the Purchaser and the Seller.

1.10The Seller and the Purchaser shall co-operate with the Reporting Accountants and comply with their reasonable requests made in connection with the carrying out of their duties under this Agreement. In particular, the Purchaser shall keep up-to-date and, subject to reasonable notice, make available to the Seller’s representatives, the Seller’s accountants and the Reporting Accountants all books and records relating to the Flu Group during normal office hours as the Seller or the Reporting Accountants may reasonably request during the period from the appointment of the Reporting Accountants down to the making of the relevant determination.

1.11Nothing in this Schedule 14 shall entitle a party or the Reporting Accountants access to any information or document which is protected by legal professional or litigation privilege, provided that neither the Seller nor the Purchaser shall be entitled to refuse to supply such part or parts of documents as contain only the facts on which the relevant claim or argument is based.

1.12Each party and the Reporting Accountants shall, and shall procure that its accountants and other advisers shall, keep all information and documents provided to them pursuant to this paragraph 1 confidential and shall not use the same for any purpose, except for disclosure or use in connection with the preparation of the Draft Closing Statement, the proceedings of the Reporting Accountants or another matter arising out of this Agreement.

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Part 2

Closing Statement Principles

This Part 2 of Schedule 14 comprises the specific rules, principles, policies and practices, without limitation, for preparing the Closing Statement.

The Closing Statement sets out accounting line items reflecting the assets and liabilities of the Flu Group Companies and the Flu Group Businesses (including the Delayed Businesses), the Flu Group Companies’ Cash Balances, the Tax Adjustment and the Third Party Indebtedness, in each case as prepared in accordance with the specific rules, principles, policies and practices set forth in this Part 2 of Schedule 14. The Closing Statement shall be prepared in the form of the Illustrative Closing Statement set out in part 3 of this Schedule 14 and shall: (i) include all current assets and current liabilities that are Liabilities in the Nature of Working Capital Exclusively Related to the Business and shall not include any current assets or current liabilities or any other Liabilities not Exclusively Related to the Business; and (ii) include the specific line items necessary for the purposes of the adjustment of Flu Group Companies’ Cash Balances, the Tax Adjustment and the Third Party Indebtedness.

For the avoidance of doubt, the Closing Statement as referred to in this Part 2 of Schedule 14 shall inclusively apply to each of the Draft Closing Statement and the Closing Statement.

1Closing Statement Rules

1.1The Closing Statement shall be prepared as follows:

1.1.1in accordance with the specific accounting treatments set out in paragraph 2 of this Part 2 of Schedule 14; and, subject thereto

1.1.2adopting the same accounting principles, methods, procedures and practices utilized in preparing the Statement of Net Assets, as detailed in the Statement of Net Asset Rules, applied on a consistent basis using consistent estimation methodologies and judgments and with consistent classifications as were used to prepare the Statement of Net Assets; and, subject thereto

1.1.3in accordance with IFRS.

1.2For the avoidance of doubt, paragraph 1.1.1 shall take precedence over paragraphs 1.1.2 and 1.1.3, and paragraph 1.1.2 shall take precedence over paragraph 1.1.3.

2Specific requirements

2.1Cut-off

The Closing Statement (including the Draft Closing Statement) shall not take into account any additional events and any additional information that becomes available after the Effective Time up to the date that such Closing Statement is prepared.

2.2Change of Ownership

The Closing Statement shall not be adjusted for any charges, provisions, reserves or write-offs in respect of any costs, liabilities or charges that may be incurred by the Flu Group prior to or after the Closing as a consequence of the change of ownership of the Flu Group or any changes in the management strategy, direction or priority or possible closure of any part of the Flu Group by the Purchaser after Closing, whether or not resulting from the change in ownership.

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2.3Deferred Tax

The Closing Statement (including the Draft Closing Statement) shall not take into account or provide for deferred tax. In particular, the lines “BS01_042 Deferred Tax Assets” and “BS01_535 Deferred Tax Liabilities” shall not be taken into account for the purposes of calculating the Tax Adjustment.

2.4Treatment of Pharma and Sandoz assets and liabilities

The Closing Statement shall include all assets and liabilities that Exclusively Relate to the Business held in the Pharma and Sandoz reporting sector.

2.5Treatment of Sinergium Loan

For the purposes of the post-Closing adjustment to the Purchase Price provided for pursuant to Clause 7, any loans made to the Sinergium Consortium which in the Statement of Net Assets and the Illustrative Statement of Net Assets have been treated as “Financial Assets — 3rd parties and loans to AC” (and have been included in line item BS01_035 Financial Assets — 3rd parties and loans to AC) shall be disregarded and, for such purposes only, shall not be treated as Third Party Indebtedness.

2.6Exclusion of FCC

The Closing Statement shall not take into account  the FCC Operations.

2.7Pension Liabilities

The Closing Statement shall include in the column entitled “Excluded/Added Items” an amount equal to the pension liability existing in respect of the German and Swiss Employees calculated in accordance with Schedule 10 of this Agreement.

2.8The Notes

The Notes to the Illustrative Closing Statement at Part 3 of this Schedule 14 shall, to the extent not already specified or superseded in this paragraph 2, form part of the specific accounting treatments referred to in paragraph 1.1.1 above.

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Part 3

Illustrative Closing Statement

[***]

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Schedule 15
US Government Contracts
(Clause 1.1)

Part 1

List of US Government Contracts

[***]

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Schedule 15
US Government Contracts
(Clause 1.1)

Part 2

US Government Contracts Obligations

1Obligation to Obtain US Government Consent

1.1Unless the parties agree otherwise, in relation to all US Government Contracts which require formal novation pursuant to 48 C.F.R. Subpart 42.12 (the “Applicable FAR Regulations”), or require consent to transfer, the Seller and the Purchaser shall obtain all US Government or state and local consents necessary for such novation or transfer as soon as reasonably practicable, and shall keep each other informed of progress in obtaining such consents. The Seller shall deliver to the Purchaser, on the Closing Date, or, if such consents have not been received by the Closing Date, as soon as reasonably practicable after their receipt, copies of any such consent executed by the appropriate parties.

2Obligations of the Parties

2.1For all US Government Contracts that the parties agree to novate, the parties shall perform their respective obligations under the Applicable FAR Regulations in order to consummate the novation of the US Government Contracts.

2.2Without limitation of and subject to the Applicable FAR Regulations:

(a)the Seller shall begin discussions with the Responsible Contracting Officer (as defined in the Applicable FAR Regulations) 30 April 2015, and in doing so shall use its reasonable endeavours to identify any possible issues with, or objections to, the Transaction and/or the proposed novation of US Government Contracts that the Responsible Contracting Officer and/or US Government might raise;

(b)the parties shall negotiate, on or before Closing, documentation in Agreed Terms to be entered into as at the Closing Date providing for such sub-contracting arrangements as would customarily be used in a transaction such as the Transaction during the period between Closing and the novation of contracts (the “Interim Period”), or for the duration of any US Government Contracts for which novation does not occur, in accordance with the Applicable FAR Regulations and consistent with the following principles:

(i)during the Interim Period, or for the duration of the relevant contract in the event that the novation does not occur, the Purchaser will perform the Seller’s obligations under the relevant US Government Contracts to the extent permissible under the Federal Acquisition Regulations (“FAR”);

(ii)during the Interim Period, or for the duration of the relevant contract in the event that novation does not occur, the Seller will perform its obligations under the relevant US Government Contracts to the extent necessary to entitle it to payment from the US Government for the work performed under such contracts; and

(iii)any payments made by the US Government during the Interim Period, or for the duration of the relevant contract in the event that novation does not

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occur, in respect of the relevant contracts shall promptly be paid over by the Seller to the Purchaser;

(c)the Seller shall seek US Government consent to the sub-contracting arrangements described in sub-paragraph (b) above on or before Closing, or as otherwise agreed between the parties;

(d)the parties shall prepare and provide (or cause to be prepared and provided) to the Responsible Contracting Officer (as defined in the Applicable FAR Regulations) for Novartis Vaccines and Diagnostics, Inc., as promptly as practicable, and in any event within two months of the Closing Date, audited balance sheets or equivalent financial information as may be available of:

(i)Novartis Vaccines and Diagnostics, Inc. as of immediately prior to Closing;

(ii)Novartis Vaccines and Diagnostics, Inc. as of immediately following Closing;

(iii)the Purchaser as of immediately prior to Closing; and

(iv)the Purchaser as of immediately following the Closing; and

(e)the parties shall provide the following information to the Responsible Contracting Officer:

(i)all information required under 48 C.F.R. § 42.1204(e)-(f), including an opinion of legal counsel for the transferor and transferee stating that the transfer was properly effected under Applicable Law and the effective date of transfer; and

(ii)any other relevant information requested by the Responsible Contracting Officer.

The provisions of Clause 4.2.4 shall apply mutatis mutandis to this Part 2 of Schedule 15.

2.3Incentive Agreements

2.3.1From the Closing Date until the US Secondment Agreement is terminated, the Seller shall, and shall procure that its Affiliates shall:

(i)cooperate with the Purchaser and any of its Affiliates in the preparation and filing of any reports required to be filed with any Governmental Entity pursuant to the terms of the Local Incentive Agreements;

(ii)provide such assistance as may be reasonably required by the Purchaser and any of its Affiliates to enable the Purchaser or any of its Affiliates to obtain any payments due under the terms of the Local Incentive Agreements to the extent such assistance would not constitute a breach of the Seller’s or its Affiliates’ obligations under the US Secondment Agreement; and

(iii)promptly transfer to the Purchaser or its nominated Affiliate any payments received by the Seller or member of the Seller’s Group from a Governmental Entity as payment for performance of the Local Incentive Agreements referable to the period after the Closing Date.

2.3.2The Seller shall indemnify and hold harmless the Purchaser or any other member

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of the Purchaser Group from any Losses arising out of the Seller or any of its Affiliates’ failure to comply with the terms of paragraph 2.3.1(iii) of this Schedule 15.

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Schedule 16
Warranties given under Clause 9.1

1Authority and Capacity

1.1Incorporation

The Seller and each Share Seller and Business Seller is validly existing and is a company duly incorporated and validly existing under the law of its jurisdiction of incorporation.

1.2Authority to enter into Agreement

1.2.1The Seller and each Share Seller and Business Seller has, or will have by Closing, the legal right and full power and authority to enter into and perform this Agreement, any Local Transfer Document to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Local Transfer Document.

1.2.2The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Seller and each Share Seller and Business Seller.

1.3Authorisation

1.3.1The Seller and each Share Seller and Business Seller has taken, or will have taken by Closing, all corporate action required by it to authorise it to enter into and to perform this Agreement, any Local Transfer Document and any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement or any Local Transfer Document.

1.3.2The execution by the Seller of this Agreement and any Ancillary Agreement to which it is a party and the performance by the Seller of its obligations under them will not result in a breach of any existing order, judgment or decree of any court, Governmental Entity by which the Seller is bound and where such breach is material to its ability to perform its obligations under such documents.

2Warranties relating to the Flu Group

2.1Organisation and Standing of the Flu Group Companies

2.1.1Schedule 2 sets out a complete and accurate list of the Flu Group Companies in existence as at the date of this Agreement, together with its jurisdiction of organisation, its authorised and outstanding capital stock or other equity interests, all of which equity interests are held by the Seller or an Affiliate of the Seller unless otherwise stated in Schedule 2.

2.1.2Each Flu Group Company is duly incorporated, validly existing and in good standing, under the laws of its jurisdiction of organisation and has all necessary corporate power under its constitutional documents to conduct its portion of the Business as at the date of this Agreement.

2.2Constitutional Documents, statutory books and records

2.2.1The constitutional documents provided in the Data Room are true and accurate copies of the constitutional documents of the Flu Group Companies and there have not been and are not any breaches by any Flu Group Company of its constitutional

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documents which would have a material adverse effect on the Business of the Flu Group.

2.2.2The registers, minute books and other records required to be maintained by each Flu Group Company under the law of the jurisdiction of its incorporation are maintained in accordance with Applicable Law and are up-to-date, in each case in all material respects.

2.2.3All material filings required by Applicable Law to be delivered or made by the Flu Group Companies to company registries in each relevant jurisdiction have been duly delivered or made.

2.2.4No member of the Flu Group Companies has received any notice of any application or intended application for rectification of its register of members or shareholders (or its relevant equivalent) under Applicable Law.

2.3The Shares

2.3.1Either the Seller or one of its Affiliates has good and valid title to the Shares, free and clear of all Encumbrances, other than transfer restrictions imposed by national, federal or state securities laws.

2.3.2All of the Shares have been duly authorised and validly issued and are fully paid.

2.3.3Either the Seller or one of its Affiliates is entitled to transfer or procure the transfer of the full legal and beneficial ownership in the Shares to the Purchaser on the terms and subject to the conditions set out in this Agreement and any Local Transfer Document (as applicable).

2.4Ownership and Sufficiency of Assets

2.4.1Each of the Business Assets (other than any business inventory acquired in the ordinary course of business on terms that the property does not pass until payment is made) and the assets of each Flu Group Company is owned both legally and beneficially by a Business Seller or a Flu Group Company and each of those assets capable of possession is, save where in the possession of third parties in the ordinary course of business, in the possession of a Business Seller or a Flu Group Company.

2.4.2Save for Permitted Encumbrances, no Encumbrance on, over or affecting the whole or any part of the Business Assets or the assets of any Flu Group Company is outstanding and, save in relation to any Permitted Encumbrance, there is no agreement or commitment entered into by any Business Seller or any Flu Group Company to give or create any Encumbrance and no claim has been made against any Business Seller or any Flu Group Company by any person to be entitled to any Encumbrance.

2.4.3The Business Assets and the assets of each Flu Group Company, together with such other facilities and services which are to be provided to the Purchaser’s Group pursuant to this Agreement and the Ancillary Agreements, comprise all of the material assets and services (excluding Intellectual Property Rights) required to carry on the Business in substantially the same manner as it has been carried on during the 12 months preceding the date of this Agreement.

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2.5Solvency

2.5.1No order has been made and no resolution has been passed for the winding up of any Flu Group Company. No petition has been presented or meeting convened for the purpose of considering a resolution for the winding up any Flu Group Company or for the appointment of any provisional liquidator. No petition has been presented for an administration order to be made, and no administrator or receiver (including any administrative receiver) has been appointed in respect of, the whole or any part of the property, assets and/or undertaking of any Flu Group Company or Business Seller or Share Seller.

2.5.2No Flu Group Company or Business Seller or Share Seller has stopped payment or suspended payment of its debts generally, is insolvent or deemed unable to pay its debts as they fall due.

2.6Third Party Indebtedness

None of the Flu Group Companies have any financing facilities with any person (other than a member of the Seller’s Group) exceeding $1 million (other than short-term bank borrowings in the ordinary course of business).

2.7Accounts

The Accounts:

2.7.1were prepared in accordance with Applicable Law in the jurisdiction of incorporation of the relevant Flu Group Company and IFRS as adopted by the European Union at the time they were audited; and

2.7.2give, with respect to the business of the relevant Flu Group Company, a true and fair view of:

(i)the assets and liabilities of the relevant Flu Group Company at the Accounts Date;

(ii)the profits or losses of the relevant Flu Group Company for the accounting period ended on the Accounts Date; and

(iii)of the state of affairs of the relevant Flu Group Company at the Accounts Date; and

2.7.3disclose and make provision or reserve for all actual liabilities (other than liabilities in respect of Tax or deferred tax);

2.7.4disclose and make provision or reserve for (or note in accordance with IFRS as adopted by the European Union) all contingent, unquantified or disputed liabilities (other than liabilities in respect of Tax or deferred tax) and all capital commitments.

2.8The Carve Out Accounts

2.8.1The 2013 Carve Out Accounts and the Stub Period Carve Out Accounts have been prepared in accordance with the basis of preparation provided at 9.1.2.2.3.1 of the Data Room.

2.8.2The 2013 Carve Out Accounts do not materially misstate the assets and liabilities (excluding any assets or liabilities in respect of Tax or deferred tax) of the Flu Group as at 31 December 2013 and the 2013 Carve Out Accounts and the Stub

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Period Carve Out Accounts do not materially misstate the profits or losses of the Flu Group for the accounting reference periods ended on 31 December 2013 and 30 September 2014, respectively.

2.9Statement of Net Assets

The Statement of Net Assets was prepared for the purposes of the transactions contemplated by this Agreement and in accordance with the Statement of Net Assets Rules and the Statement of Net Assets fairly presents, in all material respects and with respect to the Business, the financial position of the Flu Group as of the date thereof, subject to the absence of footnote discussions and similar presentation items therein. For the purposes of this paragraph 2.9, “in all material respects” shall be construed by reference to a materiality threshold of US$10 million.

2.10Events since the Accounts Date

Since the Accounts Date and except as permitted by Clause 5:

(i)there has been no Material Adverse Effect with respect to the financial condition of the Business as a whole; and

(ii)the Business has been carried on in the ordinary course.

2.11Real Property

2.11.1Company Real Properties

(i)Schedule 3 Part 1 contains a complete list of the Company Real Properties, which are the only freehold or leasehold property owned, used or occupied by the Flu Group Companies with the exception of the properties that are a part of, or shared with, the Seller’s Group Retained Business (as at the date of this Agreement).

(ii)No third party consents are required in respect of the Company Real Properties as a result of or arising out of the transactions contemplated by this Agreement.

(iii)Each of the Company Real Properties is used and occupied for the purpose of the business of a Flu Group Company.

(iv)A member of the Seller’s Group is the sole legal and beneficial owner of the Company Real Property.

(v)No person has or will have any right to possession, occupation or use of such Company Real Property in a manner that has or will have a material adverse effect on the use of, or operations at, such Company Real Property for the purposes of the Business.

(vi)There are no Encumbrances over any of the Company Real Properties other than Permitted Encumbrances and those registered in the relevant Land Register.

(vii)The present use of each Company Real Property is a permitted use for the purpose of Applicable Laws and such use is not subject to onerous or unusual conditions giving rise to material expenditure or materially and adversely affecting the use of, or operations at, such Company Real

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Property for the purposes of the Business.

(viii)To the Seller’s Knowledge, there are no material outstanding disputes, actions, claims or demands in respect of any Company Real Property, nor has the Seller or any member of the Seller’s Group received any notice threatening the same.

(ix)The Seller’s Group is not engaged in any negotiation for review of, or dispute in relation to, the rent payable under any of the Company Leased Real Property.

2.11.2Transferred Real Properties

(i)Schedule 3, Part 2 contains a complete list of the Transferred Real Properties, which, together with the Marburg MF59® Premises, are the only freehold or leasehold property owned or occupied by the Flu Group Businesses with the exception of the properties that are a part of, or shared with, the Seller’s Group Retained Business (as at the date of this Agreement).

(ii)Each of the Transferred Real Properties is used and occupied for the purpose of the business of the Flu Group Businesses.

(iii)A member of the Seller’s Group is the legal fee simple titleholder of, and has good and marketable title to, the Transferred Owned Real Property, except to the extent of the rights of the United States government pursuant to the US Government Contracts and subject to the Permitted Encumbrances.

(iv)No person other than: (i) the rights of the US government pursuant to the US Government Contracts; and (ii) the Seller’s Group has or will have any right to possession, occupation or use of such Transferred Real Property in a manner that has or will have a material adverse effect on the use of, or operations at, such Transferred Real Property.

(v)There are no mortgages or charges affecting any of the Transferred Real Properties other than Permitted Encumbrances.

(vi)To the Seller’s Knowledge, there are no material outstanding disputes, actions, claims or demands in respect of any Transferred Real Property, nor has the Seller or any member of the Seller’s Group received any notice threatening the same.

(vii)With respect to each Lease: (a) such Lease is valid, binding and enforceable as to the applicable Seller’s Group and, to Seller’s Knowledge, as to the other party thereto, in accordance with its respective terms; (b) the transactions contemplated by this Agreement do not require the consent of any other party to such Lease, will not result in a breach of or default under such Lease, or otherwise cause such Lease to cease to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing; (c) the applicable Seller’s Group possession and quiet enjoyment of the Transferred Leased Real Property under such Lease has not been disturbed in any material respect; (d) the applicable Seller’s Group and, to the Seller’s Knowledge, such other party to such Lease are not in

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breach or default under such Lease, and, to the Seller’s Knowledge, no event has occurred or circumstance exists that, with the delivery of notice, the passage of time or both, would constitute such a breach or default, or permit the termination, modification or acceleration of rent under such Lease; and (e) the applicable Seller’s Group has not subleased, licensed or otherwise granted any person the right to use or occupy such Transferred Leased Real Property or any portion thereof.

(viii)To the Seller’s Knowledge, the Seller’s Group has not received any notice of any violation of any Applicable Law, including building and zoning laws, or any Environmental Law and Occupational Safety and Health Laws issued by any applicable Government Entity having jurisdiction over the Transferred Real Property.

(ix)The Seller’s Group has not taken any action to have any real estate taxes assessed or to be assessed against the Transferred Real Property adjusted or modified in any respect.  To the Seller’s Knowledge, there is no pending reassessment, and the Seller’s Group has not received any notice of a threatened reassessment, of all or any portion of the Transferred Real Property.

(x)To the Seller’s Knowledge, use of the Transferred Real Property for the various purposes for which it is presently being used is permitted as of right under applicable zoning laws and is not subject to “permitted non conforming” use or structure classifications.

(xi)The Seller’s Group has not received written notice that the Transferred Real Property and the present use and condition thereof violate any applicable deed restrictions, zoning or subdivision regulations, or urban redevelopment plans applicable to the Transferred Real Property, as modified by any duly issued variances.  No action or proceeding relating to the foregoing is pending or to the Seller’s Knowledge threatened with respect to the Transferred Real Property.

2.11.3Marburg MF59® Premises

(i)The Marburg MF59® Premises are at the date of this Agreement held pursuant to the German Carve-out Leases and used and occupied for the purpose of the business of the Flu Group Businesses.

(ii)A member of the Seller’s Group is solely legally and beneficially entitled to the Marburg MF59® Premises pursuant to the German Carve-out Leases.

(iii)No person has or will have any right to possession, occupation or use of the Marburg MF59®Premises which at the date of this Agreement are held pursuant to the German Carve-out Leases in a manner that has or will have a material adverse effect on the use of, or operations at, the Marburg MF59®Premises.

(iv)To the Seller’s Knowledge, there are no material outstanding disputes, actions, claims or demands in respect of the Marburg MF59® Premises which at the date of this Agreement are held pursuant to the German Carve-out Leases, nor has the Seller or any member of the Seller’s Group received any notice threatening the same.

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(v)With respect to each German Carve-out Lease, (a) such German Carve-out Lease is valid, binding and enforceable as to the applicable Seller’s Group and, to the Seller’s Knowledge, as to the other party thereto, in accordance with its respective terms; (b) the applicable Seller’s Group possession and quiet enjoyment of the Marburg MF59® Premises under the German Carve-out Lease(s) has not been disturbed in any material respect; (c) the applicable Seller’s Group and, to the Seller’s Knowledge, such other party to such German Carve-out Lease are not in breach or default under such German Carve-out Lease, and, to the Seller’s Knowledge, no event has occurred or circumstance exists that, with the delivery of notice, the passage of time or both, would constitute such a breach or default, or permit the termination, modification or acceleration of rent under such Lease; and (d) the applicable Seller’s Group has not subleased, licensed or otherwise granted any person the right to use or occupy the Marburg MF59®Premises Property or any portion thereof.

(vi)To the Seller’s Knowledge, use of the Marburg MF59® Premises for the various purposes for which it is presently being used is permitted as of right under applicable zoning laws and other applicable public laws.

(vii)To the Seller’s Knowledge, the Seller’s Group has not received any notice of any violation of any Applicable Law, including building and zoning laws, or any Environmental Law and Occupational Safety and Health Laws issued by any applicable Government Entity having jurisdiction over the Marburg MF59® Premises.

2.12Intellectual Property

2.12.1Schedule 4 sets out, as of the date of this Agreement, a complete and accurate list of the material Registered Flu Group Intellectual Property Rights, including for each such item, as applicable, (i) the identity of the record owner, (ii) the registration or application number, and (iii) the jurisdiction of issuance or registration.

2.12.2Schedule 4 sets out, as of the date of this Agreement, a complete and accurate list of each Transferred Intellectual Property Contract with a value in excess of $5 million or otherwise material and necessary for the operation of the Business and for which the primary purpose of such contract relates to the licence, grant or settlement of Intellectual Property Rights (a “Material Transferred Intellectual Property Contract”). Neither the Seller nor any of its Affiliates has given, or received, written notice to terminate any Material Transferred Intellectual Property Contract and, to the Seller’s Knowledge, neither the Seller nor any Affiliate of the Seller is in breach or default of any Material Transferred Intellectual Property Contract, except for any such breach or default which would not be material to the Business.

2.12.3The Seller and its Affiliates legally and beneficially own all Registered Flu Group Intellectual Property Rights free of all Encumbrances except Permitted Encumbrances. The Seller and its Affiliates have taken reasonable steps to protect the confidentiality of Proprietary Information.

2.12.4Neither the validity nor subsistence of the Registered Flu Group Intellectual Property Rights, nor the right, title and interest of the Seller in the Registered Flu Group Intellectual Property Rights, is the subject of any current, pending or

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threatened challenge, claim or proceedings (including for opposition, cancellation, revocation or rectification) nor has it been in the period of two years prior to the date of this Agreement. As of the date of this Agreement, the Seller has not received written notice from any third party of any facts or matters nor, to the Seller’s Knowledge, have any facts or matters come to the Seller’s attention through the patent monitoring activities it conducts with third party advisors which, in each case, in the reasonable opinion of the Seller would be reasonably likely to give rise to such challenge, claim or proceedings.

2.12.5To the Seller’s Knowledge, any person who, either alone or with others, has created, developed or invented the Flu Group Intellectual Property Rights, and whose role it was or is to develop such Intellectual Property Rights in the course of their employment or engagement by the Seller or its Affiliates, has entered into a written agreement with the Seller or its Affiliates which obliges them to disclose and to assign such Flu Group Intellectual Property Rights to the Seller or its Affiliates, or such Flu Group Intellectual Property Rights are vested in the Seller or its Affiliates by operation of law. No employee inventor has brought in the period of two years prior to the date of this Agreement any claim for compensation in respect of employee inventions which relate to the Flu Group Intellectual Property. As of the date of this Agreement, the Seller has not received written notice from any third party of any non-public facts or matters nor, to the Seller’s Knowledge, have any non-public facts or matters come to the Seller’s attention through its own monitoring activities which, in each case, in the reasonable opinion of the Seller would be reasonably likely to give rise to such challenge, claim or proceedings.

2.12.6To the Seller’s Knowledge, as of the date of this Agreement, (i) the conduct of the Business as currently conducted does not infringe or misappropriate the Intellectual Property Rights or confidential information of any third party; (ii) there is no judicial, administrative or arbitral action, suit, hearing, inquiry, investigation or other proceeding (public or private) before any Governmental Entity pending against the Seller or any of its Affiliates in which it is alleged that the conduct of the Business as currently conducted by the Seller and its Affiliates infringes or misappropriates any Intellectual Property Rights or confidential information of any third party; and (iii) no allegation in writing has been made by any third party that the conduct of the Business as currently conducted infringes or misappropriates their Intellectual Property Rights or confidential information. As of the date of this Agreement, the Seller has not received written notice from any third party of any facts or matters nor, to the Seller’s Knowledge, have any facts or matters come to the Seller’s attention through the patent monitoring activities it conducts with third party advisors which, in each case, in the reasonable opinion of the Seller would be reasonably likely to give rise to such challenge, claim or proceedings.

2.12.7No claim has been made by the Seller or any of its Affiliates in the period of two years prior to the date of this Agreement which alleges that a third party is infringing or is likely to infringe the Flu Group Intellectual Property Rights.

2.12.8To the Seller’s Knowledge, the Flu Group Intellectual Property Rights, the Intellectual Property Rights licensed under the Transferred Intellectual Property Contracts, and the Intellectual Property Rights licensed under the Purchaser Intellectual Property Licence Agreement constitute all the material Intellectual Property Rights used in the conduct of the Business as currently conducted by the

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Seller and its Affiliates; provided however, that the foregoing is not a representation of non-infringement, non-misappropriation, or any other non-violation of Intellectual Property Rights of any third party.

2.13Contracts

2.13.1No Flu Group Company or Business Seller is a party to or subject to any contract, transaction, arrangement, understanding or obligation (other than in relation to any Property, lease, contract of employment, Affiliate Contract or Contract solely between or among members of the Seller’s Group) which is material to the Business and which:

(i)is not in the ordinary course of business;

(ii)is not on an arm’s length basis;

(iii)has an unexpired term or likely duration of 10 years or more;

(iv)restricts its freedom to carry on its business in any part of the world in such manner as it thinks fit other than ordinary course exclusive distribution arrangements; or

(v)involves the supply of goods and services, the aggregate sales value of which (exclusive of VAT) will be more than 10 per cent. of turnover of the business of the Flu Group (exclusive of VAT) for financial year ending on 31 December 2013, and

for the purposes of this paragraph 2.13.1 “material” shall mean with a value in excess of US$5 million (based on annual sales or expenditure).

2.13.2No Flu Group Company or Business Seller is a party to or subject to any contract, transaction, arrangement, understanding or obligation (other than in relation to any Property, lease, contract of employment, Affiliate Contract or Contract solely between or among members of the Seller’s Group) which involves an aggregate outstanding expenditure by it of more than US$20 million, exclusive of VAT.

2.13.3No member of the Seller’s Group has received written notice that it is in material default under any Transferred Contract with a value in excess of US$5 million (as determined based on annual sales or expenditure in 2013) and, to the Seller’s Knowledge, no third party is in material default under any such Transferred Contract or US Government Contract.

2.13.4Details of and copies of all material agency, sales intermediary or distribution arrangements or agreements to which a member of the Seller’s Group (in respect of the Business) or any Flu Group Company is a party or is bound by are contained in the Data Room. For the purposes of this paragraph 2.13.4 “material” shall mean with a value in excess of US$5 million (based on annual sales or expenditure for 2013).

2.13.5To the Seller’s Knowledge, as of the date of this Agreement, no member of the Seller Group has received written notice threatening to terminate any material Transferred Contract, US Government Contract, Transferred Intellectual Property Contract, Co-Owned Flu Group Intellectual Property Right, or the relevant part of a material Shared Business Contract, by reason of the transactions contemplated by this Agreement.

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2.14Joint Ventures, etc.

No Flu Group Company or Business Seller is, or has agreed to become, a member of any joint venture, consortium, partnership or other unincorporated association with respect to the Business (other than a recognised trade association in relation to which the Flu Group Company or Business Seller has no liability or obligation except for the payment of annual subscription or membership fees or otherwise in the ordinary course of business in connection with the development and Commercialisation of Products or Pipeline Products or Products Under Registration which would not result in material expenditure to the Business).

2.15Agreements with Connected Parties

There are no existing contracts or arrangements material to the Business between, on the one hand, any Business Seller or Flu Group Company and, on the other hand, the Seller, the Share Sellers or any Business Seller other than in the ordinary course of business.

2.16Compliance with Laws, Permits and Anti-Bribery

2.16.1All material licences, consents, permissions, waivers, exceptions and approvals of or issued by any Governmental Entity required for carrying on the Business in the places and in the manner which the Business is now carried on (each a “Permit” and, collectively, the “Permits”) are in full force. Neither the Seller nor any of its Affiliates has, in relation to the Business, received any written notice from any Governmental Entity that it is not in compliance with any Applicable Law or Permit in any material respect, except where such written notice is in the ordinary course or where such non-compliance or non-possession does not remain outstanding or uncured as of Closing.

2.16.2So far as the Seller is aware, there are no circumstances which indicate that any Permits will or are likely to be suspended, cancelled or revoked or not renewed, in whole or in part, in the ordinary course of events (whether in connection with the Transaction or otherwise), and where the suspension, cancellation, revocation or failure to renew such Permit would be reasonably expected to have a material adverse effect on the operation of the Business or the Commercialisation of a Product.

2.16.3During the 24 months ending on the date of this Agreement, the Business has been conducted in all material respects in compliance with applicable GMP requirements.

2.16.4With respect to the Business, since 1 January 2011, neither the Seller nor any of its Affiliates, nor any of their respective directors, officers or employees and, to the Seller’s Knowledge, no Seller Partner has, directly or indirectly: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity or to influence official action; (ii) made or offered to make any unlawful payment to any foreign or domestic government official or employee, or agent, political party or any official of such party, or political candidate from corporate funds; (iii) made or offered to make any bribe, rebate, payoff, influence payment, money laundering, kickback or other unlawful payment; or (iv) violated or is in violation of any provision of any applicable Anti-Bribery Law; and with respect to the Business, the Seller and its relevant Affiliates have instituted and maintain policies and procedures reasonably designed to ensure

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compliance with applicable Anti-Bribery Law.

2.16.5With respect to the Business, neither the Seller nor any of its Affiliates, nor any of their respective directors, officers or employees and, to the Seller’s Knowledge, no Seller Partner is currently the subject of, nor has it been since 1 January 2011, the subject of, any action alleging a violation, or possible violation, of any Anti-Bribery Law, or been since 1 January 2011, the recipient of a subpoena, letter of investigation or other document alleging a violation, or possible violation, of any Anti-Bribery Law.

2.16.6With respect to the Business, since 1 January 2011, neither the Seller nor any of its Affiliates, nor any of their respective directors or officers, and, to the Seller’s Knowledge, none of their respective employees has received notice that any such person is or has been alleged to be in violation of any sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or by the U.S. Department of State or equivalent measures of the United Kingdom, European Union, or the United Nations (the “Sanctions Laws”). With respect to the Business, neither the Seller nor any of its Affiliates, nor any of their respective directors or officers, and, to the Seller’s Knowledge, none of their respective employees has conducted any of their business activities whatsoever with, or for the benefit of, a government, national or legal entity to the extent such actions would violate any Sanctions Law. None of the execution, delivery and performance of this Agreement and the direct or indirect use of proceeds from any transaction contemplated hereby or the fulfilment of the terms hereof will result in a violation by any person of any Sanctions Law.

2.17Product Approvals

2.17.1The Seller or one of its Affiliates is the registered holder of each of the Product Approvals. All Product Approvals, Pipeline Product Approvals and approvals for Products under Registration held by the Seller or its Affiliates are in full force and effect.

2.17.2Each Product marketed or sold under a Product Approval is manufactured, marketed and sold in all material respects in accordance with the specifications and standards contained in such Product Approval and the related Marketing Authorisation Data and in accordance with Applicable Laws.

2.17.3Neither the Seller nor, to the Seller’s Knowledge, any of its Affiliates, has received any written notice that any Governmental Entity with jurisdiction over the Products has commenced or will commence any action: (i) to withdraw the approval of any Product or otherwise revoke or materially amend any Product Approval or Marketing Authorisation Data; or (ii) enjoin production, marketing or sale of any Product.

2.17.4All application and renewal fees due and payable with respect to all material Product Approvals have been paid.

2.17.5To the Seller’s Knowledge, during the two influenza seasons prior to the date of this Agreement, there has been no adverse event in relation to any Product which has or might reasonably give rise to a suspension or withdrawal of any Product Approval or a recall of any of the Products from the market.

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2.18Taxes

2.18.1General

No charge to Tax will arise to a Flu Group Company as a result of:

(i)entering into this Agreement; or

(ii)Closing.

2.18.2Clearances, consents and special arrangements

Any transaction or arrangement for which any clearance or consent was required to be obtained by a Flu Group company, or in respect of which a Tax Authority has agreed to operate any special arrangement in relation to a Flu Group Company (other than an arrangement which is in accordance with relevant law or the published statements of practice or published extra-statutory concessions of the relevant Tax Authority), has been carried out only in accordance with the terms of a valid clearance or consent given following full, accurate and timely disclosure of all material facts and circumstances or in accordance with the relevant special arrangement (as applicable). To the Seller’s knowledge, nothing has arisen since any such clearance or consent was obtained, or the special arrangement was entered into, which would bring into question its validity.

2.18.3Secondary liability

No Flu Group Company is, nor to the Seller’s knowledge have there been any circumstances in which a Flu Group Company will, or is likely to, become liable to pay any Tax or any amount in respect of any Tax which is primarily or jointly chargeable against or attributable to any other person (other than a Flu Group Company, the Purchaser or a member of the Purchaser’s Group) and which such other person fails to discharge.

2.18.4Compliance

(i)Each Flu Group Company has timely filed all Tax Returns it was legally required to file, and all Taxes shown due on such returns have been paid or will be paid on a timely basis. As far as the Seller is aware, all such returns and information remain correct and complete and none is, or is likely to become, the subject of any investigation or dispute by or with any Tax Authority.

(ii)Each Flu Group Company has properly and within the applicable time limits paid all Tax which it has become liable to pay and it has not in the preceding six year period paid or become liable to pay any penalty, fine or surcharge in respect of Tax.

(iii)To the Seller’s Knowledge, no Flu Group Company is currently under audit or examination by a Tax Authority that could result in the assessment of a material amount of Tax, and no Flu Group Company has received written notice from a Tax Authority of any material unresolved Tax deficiency or assessment or an intention to commence an audit or examination.

(iv)Each Flu Group Company has complied with all valid notices served on it by any Tax Authority to the extent that compliance is required prior to the date hereof and unless the relevant Flu Group Company is disputing such

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notice (or the subject matter thereof) in good faith.

(v)To the Seller’s Knowledge, no Flu Group Company has received or requested any extension of time to file a Tax Return which is not in the ordinary course that remains unfiled or has granted or requested a waiver or extension of a limitation on any period for audit and examination or assessment and collection of Tax for any taxable period as to which Tax could be assessed.

2.18.5Records

Each Flu Group Company has prepared, kept and preserved complete, accurate and up-to-date records both as required by law and to enable it to deliver correct and complete Tax Returns and to calculate any current or, to the extent that it depends on any Event occurring on or before Closing, future Tax liability or Purchaser’s Relief of that Flu Group Company.

2.18.6Deduction of Tax

All payments by the Flu Group Companies which were required to have been made under deduction of Tax have been so made and, where required, relevant Flu Group Companies have provided a certificate of deduction in the required form and properly and punctually accounted to the relevant Tax Authority for the Tax so deducted.

2.18.7International

Each Flu Group Company is and has always been resident for all Tax purposes only in the jurisdiction in which it is incorporated and is not liable to and has at no time incurred any liability to Tax in respect of a permanent establishment in any jurisdiction other than the jurisdiction in which it is incorporated.

2.18.8Third party rights in respect of unpaid Tax

To the Seller’s Knowledge, (a) there are no Tax liens on the Flu Group Businesses or the assets of the Flu Group Companies (other than Permitted Encumbrances), and (b) no event has occurred which could result in any charge, lien, security interest, encumbrance or other third party right arising over any asset of the Flu Group in respect of unpaid Tax.

2.18.9Transfer Taxes

Each Flu Group Company has paid all stamp duties or similar transfer taxes (including interest and penalties) in respect of all documents or transactions necessary to establish that Flu Group Company’s right or title to any asset and all such documents requiring stamping have been duly stamped.

2.18.10Employment/Payroll Taxes

The Flu Group has deducted Tax as required by law from all payments to or treated as made to or benefits provided for employees, officers, ex-employees, ex-officers of and persons rendering services to it and has within the appropriate time limits accounted to the relevant Tax Authority for all such Tax deducted and has paid to the relevant Tax Authority all Tax payable in respect of such payments or benefits.

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2.19Environmental Matters

2.19.1To the Seller’s Knowledge, each Business Seller (with respect to its conduct of the Business and any Transferred Real Property) and Flu Group Company is, and has been during the period of three years prior to the date of this Agreement, in compliance in all material respects with all Environmental Laws.

2.19.2To the Seller’s Knowledge, each Flu Group Company and each Business Seller (with respect to its conduct of the Business and any Transferred Real Property) possesses and is in material compliance with all material Permits required under applicable Environmental Laws to conduct its portion of the Business. All such Permits are in full force and effect and have been complied with in all material respects during the period of three years prior to the date of this Agreement.

2.19.3No material capital expenditure is required to be expended in the three years following the date of this Agreement to discharge any regulatory upgrade, remediation or abatement obligation under Environmental Law that is known to the Seller in order to carry on lawfully the Business and/or to use any Property for the purpose of the Business in each case as it is carried out at the date of this Agreement.

2.19.4No Flu Group Company nor any Business Seller (with respect to its conduct of the Business and any Transferred Real Property) has in the three years prior to the date of this Agreement received any written notice alleging a material violation of any Environmental Laws, other than matters that have been resolved in all material respects.

2.19.5No Flu Group Company nor any Business Seller (with respect to its conduct of the Business and any Transferred Real Property) has in the three years prior to the date of this Agreement received any written notice or claim alleging that it is or may be liable to any person in any material respect under any applicable Environmental Law as a result of a release or threatened release of any Hazardous Substance at any Transferred Real Property, other than matters that have been resolved in all material respects.

2.19.6To the Seller’s Knowledge, no Flu Group Company nor any Business Seller (with respect to its conduct of the Business and Transferred Real any Property) is a party to any pending proceedings relating to any Environmental Laws, other than proceedings that would not reasonably be expected to have a material adverse effect on the Business of the Flu Group.

2.20Employees

2.20.1The Disclosure Letter contains the following information in respect of each Flu Business Employee and each Flu Group Company Employee as of 21 October 2014: (A) employee identification details; (B) date of birth; (C) employment status (part-time or full-time); (D) salary and wages; (E) target annual incentive for 2014; and (F) target long-term incentive for 2014.

2.20.2In the Material Employee Jurisdictions:

(i)As of the date of this Agreement there is not, and in the 12 months prior to the date of this Agreement there has not been, nor to the Seller’s Knowledge is there pending or threatened, any labour strike, dispute, work

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stoppage or lockout by any group of either Flu Business Employees or Flu Group Company Employees;

(ii)No collective bargaining negotiations, whether voluntary or mandatory, are currently taking place with respect to any of the Flu Business Employees or Flu Group Company Employees and, as of the date of this Agreement, no Flu Group Company or Business Seller is a party to any collective bargaining agreement affecting any Flu Business Employee or Flu Group Company Employee;

(iii)No Flu Group Company or Business Seller has, within the 90 days prior to the date of this Agreement and with respect to the Business, closed any plant or facility, effectuated any layoffs of employees or implemented any early retirement, separation or similar programme in each case in violation of the WARN Act, nor has any Flu Group Company or Business Seller announced any such action or programme for the future;

(iv)Other than with respect to the retention arrangements set out in paragraph 8 of Schedule 9, or any arrangement relating to the share-based incentive schemes of the Seller’s Group pursuant to paragraph 9 of Schedule 9, neither the Seller nor any relevant member of the Seller’s Group are involved in negotiations (whether with employees, any trade union, work’s council or other employees’ representatives) to vary the terms and conditions of employment of any Flu Business Employee or Flu Group Company Employee, nor has it made any representations, promises, offers or proposals concerning or affecting the terms and conditions of employment of any Flu Business Employee or Flu Group Company Employee, nor is it under any obligation to vary such terms or conditions;

(v)Other than with respect to the retention arrangements set out in paragraph 8 of Schedule 9 and the share-based incentive schemes of the Seller’s Group (to which paragraph 9 of Schedule 9 applies), Closing will not give rise to the payment of any remuneration, payments or benefits or any enhancements or accelerations thereof to any Transferred Employee whether in accordance with the standard terms and conditions of employment of such Transferred Employee or otherwise;

(vi)The Seller and each relevant member of the Seller’s Group have discharged its obligations in full in relation to salary, wages, fees, commission, bonuses, overtime pay, holiday pay, sick pay and all other benefits and emoluments relating to the Flu Business Employees and Flu Group Company Employees in respect of all prior periods; and

(vii)Neither the Seller nor any member of the Seller’s Group has adopted, whether formally or informally, and whether in writing or otherwise, any policy, custom or practice of making redundancy or severance payments in excess of statutory minima or of making payments in lieu of notice nor has it historically made any such redundancy or severance payments or payments in lieu of notice.

2.21Employee Benefits

2.21.1The Disclosure Letter contains a true, complete and correct list of each material

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Benefit Plan applicable to either Flu Business Employees or Flu Group Company Employees in the Material Employee Jurisdictions.

2.21.2The Seller has, in the Material Employee Jurisdictions, provided or made available to the Purchaser true and complete copies of all material written Benefit Plans applicable to either Flu Business Employees or Flu Group Company Employees and for Benefit Plans that are not share-based incentive schemes all related trust agreements or other funding documents and a summary of the material terms of any material unwritten Benefit Plan. Neither the Seller nor any Business Seller has made any promises or commitments to create any additional material Benefit Plan, agreement or arrangement, or to modify or change in any material way any existing Benefit Plan with respect to which the Purchaser or any member of the Purchaser’s Group could reasonably be expected to have any material additional Liability.

2.21.3US Benefit Plans

(i)Each US Benefit Plan applicable to the Flu Business Employees has been administered in compliance with the terms of such US Benefit Plan and all Applicable Laws, except for failures that would not reasonably be expected to have a material adverse effect.

(ii)Except as Disclosed in the Disclosure Letter, none of the US Benefit Plans covering Flu Business Employees is, and none of the Seller, Flu Group Company or Business Seller (with respect to the Business) had, during the last six years any obligation to contribute to: (i) a plan subject to Title IV of ERISA or section 412 of the Code; or (ii) a “multiemployer plan” (within the meaning of section 3(37) of ERISA).

(iii)For the avoidance of doubt, none of the representations and warranties in this paragraph 2.21.3 is intended to apply to any Non-US Benefit Plan.

2.21.4Non-US Benefit Plans

(i)Since 1 July 2012, in the Material Employee Jurisdictions all benefit and compensation plans, contracts, policies, agreements or arrangements (other than US Benefit Plans and plans, contracts, policies, agreements or arrangements operated by any Governmental Entity) (A) maintained by a Flu Group Company or Business Seller, with respect to Flu Group Company Employees or Flu Business Employees or current or former employees or directors of a Flu Group Company, (B) in respect of which any Flu Group Company or Business Seller, with respect to Flu Group Company Employees or Flu Business Employees, the Seller or any member of the Seller’s Group has contributed or (C) in respect of which any Flu Group Company or Business Seller, with respect to Flu Group Company Employees or Flu Business Employees, has any material liability (whether actual or contingent), including, but not limited to, plans providing benefits on retirement, early retirement, leaving service, death, termination of employment (whether voluntary or not), or during periods of sickness or disablement, or any deferred or incentive compensation, welfare, healthcare, medical, stock or stock-related award plans, including individual pension commitments, “jubilee” pension benefits and retirement and termination indemnity arrangements (such plans, contracts, agreements, policies and arrangements hereinafter being referred to as “Non-US

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Benefit Plans”) have been administered in accordance with their terms and are in compliance with Applicable Laws, except for any failures to so administer or be in compliance that, individually and in the aggregate, would not reasonably be expected to have a material adverse effect. All required filings for all Non-US Benefit Plans have been made on time and with the appropriate Governmental Entity, except for any failures to timely file that, individually and in the aggregate, would not reasonably be likely to have a material adverse effect. As of the date hereof, there is no pending or, to the Knowledge of Seller, threatened material litigation relating to Non-US Benefit Plans.

(ii)The Flu Group Companies or Business Sellers, with respect to Flu Group Company Employees or Flu Business Employees in a Material Employee Jurisdiction, (A) are in material compliance with all Applicable Laws respecting employment, employment practices, terms and conditions of employment, occupational health, safety, wages and hours, (B) have withheld all amounts required by Applicable Laws, collective bargaining agreements or the Non-US Benefit Plans to be withheld from the wages, salaries or other payments to the Flu Group Company Employees or the Flu Business Employees and former employees of the Flu Group Companies, (C) in respect of the Flu Group Company Employees or Flu Business Employees or former employees of the Flu Group Companies, are not liable under any applicable provisions of the Non-US Benefit Plans and any Applicable Laws for any arrears, wages, Taxes, other than payments not yet due, or any penalty for failure to comply with the foregoing and (D) are not liable under any applicable provisions of the Non-US Benefit Plans and any Applicable Laws for any payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation benefits, workers compensation, social security or other benefits for Flu Group Company Employees or Flu Business Employees or former employees of the Flu Group Companies, other than payments not yet due, except, in each case, for any failures to comply, failures to withhold or liabilities that, individually and in the aggregate, would not reasonably be likely to have a material adverse effect.

(iii)All material contributions that the Flu Group Companies or Business Seller, with respect to Flu Business Employees or the Flu Group Company Employees in a Material Employee Jurisdiction, are required to make to any Non-US Benefit Plan in respect of the period on or before the date of this Agreement have been fully and timely paid when due.

(iv)For the avoidance of doubt, none of these representations and warranties in this paragraph 2.21.4 is intended to apply to any US Benefit Plan.

2.21.5No retirement benefits scheme (as formerly defined in Section 611 of the Taxes Act) or scheme registered under Chapter 2 of Part 4 of the Finance Act 2004 in which the Flu Group Companies participate or have participated has been or is in the process of being (or is proposed to be) wound up (in whole or in part) or closed to new entrants (in whole or in part).

2.21.6No plan, proposal or intention to set up any new arrangement has been communicated to any Employee.

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2.21.7The Flu Group Companies have not at any time in relation to the provision of pension or life assurance benefits for or in respect of any Employee or former employee infringed any legal requirement relating to discrimination on any grounds, including the equality of pay or treatment of male and female employees, including without prejudice to the generality to the foregoing, Article 141 of the Treaty of Rome (formerly Article 119) and the Equality Act 2010 and the Part-time Workers (Prevention of Less Favourable Treatment Regulations) 2000.

2.21.8No Flu Group Company has given a guarantee, security or indemnity in relation to any pension scheme and there are no circumstances which have arisen prior to the Completion Date which may give rise to the imposition on any Flu Group Company or the Purchaser or their associated or affiliated companies of any order, notice or direction pursuant to Sections 38 to 51 of the Pensions Act 2004.

2.21.9No Employee or former employee has transferred to the employment of a Flu Group Company in circumstances governed by the Transfer of Undertakings (Protection of Employment) Regulations 2006 or predecessor legislation with an entitlement to payment of enhanced benefits on redundancy or early retirement by reference to employment with the Flu Group Company or a previous employer.

2.21.10The Seller has Disclosed in relation to the Flu Group Companies data showing the number, gross earnings, age and sex of workers who (i) are or will be required to be automatically enrolled in to an automatic enrolment scheme, (ii) or who may request membership of a pension scheme, (iii) or who are active members of a qualifying scheme in accordance with the Pensions Act 2008 and material details of any proposals made or announced to workers regarding how the Flu Group Companies comply or intends to comply with their duties under the Pensions Act 2008, and the staging dates applicable.

2.21.11The Seller has at all times complied with its obligations under the Pensions Act 2008 and relevant regulations in relation to automatic enrolment and there are no circumstances which might result in failure to comply with such obligations.

2.21.12Other than under the Chiron UK Pension Scheme, all benefits provided under any pension arrangement are and have in the past been provided and calculated on a money purchase basis only, and all risk benefits are insured with an insurer of good repute.

2.22Litigation

Except in relation to Intellectual Property Rights:

2.22.1No Flu Group Company or Business Seller is involved whether as claimant or defendant or other party in any claim or Proceeding (or series of related claims or proceedings) in relation to the Business (other than as claimant in the collection of debts arising in the ordinary course of its business) which has a value in excess of US$2.5 million.

2.22.2To the Seller’s Knowledge, no such claim or Proceeding in relation to the Business is threatened or pending by or against any Flu Group Company or Business Seller.

2.23Insurance

All material insurance policies relating to the Business are in full force and effect and, to

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the Seller’s Knowledge, no notice of cancellation, termination or default has been received with respect to any such insurance policy. All premiums due and payable on such policies covering periods up to Closing have been paid in full or accrued.

2.24Research and Development

2.24.1The Seller and its Affiliates have carried out in all material respects their respective obligations under Applicable Law in relation to all clinical trials for the Products, Products Under Registration and Pipeline Products conducted by or on behalf of the Sellers or its Affiliates and included in the Sellers’ or its Affiliates’ regulatory filings.

2.24.2To the Seller’s Knowledge, the Sellers and its Affiliates have not withheld from any regulatory authority any material information in the possession of the Sellers or its Affiliates related to the safety, toxicity, quality or efficacy of the Products, Products Under Registration and/or Pipeline Products that has been reasonably requested by a regulatory authority or is required by Applicable Law to be disclosed.

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Schedule 17
Warranties given by the Purchaser under Clause 9.4

1Authority and Capacity

1.1Incorporation

The Purchaser is validly existing and is a company duly incorporated and registered under the law of its jurisdiction of incorporation.

1.2Authority to enter into Agreement

1.2.1The Purchaser and each member of its Group has, or will have by Closing, the legal right and full power and authority to enter into and perform this Agreement, any Local Transfer Document and any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement, any Local Transfer Document, or any Ancillary Agreement.

1.2.2The documents referred to in paragraph 1.2.1 will, when executed, constitute valid and binding obligations on the Purchaser and each member of its Group.

1.3Authorisation

The Purchaser has taken, or will have taken by Closing, all corporate action required by it to authorise it to enter into and to perform this Agreement, any Local Transfer Document and any Ancillary Agreement to which it is a party and any other documents to be executed by it pursuant to or in connection with this Agreement, any Local Transfer Document or any Ancillary Agreement.

2Financing

The Purchaser has, and at Closing shall have, immediately available on an unconditional basis (subject only to Closing) sufficient cash, financial resources and credit to pay the Headline Price, and to make any other necessary payment contemplated hereunder, under the Local Transfer Documents and under the Ancillary Agreements, including fees and expenses in connection with the consummation of the Transaction. The Purchaser acknowledges that its obligation to consummate the Transaction is not and will not be subject to the receipt by the Purchaser of any financing or the consummation of any other transaction.

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Schedule 18
Excluded Employees
(Clause 1.1)

[***]

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Schedule 19
International Assignees
(Clause 1.1)

[***]

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Schedule 20
Statement of Net Assets (Clause 1.1)
Part 1
Statement of Net Assets

[***]

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Schedule 20
Statement of Net Assets (Clause 1.1)
Part 2
Statement of Net Assets Rules

1Preparation of the Statement of Net Assets

1.1Period

The Statements of Net Assets is prepared as of the close of business on the final day of the relevant calendar month.

1.2Translation of Reporting Entity’s Statements of Net Assets

A reporting entity reports in local currency. All reports are translated into US Dollars by the Seller for reporting purposes. The Statement of Net Assets is translated with the period-end exchange rates which are the rates provided by Novartis Group Treasury and are based on Bloomberg’s mid-morning CET exchange rates and are published in the Group Treasury section of the Novartis intranet.

1.3Novartis Reporting System and Materiality:

1.3.1Financial information for the Flu Businesses has historically been reported together within all other activities of the Vaccines & Diagnostics division within the Financial Consolidation & Reporting System of Novartis. The financial information for the business has been carved out for the purpose of this statement of net assets utilizing information contained in the SAP IFRS ledgers. All financial information are prepared in accordance with Novartis’s Accounting Manual (the “NAM”). The Financial Consolidation & Reporting System is the system of record for Novartis external reporting. References in the Statement of Net Assets included as part 1 of this Schedule 20 shown as “BS01 lines 010-671” relate to the groupings shown in Novartis’s monthly reporting form “BS01 — Balance sheet”.

1.3.2For the Seller’s reporting purposes, the financial reporting of a legal entity is separated into a divisional part, which includes operating items (column A) and a corporate part (column B), which mainly captures the amounts related to taxes, post-employment benefit obligations and most of the financial assets and liabilities. The Statement of Net Assets contains the Novartis Flu Business, and items of the corporate Statement of Net Assets for the Flu legal entities, which existed as per the date at which this Statement of Net Assets is prepared. A US$10 million threshold was applied to this Statement of Net Assets.

1.3.3The Statement of Net Assets has been prepared as follows:

(i)in accordance with the specific accounting treatments set out below; and, subject thereto;

(ii)adopting the same accounting principles, methods, procedures and practices utilized in preparing the consolidated financial statements of Novartis AG as described in the Novartis Accounting Manual applied on a consistent basis using consistent estimation methodologies and judgments and with consistent classifications and, subject thereto;

(iii)in accordance with IFRS.

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1.3.4For the avoidance of doubt:

(i)paragraph 1.3.3(i) shall take precedence over paragraphs 1.3.3(ii), and 1.3.3(iii); and

(ii)paragraph 1.3.3(ii) shall take precedence over paragraph 1.3.3(iii).

2Specific Policies

The following supplement the description in the NAM for certain items included in the Statement of Net Assets:

2.1Assets

2.1.1Financial assets & subsidiaries/JV (BS01_040)

This line reflects equity investments that Flu Group Companies hold in other Flu Group Companies. These relationships have been eliminated in the Statement of Net Assets (as reflected in Column C).

2.1.2Financing to subsidiaries / JV (BS01_046)

This line represents financing owed by any member of the Seller’s Group to a Transferred Subsidiary. For the purpose of the Statement of Net Assets balances within the Flu Group have been excluded (as reflected in Column C).

2.1.3Receivables own BU (BS01_130)

For the Corporate part this line may show balances against other members of the seller group and entities within the Flu Businesses. As of the date of the Statement of Net Assets all receivables are hold against other entities within the Flu Businesses and have therefore been eliminated in Column C of the Statement of Net Assets. For the operating part of the business this line has not been filled in as the entire amount eliminates against a respective payable.

2.1.4Prepaid share-based payments (BS01_161)

An asset for prepaid share-based compensation is recognized to reflect Novartis’s internal charge-out mechanism for its equity settled share-based compensation plans. For entities settling the charge for the shares at the beginning of the vesting period, it reflects the expense yet to be recognized for the unvested part of a share-based compensation plan. This asset has been excluded (as reflected in Column C) and is not reflected in the Statement of Net Assets.

2.1.5Total BS01_110 Total inventories

This line includes an amount of US$ 10m for raw materials and work in progress for FCC products.

2.2Liabilities:

2.2.1Financing from subsidiaries / JV (BS01_516)

This line represents financing received from any member of the Seller’s Group. For the purpose of the Statement of Net Assets, balances within the Flu Group have been excluded (as reflected in Column C).

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2.2.2Other non-current liabilities (BS01_540)

Column C excludes net liabilities for post-employment benefits of US$8 million included in the corporate part of the Flu Group Companies as their treatment is addressed separately in Schedule 20.

2.2.3Payables own BU (BS01_620)

For the Corporate part this line shows balances against other members of the seller group and entities within the Flu Businesses. The amounts related to other members of the Flu Group have been eliminated in column C in the Statement of Net Assets.

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Schedule 21
Exceptions to Pre-Closing Obligations
(Clause 5.2)

1.In accordance with past practice in the relevant market, respond to any calls for a tender (including any tender for a basket of products), whether a new tender or the renewal of an existing tender, which relates in whole or in part to the sale of Products.

2.Entry into Contracts from time to time with third parties where the Flu Group has submitted a binding offer in relation thereto on or prior to the date of this Agreement.

3.Entry into Contracts from time to time in relation to any tender submitted to a Governmental Entity by the Flu Group on or prior to the date of this Agreement.

4.Entry in the ordinary course of business into any Contract in furtherance of the terms of any Shared Business Contract or Transferred Contract including: (i) the delivery of any forecast and order letter pursuant to the terms of a manufacturing or supply agreement; (ii) entry into a material transfer agreement pursuant to any research or collaboration agreement; or (iii) the entry into any quality agreement or commercial agreement pursuant to an existing supply or distribution agreement.

5.Any matter undertaken in order to continue to conduct, in accordance with good clinical practices and the Seller’s Group policies and procedures, the ongoing clinical studies sponsored or supported by the Seller’s Group (including post-approval studies) or otherwise recommended by a Governmental Entity, and any regulatory commitments in respect of the Products and the Pipeline Products.

6.Any matter undertaken in connection with the Commercialisation of the Products in accordance with past practice, including in respect of a bona fide increase in demand for the relevant Product by the relevant distributor and/or wholesaler which has not been stimulated in any way by discounts, rebates, claw-backs or the like outside of the ordinary course of business or the grant of preferred terms offered by the Seller’s Group outside of the ordinary course.

7.Entry into any Contract or series of Contracts with DPI NewCo LLC or its affiliates in relation to fulfilment of commitments to the United States Department of Health and Human Services for the provision of surge/pandemic and seasonal influenza vaccine formulation and fill-finish services.

8.Entry into an agreement between Novartis Pharma Schweiz AG and Swiss Army Pharmacy (on behalf of the Swiss government) for reservation of capacity at the Liverpool bulk manufacturing facility and an option to purchase additional doses.

9.Implementation of a change to compliance policies or procedures of the Seller’s Group, provided that any such changes are implemented in the Flu Group as part of a global program affecting the Seller’s Group as a whole.

10.Initiation, settlement or abandonment of any claim, litigation, arbitration or other proceedings which is included in the list of actual, potential and threatened litigation as contained in the of the Disclosure Letter.

11.Amendments of modifications to any Contract which would not reasonably be expected to increase the Liability of the Flu Group thereunder.

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12.In respect of each of the matters set out in paragraphs 1 to 11, the negotiation and execution of any Contract (including Ancillary Agreements related thereto or contemplated thereby) in furtherance thereof.

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Schedule 22
Competition Authorities

1Australia

2US

3Brazil

4EU or, in the event that the Transaction is not capable of being reviewed under the national competition laws of at least three EU Member States or, upon a reasoned submission being made under Article 4(5) of EU Council Regulation 139/2004, one or more EU Member States competent to examine the Transaction under its national competition law expressing its disagreement as regards the request to refer within 15 working days of receiving the reasoned submission, then: Austria, Germany and the United Kingdom.

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Schedule 23
MF59® Platform Intellectual Property Rights

[***]

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Schedule 24
Delayed Jurisdictions

1Definitions used in this Schedule

1.1In this Schedule:

“[***]” has the meaning given to it in paragraph 4.1 of this Schedule;

“[***] Business Activities” has the meaning given to it in paragraph 4.1 of this Schedule;

“[***] Termination Date” has the meaning given to it in paragraph 4.1 of this Schedule;

“[***]”  has the meaning given to it in paragraph 4.1 of this Schedule;

“[***] Business Activities” has the meaning given to it in paragraph 4.1.5 of this Schedule;

“Accounting Standards” means the most recent edition of the International Financial Reporting Standards as published by the International Accounting Standards Board at the time that any amount is to be calculated by reference to these standards;

“[***] Date” has the meaning given to it in paragraph 4.2 of this Schedule;

“Associated Persons” has the meaning given in paragraph 8.18.1 of this Schedule;

“Controlled Business Instruction” has the meaning given in paragraph 8.4.1 of this Schedule;

“Controlled Delayed Businesses” means the Delayed Businesses other than the Non-Controlled Delayed Businesses;

“Delayed Businesses” means the Flu Group Businesses listed Appendix 1 to this Schedule and “Delayed Business” means any one of them and, in addition, in respect of the Stage 3 Delayed Businesses, after the relevant [***] Date, the part of the Business that relates to the [***];

“Delayed Business Representative” has the meaning given in paragraph 8.3 of this Schedule;

“Delayed Closing” means:

(i)in respect of a Stage 2 Delayed Business, the completion of the transfer of legal ownership of that Delayed Business to the Purchaser in accordance with this Schedule, and

(ii)in respect of a Stage 3 Delayed Business, each of:

(a)in respect of the part of the Business that relates to the [***] and thereafter, the occurrence of the [***] Date and the transfer of Business Assets and Assumed Liabilities, if any, to a [***] in accordance with paragraphs 4.1 and 7 of this Schedule 24 and

(b)in respect of the part of the Business that relates to the [***], the occurrence of the [***] Termination Date,

as the case may be;

“Delayed Closing Date” means the date on which Delayed Closing in respect of a Delayed Business or part thereof takes place;

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“Delayed Employees” has the meaning given to it in Schedule 9;

“Delayed Indemnity Parties” has the meaning given in paragraph 8.15 of this Schedule;

“Disputed Items” has the meaning given in paragraph 9.9 of this Schedule;

“Dispute Notice” has the meaning given in paragraph 9.8 of this Schedule;

“Draft Economic Benefit Statement” has the meaning given in paragraph 9.2 of this Schedule;

“Economic Benefit Amount” has the meaning given to it in paragraph 10.2 of this Schedule;

“Economic Benefit Expert” has the meaning given in paragraph 9.11.2 of this Schedule;

“Economic Benefit Objective” has the meaning given to it in paragraph 9.3 of this Schedule;

“Economic Benefit Payment” has the meaning given in paragraph 9.14.1 of this Schedule;

“Economic Benefit Statement” has the meaning given in paragraph 9.11.1 of this Schedule;

“Extended Stage 3 Target [***] Date” has the meaning given to it in paragraph 4.7.1(i) of this Schedule;

“Instructing Personnel” has the meaning given in paragraph 8.2 of this Schedule;

[***];

“Non-Controlled Delayed Business” means [***];

“Protected Information” has the meaning given in paragraph 9.6 of this Schedule;

“Purchaser’s Audit Team” has the meaning given in paragraph 9.2 of this Schedule;

“Quarterly Accounting Period” means (i) the period commencing on 1 January in any year and ending on 30 March in the same year, (ii) the period commencing on 1 April in any year and ending on 30 June in the same year, (iii) the period commencing on 1 July in any year and ending on 30 September in the same year and (iv) the period commencing on 1 October in any year and ending on 31 December in the same year;

“Reverse Payment” has the meaning given in paragraph 9.14.2 of this Schedule;

“Seller Involvement Instruction” has the meaning given in paragraph 8.10 of this Schedule;

“Stage 2 Closing Readiness Notice” has the meaning given to it in paragraph 3.4 of this Schedule;

“Stage 2 Delayed Businesses” means the Delayed Businesses listed in Part A of Appendix 1 to this Schedule;

[***];

“Stage 3 Delayed Businesses” means the Delayed Businesses listed in Part B of Appendix 1 to this Schedule;

[***];

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[***];

[***];

“Stage 4 Delayed Businesses” means the Delayed Businesses listed in Part C of Appendix 1 to this Schedule;

“Stage 4 Long-stop Date” means [***];

“Target [***] Date” means with respect of each Stage 3 Delayed Business, the date specified in column 3 of Part B of Appendix 1 to this Schedule; and

“Target Closing Date” means, with respect to each Stage 2 Delayed Business, the date specified in column 3 of Part A of Appendix 1 to this Schedule.

2Transfer of Delayed Businesses

2.1The parties agree that legal ownership of the Delayed Businesses (excluding the Transferred Intellectual Property Rights) shall not be transferred by the Seller to the Purchaser at Closing, and that the Delayed Businesses shall, from the Effective Time, be operated by Seller until, in respect of the Stage 2 Delayed Businesses, the relevant Delayed Closing Dates and, in respect of the Stage 3 Delayed businesses, in accordance with the provisions of paragraph 4 of this Schedule, but in all cases, for the benefit and burden of the Purchaser on the terms set out in this Schedule.

3Stage 2 Delayed Businesses

3.1The [***] shall (and shall procure that its respective Affiliates shall) [***] complete the transfer of the Stage 2 Delayed Businesses as promptly as possible after the Closing Date and, in any event, by the relevant Target Closing Date. For the purposes of the substitution of CSL Behring S.A. for the relevant members of the Seller’s Group who are party to [***], the Parties acknowledge and agree that the obligation to use best endeavours shall not require [***].

3.2The [***] shall (and shall procure that its respective Affiliates shall) [***] to provide all assistance reasonably required by the [***] in connection with the Purchaser achieving closing in respect of each Stage 2 Delayed Business by the relevant Target Closing Date including, without limitation:

3.2.1[***]

3.2.2[***]

3.2.3[***]

provided that, in all circumstances:

3.2.4[***]

3.2.5[***]

3.2.6[***]

3.3The [***] shall keep the [***] reasonably informed of all relevant developments relating to the [***] progress in achieving closing for each Stage 2 Delayed Business by the relevant Target Closing Date including progress in relation to [***]. The [***] shall promptly notify the [***] as soon as the [***] identifies any issue which the [***] reasonably considers may

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adversely affect its ability to achieve closing for a Stage 2 Delayed Business by the relevant Target Closing Date.

3.4The [***] shall give the [***] written notice of the proposed Delayed Closing Date as soon as the [***] (the “Stage 2 Closing Readiness Notice”).

3.5Unless otherwise agreed between the Parties, the Delayed Closing in respect of a Stage 2 Delayed Business shall occur on the last day of the first full calendar month to elapse after the date on which the Stage 2 Closing Readiness Notice relevant to that Delayed Business has been received by the Seller (the “Stage 2 Delayed Closing Date”).

3.6Subject to paragraph 6, if the [***] has not completed the transfer of a Stage 2 Delayed Business by the relevant Target Closing Date, [***].

3.7In the event that the [***] has not completed the transfer of a Stage 2 Delayed Business within [***] of the Target Closing Date for the relevant Stage 2 Delayed Business, the Parties shall discuss in good faith finding alternative means of implementing the transfer of the relevant Stage 2 Delayed Business (including [***]). If the [***] has not completed the transfer of the relevant Stage 2 Delayed Business within [***] of the Closing Date, the Parties acknowledge and agree that the [***] shall be entitled to [***], provided that the [***] shall consult with the [***] in advance of [***] and shall take into consideration any reasonable request made by the [***]), in which case the [***] shall indemnify on demand and hold harmless each member of the [***]’s Group and their respective directors, officers, employees and agents against and in respect of any and all Liabilities arising in connection with [***]and neither party shall have any further obligations with respect to the transfer of the relevant Stage 2 Delayed Business.

4Stage 3 Delayed Businesses

4.1The Seller and the Purchaser acknowledge and agree that, in respect of the Stage 3 Delayed Businesses, there will be a transition of each Stage 3 Delayed Business from the Seller to the Purchaser, in the period between [***]. Such transition shall, in respect of each Stage 3 Delayed Business, be effected in accordance with the following provisions of this paragraph 4.1:

4.1.1the [***] shall (and shall procure that its respective Affiliates shall) [***] as promptly as possible after the Closing Date and, in any event, by the relevant Target [***] Date;

4.1.2the [***] shall procure that, with effect from the relevant [***] Date, each [***] shall begin carrying out all activities relating to [***] with respect to the relevant Stage 3 Delayed Business (“[***] Business Activities”), including but not limited to:

(i)carrying out marketing activities;

(ii)entering into contracts for the [***];

(iii)performing the obligations under the contracts for the [***];

(iv)managing returns for the [***]; and

(v)generally conducting all activities necessary to carry on the Business for the [***] and thereafter,

provided that, the [***] shall not be in breach of its obligations in this paragraph 4.1.2 to the extent that the failure of the [***] to procure that a relevant [***] begins

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carrying out all [***] Business Activities occurs solely as a result of the [***] having failed to comply with its obligation to provide the relevant reasonable assistance to the [***]pursuant to paragraph 4.2 below;

4.1.3with effect from the [***] Date, legal ownership of the Stage 3 Delayed Business in respect of the [***] and thereafter shall be transferred to the Purchaser, or where it is not possible or practicable to transfer the legal ownership of only part of the relevant Stage 3 Delayed Business, pending the [***] Termination Date (as defined below), the parties shall nevertheless conduct their affairs during this period as if the legal ownership of the Stage 3 Delayed Business in respect of the [***] and thereafter had so transferred;

4.1.4the Seller shall have no obligation after [***]to carry on any part of the Business other than as specified in paragraph 4.1.5 below;

4.1.5notwithstanding any [***] Date, the parties acknowledge and agree that legal ownership of the Stage 3 Delayed Business in respect of the [***] only shall remain with the Seller who shall, subject to the remaining provisions of this Schedule 24,  carry out all activities necessary for the fulfilment or discharge of any obligations with respect to the [***] (“[***] Business Activities”), for the benefit and burden of the Purchaser, including but not limited to:

(i)carrying out marketing activities;

(ii)entering into contracts for the [***] (provided that such contracts are limited to the [***] only);

(iii)performing the obligations under the contracts for the [***]; and

(iv)managing returns for the [***];

4.1.6the obligations of the Seller to carry out the [***] Business Activities shall:

(i)be subject to the provisions of paragraph 8 of this Schedule 24;

(ii)be limited to running the Business in respect of the [***]in the ordinary course of business, consistent with past practice;

(iii)be subject to the limitations of liability as set out in Clause 10.5.4 of this Agreement;

(iv)terminate on the earlier of the date of discharge of the last obligation in respect of the [***] (“[***] Termination Date”); and

(v)exclude any obligations of the Seller or any of its Affiliates under any of the Ancillary Agreements, it being acknowledged that this paragraph 4.1.6 shall not serve to limit or otherwise amend such obligations as they exist from time to time under the relevant Ancillary Agreement.

4.2The [***] shall (and shall procure that its respective Affiliates shall) [***] to provide all assistance reasonably required by the [***] and its Affiliates in connection with the [***] (“[***]Date”) including without limitation:

[***]provided that, in all circumstances:

4.3[***] The [***] shall keep the [***] reasonably informed of all relevant developments relating to the [***]’s progress in [***] by the relevant Target [***] Date and enabling [***]. The [***]

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shall promptly notify the [***] as soon as the [***] identifies any issue which the [***] reasonably considers may adversely affect its ability to [***] by the relevant Target [***] Date.

4.4The [***] shall give the [***] at least 60 days’ written notice of the proposed [***] Date.

4.5Unless otherwise agreed between the Parties, upon the [***] Date, each party shall comply with the provisions of paragraph 7 of this Schedule 24, save that the Seller shall not be required to transfer legal title to any Business Asset and the Purchaser shall not be required to assume any Assumed Liability to the extent that any such Business Asset or Assumed Liability is necessary for the completion by the Seller of the [***] Business Activities. The Parties acknowledge and agree that as a result, a situation may arise in which no Business Assets or Assumed Liabilities are transferred to or assumed by the [***] on the [***] Date, and in addition, a transitional arrangement may be required to be entered into between the Seller (or relevant member of the Seller’s Group) and the relevant [***]by Applicable Law for regulatory purposes to enable [***] to carry on the [***] Business Activities. Accordingly:

4.5.1within a reasonable period prior to the [***] Date, the parties shall discuss and agree in good faith which, if any, of the Business Assets or Assumed Liabilities should transfer to the [***] on the relevant [***] Date, having regard to the need for the Seller (or its Affiliates as the case may be) to be able to discharge its obligations to conduct the [***] Business Activities; and

4.5.2the Seller shall comply with its obligations in paragraph 4.2 above to put such transitional arrangements in place (provided always that such agreements or arrangements comply with paragraph 7.2.1 below).

4.6On the [***] Termination Date, the Seller shall transfer legal title to any Business Asset and the Purchaser shall or shall procure that the [***] shall assume any Assumed Liability of the relevant Stage 3 Delayed Business to the extent not already transferred or assumed in accordance with paragraph 4.5 and otherwise still in existence.

4.7Subject to paragraph 6, if the Purchaser has not [***] in respect of a Stage 3 Delayed Business by the relevant Target [***] Date and:

4.7.1the Business Assets of the relevant Stage 3 Delayed Business comprise [***] then:

(i)the Purchaser shall [***] for each such Stage 3 Delayed Business and the relevant Target [***] Date for each such Stage 3 Delayed Business shall be extended by [***] (the “Extended Stage 3 Target [***] Date”);

(ii)if the Purchaser has not [***] by the Extended Stage 3 Target [***] Date, the Purchaser shall [***]; and

(iii)neither party shall have any further obligations with respect to the transfer of the Business Assets of the relevant Stage 3 Delayed Business and the [***] and its Affiliates shall be entitled to [***] (provided that the [***] shall consult with the Purchaser in advance of [***] and shall take into consideration any reasonable request made by the [***])  following consultation with the [***]) and the [***] shall indemnify on demand and hold harmless each member of the [***]’s Group and their respective directors, officers, employees and agents against and in respect of any and all Liabilities arising in connection with [***];

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4.7.2the Business Assets of the relevant Stage 3 Delayed Business comprise [***] then the [***] shall be entitled to:

(i)[***], in which case the [***] shall indemnify on demand and hold harmless each member of the [***]’s Group and their respective directors, officers, employees and agents against and in respect of any and all Liabilities arising in connection with [***] and neither party shall have any further obligations with respect to the transfer of the Business Assets of the relevant Stage 3 Delayed Business (provided that the [***] complies with the obligations to [***] in accordance with this Schedule 24 as set out in paragraph 5); or

(ii)[***]. The Parties agree and acknowledge that in the circumstances contemplated by this paragraph (ii), the [***] shall not [***].

5Stage 4 Delayed Businesses

5.1From the Closing Date until the Stage 4 Long-stop Date the Seller shall operate the Stage 4 Delayed Businesses with a view to [***] and in so doing, and notwithstanding anything to the contrary in this Schedule, the Seller shall:

[***]

5.2The [***] hereby undertakes to the [***](for itself and on behalf of each other member of the [***]’s Group and their respective directors, officers, employees and agents) that the [***] will indemnify on demand and hold harmless each member of the [***]’s Group and their respective directors, officers, employees and agents against and in respect of any and all costs and expenses incurred by them in order to [***].

5.3If at any point prior to the Stage 4 Long-stop Date, the [***] reasonably determines that any Stage 4 Delayed Businesses will [***], the [***] shall notify the [***]of the same in writing (the “Stage 4 Delayed Business Notice”) and the [***]shall, upon receipt of such Stage 4 Delayed Business Notice, take the steps necessary to [***] If, from Closing, the [***] becomes aware of any contractual obligations in a Stage 4 Delayed Jurisdiction which will fall to be discharged after the Stage 4 Long-stop Date, the [***] shall promptly notify the [***] of such obligations.

5.4The Parties acknowledge and agree that at any point prior to the Stage 4 Long-stop Date, the [***] may, by notice in writing no less than 30 days before the Stage 4 Long-stop Date, elect for any Stage 4 Delayed Business to be converted to a Stage 3 Delayed Business, in which case the Stage 4 Long-stop Date will become the Stage 3 Target [***] Date and the provisions of paragraph 4 above shall apply to such Delayed Business.

6[***]

7Obligations on Delayed Closing

The Seller’s Obligations in respect of a Stage 2 Delayed Business

7.1On each Delayed Closing Date in respect of a Stage 2 Delayed Business, the Seller shall:

7.1.1transfer (or procure the transfer) to the Purchaser or the relevant member of the Purchaser’s Group or the [***], as applicable, all of the Business Assets (excluding the Transferred Intellectual Property Rights) and Assumed Liabilities which exist in respect of the relevant Delayed Businesses as at the relevant Delayed Closing

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Date; and

7.1.2deliver (or procure the delivery) to the Purchaser the Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents and, in the case of Germany, the GSK Support Services Agreement and the associated notice to GSK and the Sublease Consents required to complete or give practical effect to the Separation so that the relevant Flu Group Companies may lawfully use the Marburg MF59® Premises following the relevant Delayed Closing) duly executed by the relevant member(s) of the Seller’s Group.

The Seller’s Obligations in respect of a Stage 3 Delayed Business

7.2On each Delayed Closing Date which falls within paragraph (ii)(a) of the definition of Delayed Closing for Stage 3 Delayed Businesses in this Schedule 24, the Seller shall:

7.2.1in addition to those agreements contemplated by the Global Transitional Distribution Services Agreement in relation to marketing authorisation services, enter into such additional agreements with the [***], if any, that are required by Applicable Law for regulatory purposes for the [***] to commence the [***] Business Activities. Each such additional agreement, if any, shall be for a term of not more than [***] and shall be in a form which is acceptable to the Seller or the relevant member of the Seller’s Group (acting reasonably) and shall be on terms which are no [***]; and

7.2.2transfer (or procure the transfer) to the [***] designated by the Purchaser, all of the Business Assets (excluding the Transferred Intellectual Property Rights) and Assumed Liabilities which exist in respect of the relevant Delayed Business as at the [***] Date and which it has been agreed between the Parties are to transfer upon the [***] Date in accordance with paragraph 4.5 of this Schedule 24.

7.3On each Delayed Closing Date which falls within paragraph (b) of the definition of Delayed Closing for Stage 3 Delayed Businesses in this Schedule 24, the Seller shall transfer (or procure the transfer) to the [***] designated by the Purchaser, all of the Business Assets (excluding the Transferred Intellectual Property Rights) and Assumed Liabilities which exist in respect of the relevant Delayed Business as at the relevant [***] Termination Date.

The Purchaser’s Obligations

7.4On each Delayed Closing Date, the Purchaser shall deliver to the Seller the Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents and, in the case of Germany, the GSK German Support Services Agreement) duly executed by the relevant member(s) of the Purchaser’s Group.

Ancillary Agreements

7.5For the purposes of compliance with paragraphs 7.1 to 7.3 of this Schedule, the Seller and the Purchaser shall, between the Closing Date and the Delayed Closing Date, negotiate in good faith any and all Ancillary Agreements relating to the Delayed Business (including, without limitation, the Local Transfer Documents) such that they are consistent with this Agreement and equivalent Ancillary Agreements executed at Closing, and shall take all such other steps as are required to transfer the Delayed Businesses in accordance with this Agreement and the Ancillary Agreements.

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Tax Indemnity

7.6References in paragraphs 7.1 to 7.5 above to Ancillary Agreements shall not include the Tax Indemnity, the execution and delivery of which shall be dealt with under Schedule 13.

7.7This Schedule is without prejudice to the rights and obligations of the parties and their respective Groups under the Tax Indemnity.

8Management and Control of Delayed Businesses

Management and control

8.1To the maximum extent permissible by Applicable Law, and the terms of any Product Approvals and Product Applications, the parties intend that, pursuant to this Schedule, all management and control rights and powers that the Seller (or any member of the Seller’s Group) has in relation to a Controlled Delayed Business shall transfer to the Purchaser with effect from Closing and, accordingly, that the Purchaser shall consolidate the Controlled Delayed Businesses into its accounts with effect therefrom in accordance with its accounting policies as applied from the Closing Date.

8.2As soon as reasonably practicable after Closing, the Purchaser shall notify the Seller of the names of its personnel permitted to provide Controlled Business Instructions (“Instructing Personnel”), and the Seller shall be entitled to rely on and act in accordance with Controlled Business Instructions from Instructing Personnel without further verification. Instructions provided by or on behalf of the Purchaser shall not be required to be in writing if they are provided by the Instructing Personnel. The Purchaser shall be free to change its Instructing Personnel from time to time by providing 10 Business Days’ written notice to the Seller’s Delayed Business Representative.

8.3In order to co-operate in managing the implementation of the provisions set out in this Schedule, the Seller and the Purchaser shall notify each other of the identity of a senior member of management (the “Delayed Business Representative”) who shall be the primary point of contact in the event that there is any issue in connection with the operation of the provisions in this Schedule. The parties shall notify each other in writing of the contact details for their respective Delayed Business Representatives from time to time.

8.4From Closing until the relevant Delayed Closing Date (which, in respect of a Stage 3 Delayed Closing shall mean the [***] Termination Date in respect of the part of the Business relating to the [***] and the [***] Date in respect of the part of the Business relating to the [***] and thereafter and all references to Delayed Closing Date in this paragraph 8 of Schedule 24 shall be construed accordingly), in respect of any Controlled Delayed Business without prejudice to the generality of paragraph 8.1 above, the Seller shall permit the Purchaser to manage and operate the relevant Controlled Delayed Business or any part of it, provided always that the Purchaser does not become the employer of the relevant Delayed Employees, and the Seller shall:

8.4.1subject to paragraphs 8.11 and 8.13 and to the maximum extent permitted by Applicable Law, and the terms of any relevant Product Approvals and Product Applications, act in accordance with any instructions provided to it by any of the Instructing Personnel in relation to any aspect of the management and operation of the relevant Controlled Delayed Business or any part of it, to the maximum extent permissible by Applicable Law, and the terms of any relevant Product Approvals and Product Applications (a “Controlled Business Instruction”);

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8.4.2comply with the provisions of Schedule 7 in relation to Product Approvals and Product Applications relating to the Controlled Delayed Business; and

8.4.3subject to paragraph 8.11 and 8.13, not take any steps to countermand or prevent (i) the effect of a Controlled Business Instruction which relates to the Business; or (ii) the effect of paragraph 8.1, provided always that in the case of (i) such Controlled Business Instruction has been communicated to the Seller’s Delayed Business Representative at the time of communication to the relevant Delayed Employees.

8.5The provisions of Clause 5 and Schedule 21 shall not apply in respect of any Controlled Delayed Business following Closing.

8.6The Purchaser shall (or shall procure that its Affiliates shall) supply such assistance and access (including the supply of products and services and access to Transferred Books and Records and Commercial Information, but excluding any access to Intellectual Property Rights except as referred to in paragraph 8.7 below) as shall be reasonably necessary to allow the Seller to comply with its obligations in accordance with this Schedule.

8.7Subject to the terms of paragraph 8.8 below, the Purchaser hereby grants with effect from the Closing Date (and shall procure that each of its Affiliates shall grant with effect from the Closing Date) the Seller a non-exclusive, worldwide, fully paid-up, royalty free and sub-licensable licence or sub-licence (as applicable) to use, notwithstanding any other provision of this Agreement or any of the Ancillary Agreements: (i) the Flu Group Intellectual Property Rights transferred to the Purchaser (or relevant member of the Purchaser’s Group) pursuant to this Agreement or any Ancillary Agreement; and (ii) any Intellectual Property Rights licensed to the Purchaser (and its Affiliates) under any Ancillary Agreement (except the Purchaser Intellectual Property Licence Agreement) for the sole purpose of operating each Delayed Business in accordance with the provisions of this Schedule 24. This licence granted under this paragraph 8.7 shall continue on a country by country basis, in relation to each Delayed Business, until the date on which that Delayed Business has been transferred by the Seller to the Purchaser in accordance with this Schedule, on which date the licence shall immediately lapse and terminate in respect of that Delayed Business only without further action on behalf of the parties.

8.8The licence granted to the Seller pursuant to paragraph 8.7 above shall be exclusive (but shall otherwise be on the terms set out in paragraph 8.7 above) to the extent required by Applicable Law or any Governmental Entity in any jurisdiction in order to allow the Seller (or the relevant member of the Seller’s Group) to maintain in force the relevant Product Approvals in that jurisdiction until the date of the completion of the transfer of such Product Approvals in that jurisdiction to the Purchaser in accordance with the terms of this Agreement, on which date the licence granted to the Seller pursuant to this paragraph 8.8 shall be converted to a non-exclusive licence and shall be subject to the terms of paragraph 8.8 above.

8.9Save as agreed between the Seller and Purchaser, Delayed Employees who are engaged in a Controlled Delayed Business shall report to the management of the Purchaser and shall be treated for such management and reporting purposes in the same way as any employee of the Purchaser’s Group. Notwithstanding anything to the contrary in this Schedule 24, Controlled Business Instructions shall be given by the Instructing Personnel directly to any Delayed Employee engaged in a Controlled Delayed Business.

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8.10To the extent that the implementation of any Controlled Business Instruction requires an action or actions of a person employed by the Seller but who is not a Delayed Employee (whether because Applicable Law prevents such Controlled Business Instruction from being given directly to a Delayed Employee or for any other reason) (a “Seller Involvement Instruction”), the Purchaser shall provide the Controlled Business Instruction, in writing (which may include email), to the Seller’s Delayed Business Representative specifying (i) that it is a Seller Involvement Instruction; (ii) the actions that are required to be taken by such person; and (iii) a reasonable time within which such actions are required to be taken.

8.11The Seller and the Purchaser acknowledge that the Delayed Employees shall continue to be bound by, and shall comply with, the employment policies and procedures (including terms and conditions and disciplinary procedures) of the Seller’s Group that apply to employees of the Seller’s Group.

8.12Subject to paragraph 8.11, the Seller and the Purchaser acknowledge that Delayed Employees shall continue to be bound by and shall comply with the policies of the Seller’s Group, provided that the Seller shall provide the Purchaser with copies of its operational and other policies that apply in relation to Controlled Delayed Businesses. In respect of such policies, the Purchaser may give notice to the Seller that it wishes a particular policy of the Purchaser’s Group to apply in respect of a Controlled Delayed Business and/or the relevant Delayed Employees in place of the equivalent Seller’s policy. The Purchaser’s equivalent policy shall apply to the relevant Delayed Employees from the date on which such Delayed Employees are given reasonable notice of the relevant policy. If the Seller’s and the Purchaser’s policies apply at the same time, if and to the extent that there is any inconsistency or conflict between the two policies, the Seller’s policy shall prevail.

8.13The Seller shall not be required to act (or fail to act) in accordance with any Controlled Business Instruction:

8.13.1which it reasonably believes would be a breach of Applicable Law or of a contractual obligation to which it or a member of the Seller’s Group is subject;

8.13.2[***];

8.13.3relating to, or that would result in, any change to any Transfer Price or the economic terms of any other transactions relating to the Delayed Business between, on the one hand, the Local Seller Entity and, on the other hand, a member of the Purchaser’s Group or a member of the Seller’s Group, in each case which the Seller reasonably believes could increase its, or a member of the Seller’s Group’s, liability to Tax, unless agreed by the Seller and the Purchaser in writing;

8.13.4which it reasonably believes would materially damage its reputation; or

8.13.5which it reasonably believes would impair the right of the Seller in and to the Seller Marks, including any act or omission that it reasonably believes would or would be likely to:

(i)invalidate or cause the cancellation or abandonment of the Seller Marks;

(ii)bring the Seller Marks into disrepute;

(iii)damage the goodwill or reputation attaching to the Seller Marks;

(iv)dilute or reduce the value or strength of the Seller Marks;

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(v)breach any Seller specifications, standards or guidelines relating to the use of the Seller Marks; or

(vi)result in the Seller Marks being used in a manner that is inconsistent with the manner in which the Seller Marks were used in the 12 months immediately prior to the Closing Date,

save that in such circumstances, but without prejudice to the Seller’s rights to refuse to act in accordance with a Controlled Business Instruction under this paragraph 8.13, the Seller and the Purchaser shall engage in good faith discussions with a view to finding a mutually agreeable means of either resolving the impediment to the Seller acting in accordance with the relevant Controlled Business Instruction or finding alternative means of implementing the relevant Controlled Business Instruction.

8.14Notwithstanding any other provisions in this Schedule 24, the Seller reserves all rights in and to the Seller Marks. The Purchaser acknowledges and agrees that, as between the Seller and the Purchaser, the Seller is the sole and exclusive owner of all right, title and interest in and to the Seller Marks, including all goodwill of the business connected with the use of, or symbolised by, the Seller Marks. All goodwill generated by the Seller’s and each member of the Seller’s Group’s use of the Seller Marks in relation to any Delayed Business shall inure solely to the benefit of the Seller and its Group, and nothing in this Agreement grants the Purchaser any ownership or other proprietary interest in the Seller Marks.

8.15The Purchaser hereby undertakes to the Seller (for itself and on behalf of each other member of the Seller’s Group and their respective directors, officers, employees and agents (excluding any Delayed Employees) (the “Delayed Indemnity Parties”) that, with effect from the Effective Time, the Purchaser will indemnify on demand and hold harmless each of the Delayed Indemnity Parties against and in respect of any and all Liabilities, resulting directly or indirectly from any Controlled Delayed Business and/or from any Controlled Business Instruction to the extent that (i) such Liabilities are not Assumed Liabilities and (ii) the Delayed Indemnity Parties concerned would not have incurred such Liabilities if the Controlled Delayed Business in question had been transferred to the relevant member of the Purchaser’s Group at Closing (“Incremental Delay Liabilities”), but in any case excluding any such Liabilities to the extent that they:

8.15.1arise from a breach by the Seller under paragraph 8.18;

8.15.2arise from a breach by the Seller of its obligations under paragraphs 8.4, 8.20 or 8.22;

8.15.3arise from any action or inaction by the Seller which prevents a Delayed Employee from complying with the obligations described in paragraph 8.8 (other than an action or inaction by the Seller pursuant to and in accordance with paragraph 8.13);

8.15.4are in respect of corporate income tax liabilities in respect of the Economic Benefit Amount except to the extent that such tax liabilities would not have arisen but for a Controlled Delayed Business Instruction (or its implementation) where such Delayed Controlled Business Instruction is inconsistent with the operation of the relevant Delayed Business in the ordinary course of business in the 12 months prior to Closing ; or

8.15.5are Liabilities which the provisions of Schedules 9 and 10 state to be for the Seller’s account or which have actually been recovered under any policy of insurance held by the Seller or any member of the Seller’s Group.

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8.16If the Seller is of the opinion that any Controlled Business Instruction may result in any Liability that would fall to be indemnified pursuant to paragraph 8.15 above, the Seller shall use its reasonable endeavours to inform (and procure that the members of the Seller’s Group shall inform) the Purchaser of that opinion and the reasons for it as soon as reasonably practicable after reaching that opinion. The indemnity set out in paragraph 8.15 above shall not be affected or limited in any way by any failure of any member of the Seller’s Group to so inform the Purchaser.

8.17The Purchaser shall not be entitled to make any claim for damages against the Seller in respect of a breach of paragraph 8.4 otherwise than pursuant to a claim brought under paragraph 8.18.

8.18Subject to paragraph 8.13, the Seller shall procure that:

8.18.1in respect of Controlled Business Instructions that are not Seller Involvement Instructions, neither it nor any member of its Group, nor their respective directors, officers, employees and agents (excluding any Delayed Employees) (collectively, “Associated Persons”) shall act (or fail to act) fraudulently or negligently or with wilful default in connection with the implementation of any Controlled Business Instruction, and such persons shall take no steps which are intended to have the effect of preventing this implementation of a Controlled Business Instruction; and

8.18.2in respect of Seller Involvement Instructions, neither it nor any of its Associated Persons shall act (or fail to act) fraudulently or negligently or in wilful default in connection with the implementation of the Seller Involvement Instruction and shall take no steps which are intended to have the effect of preventing this implementation of a Seller Involvement Instruction,

provided that it shall not be a breach of this paragraph 8.18 (and shall, accordingly, not be acting with negligence or wilful default for the purposes of this paragraph) to carry out any act, or fail to act, if to do so is:

8.18.3required to implement a Controlled Business Instruction;

8.18.4required to comply with any Applicable Law;

8.18.5required to implement or comply with the terms of this Agreement or any Ancillary Agreement; or

8.18.6taken to mitigate any other loss or damage to the Controlled Delayed Business which the Seller (or the relevant Associated Person) believes, acting reasonably and in good faith, could be material in the context of that Controlled Delayed Business.

In any event, no claim shall be made by the Purchaser (and the Purchaser shall ensure that no member of the Purchaser’s Group shall make any claim) for any breach of any other provisions of this Agreement (or the provisions of any Ancillary Agreement) by the Seller (or any member of the Seller’s Group) that occurs in order to comply with any Controlled Business Instruction.

8.19Prior to the making of any claim under this Schedule 24 in respect of any matter, the parties shall use reasonable endeavours to escalate such matter first for consideration to the Delayed Business Representatives and then to the Purchaser’s and the Seller’s chief financial officers, for the purpose of seeking to resolve such matter within a period of 30 days following such escalation.

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8.20Subject in each case to Applicable Law, the Seller shall, in the period between Closing and the relevant Delayed Closing Date, promptly upon request by the Purchaser provide (or procure that any member of its Group shall provide) the Purchaser and its representatives with access to:

8.20.1any books and records of the Seller’s Group to the extent relating to any Controlled Delayed Business of the Seller; and

8.20.2any personnel of the Seller for the purposes of any requests for information from such personnel in relation to the Controlled Delayed Business.

For the avoidance of doubt, the parties shall take all steps necessary to ensure that no information is provided to the Purchaser or any person on behalf of the Purchaser which relates to any business of the Seller or any member of the Seller’s Group other than the Controlled Delayed Business.

8.21For the purposes of the Warranties deemed repeated by the Seller at Closing pursuant to Clause 9.1.1, ownership of the Delayed Businesses shall be deemed to have transferred to the Purchaser at Closing.

8.22During the period between the Closing Date and the Delayed Closing Date, funding for the Delayed Businesses shall continue to be provided by the Seller’s Group if any Delayed Business requires funds (for the purposes of working capital, acquisitions, capital expenditure or otherwise), and funds so provided, together with any financing costs and charges associated with making such funding available, shall be treated as a cost incurred by the relevant local seller entity in relation to the relevant Delayed Business for the purposes of the calculation of the Economic Benefit Amount in accordance with paragraph 10.2 of this Schedule, provided that such financing costs shall not exceed LIBOR plus 25 basis points (or the nearest equivalent reference rate having regard to the jurisdiction in which the relevant Delayed Business is operating), save with respect to any Delayed Businesses operating in jurisdictions where such financing costs would be inconsistent with the prevailing market, in which case the Seller shall be entitled, in its absolute discretion, to apply a rate consistent with the market in the relevant jurisdiction in which the Delayed Business is operating and shall provide evidence of such rate to the Purchaser if requested to do so.

Non-Controlled Delayed Businesses

8.23From Closing until the relevant Delayed Closing Date:

8.23.1the provisions of paragraph 8 of this Schedule shall not apply in respect of the Non-Controlled Delayed Businesses, with the exception of paragraphs 8.7, 8.11, 8.20, 8.21, 8.22, this paragraph 8.23 and paragraph 8.24 below, which shall apply if and to the extent permitted by Applicable Law;

8.23.2subject to paragraph 8.24, the provisions of paragraph 9 of this Schedule shall not apply in respect of the Non-Controlled Delayed Businesses; and

8.23.3if and to the extent permitted by Applicable Law, the provisions of Clause 5 (save that the words “other than in the ordinary and usual course of business” shall be treated as deleted from Clauses 5.1.2(xix), (xxi) and (xxiv)) and Schedule 21 will continue to apply to the Non-Controlled Delayed Businesses mutatis mutandis, and each Seller shall exercise such interests, rights and powers that such Seller has in respect of that Non-Controlled Delayed Business to the maximum extent that it is

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able in order to procure that the Non-Controlled Business is operated in accordance with Clause 5 and Schedule 21.

8.24With effect from the relevant Delayed Closing Date, the provisions of paragraph 9 of this Schedule shall apply in respect of the Non-Controlled Delayed Businesses mutatis mutandis, save that the first Quarterly Accounting Period shall be extended so that it commences at the Effective Time and ends on the relevant Delayed Closing Date.

8.25From Closing until 31 March 2016, the Seller shall provide the Purchaser with such assistance and information to which it does not otherwise have access as it reasonably requests in order for it to be able to calculate the necessary receivables to be recorded in respect of any payments that may be made under paragraph 9.14, including such monthly profit and loss forecast information as already exists and is reasonably available to the Seller or its Affiliates in relation to the Non-Controlled Delayed Businesses for the period up to the estimated relevant Delayed Closing Date.

9Economic Benefit Transfer

Economic benefit

9.1The Seller shall comply with the provisions of this paragraph 9, in relation to any Delayed Business, for each Quarterly Accounting Period in which such Delayed Business (including, in respect of a Stage 3 Delayed Business the entire Business up until the [***] Date and thereafter, the part of the Business that relates to the [***] and references to Delayed Business throughout paragraphs 9 and 10 of this Schedule 24 shall be construed accordingly) remains legally owned by it or any member of the Seller’s Group, provided that the first period for which the provisions of this paragraph 9 apply shall commence at the Effective Time and shall end on 31 October 2015 and the following period shall commence on 1 November 2015 and shall end on 31 December 2015.

9.2Within one month following the end of each Quarterly Accounting Period (or the Delayed Closing Date for the relevant Delayed Business, as applicable, which, in respect of a Stage 3 Delayed Business shall mean the [***] Termination Date and all references to the Delayed Closing Date in paragraphs 9 and 10 of this Schedule 24 shall be construed accordingly), the Seller shall produce and provide to the internal purchaser’s audit team of the Purchaser (and, at the Purchaser’s discretion, the external auditors) (the “Purchaser’s Audit Team”) a draft statement setting out the Economic Benefit Amount in respect of each Delayed Business for such Quarterly Accounting Period (or, if applicable, such part of the Quarterly Accounting Period as falls prior to the Delayed Closing Date for such Delayed Business). Each such statement shall be a “Draft Economic Benefit Statement”.

9.3It is intended that the Economic Benefit Amount shown in each Economic Benefit Statement is the amount that is necessary to be paid to the Purchaser by the Seller or by the Seller to the Purchaser, in order to put the Purchaser’s Group and the Seller’s Group in substantially the same economic position as they would have been in, taking into account any arrangements that would have been in place in respect of the relevant Delayed Businesses pursuant to any Ancillary Agreement, had such Delayed Businesses been transferred to the Purchaser at Closing without taking account, in either case, of any Tax effect for the Purchaser or the Seller in respect of such payment (the “Economic Benefit Objective”).

9.4The Seller and the Purchaser shall meet together regularly to consider in good faith whether there are any adjustments required to the provisions of this paragraph 9 in order

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for the Economic Benefit Statements to achieve the Economic Benefit Objective and (acting reasonably and in good faith) seek to agree such adjustments.

9.5The portion of the Economic Benefit Amount set out in the Draft Economic Benefit Statement in relation to each Delayed Business shall be calculated in the local currency for that Delayed Business, but any Economic Benefit Payment shall be paid pursuant to paragraph 9.14 of this Schedule in US dollars, for which purpose each amount in a currency other than US dollars shall be converted into US dollars at the spot reference rates quoted by the European Central Bank to convert a relevant local currency to US dollars (or, if there are no such rates, the spot reference rates quoted by the nearest equivalent institution) on the Business Day five days prior to the relevant payment date, and the sum of such converted US dollars amounts shall be the Economic Benefit Payment amount. The calculation of the Economic Benefit Amount set out in an Economic Benefit Statement shall only be converted into US dollars in accordance with this paragraph 9.5 and aggregated after the Economic Benefit Statement has been agreed or determined in accordance with this paragraph 9.

9.6The Seller shall, and shall procure that the members of the Seller’s Group (and, if applicable, its external accountants) shall, provide to the Purchaser’s Audit Team, without charge, such access to their personnel, books and records, calculations and working papers as the Purchaser’s Audit Team may reasonably request in connection with its review of the Draft Economic Benefit Statement, subject (where applicable) to the Purchaser obtaining from the relevant external accountants such undertakings in favour of the Purchaser and, as the case may be, the Seller, as the Seller may reasonably request, and provided that the Purchaser hereby undertakes to the Seller that it shall and it shall procure that each member of the Purchaser’s Audit Team shall (i) keep any such information which is commercially sensitive and does not relate exclusively to the Flu Group Businesses (the “Protected Information”) confidential and shall only disclose such information to, and discuss such information with, other members of that Purchaser’s Audit Team; (ii) be expressly prohibited from communicating (in any form) any Protected Information to any other employee, agent, adviser or consultant of any member of the Purchaser’s Group; and (iii) be subject to the above requirements whilst employed or engaged by any member of the Purchaser’s Group in any capacity (whether or not as a member of that Purchaser’s Audit Team). The provisions of Clause 12 (Confidentiality) of this Agreement shall apply mutatis mutandis to such information, including, for the avoidance of doubt, to allow (where permitted by that Clause) disclosure of information otherwise prohibited to be communicated to any agent, adviser or consultant of any party’s Group.

9.7No amendments shall be made to any Draft Economic Benefit Statement except in accordance with the provisions of paragraph 9.8 below.

9.8The Purchaser may dispute a Draft Economic Benefit Statement by notice in writing (in this Schedule, a “Dispute Notice”) delivered to the Seller by or on behalf of that Purchaser’s Audit Team in accordance with Clause 15.11 (Notices) of this Agreement within 30 days following receipt of the Draft Economic Benefit Statement. Any Dispute Notice shall specify (i) which items of the Draft Economic Benefit Statement are disputed; (ii) the reasons therefor, making specific reference (where relevant and reasonably possible) to the parts of this Schedule which the Purchaser’s Audit Team asserts have not been complied with in preparing the relevant statement; and (iii) to the extent practicable, any adjustments that the Purchaser’s Audit Team considers should be made to the Draft Economic Benefit

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Statement, it being understood that the Purchaser can only include an item in a Dispute Notice if the amount under dispute of that individual item exceeds US$100,000.

9.9Any Dispute Notice shall be accompanied by all relevant supporting documentation and working papers on which the Purchaser’s Audit Team wishes to rely, it being acknowledged by the Purchaser that it shall procure that its Purchaser’s Audit Team shall provide further documentation to support its claims promptly on reasonable request by the Seller or, where relevant, the Economic Benefit Expert. Only those items or amounts specified in a Dispute Notice shall be treated as being in dispute (the “Disputed Items”) and no amendment may be made by any party, or any Economic Benefit Expert, to any items or amounts which are not Disputed Items.

9.10If the Purchaser’s Audit Team does not serve a Dispute Notice under and within the time period set out in paragraph 9.8 above, the Draft Economic Benefit Statement shall constitute the “Economic Benefit Statement” for the Seller in respect of the relevant Quarterly Accounting Period to which that Economic Benefit Statement relates.

9.11If the Purchaser’s Audit Team does serve a Dispute Notice under and within the time period set out in paragraph 9.8 above, the Seller shall use its reasonable endeavours to resolve the Disputed Items as soon as reasonably practicable (with the Purchaser acting through its Purchaser’s Audit Team) and either:

9.11.1if the parties reach agreement on the Disputed Items within 10 Business Days of the service of the relevant Dispute Notice (or such longer period as they may agree in writing), the Draft Economic Benefit Statement shall be amended to reflect such agreement and shall then constitute the “Economic Benefit Statement” in respect of the relevant Quarterly Accounting Period to which that Economic Benefit Statement relates; or

9.11.2if the parties do not reach agreement in accordance with paragraph 9.11.1 above, either party may refer the dispute to such individual at an independent firm of chartered accountants of international repute as the parties may agree or, failing such agreement (including such firm and/or individual not accepting such appointment), within two Business Days of expiry of the period described in paragraph 9.11.1 above, to such independent firm of chartered accountants of international repute in London as the President of the Institute of Chartered Accountants in England and Wales may, on the application of either party, nominate (the “Economic Benefit Expert”), on the basis that the Economic Benefit Expert is to make a decision on the dispute and notify the parties of its decision within three weeks of receiving the reference or such longer reasonable period as the Economic Benefit Expert may determine.

9.12The Purchaser shall bear the costs in relation to the review of (and any dispute in relation to) any Draft Economic Benefit Statement.

9.13In any reference to the Economic Benefit Expert in accordance with paragraph 9.11 above:

9.13.1the Economic Benefit Expert shall act as expert and not as arbitrator and shall be directed to determine any dispute in accordance with the Accounting Standards and paragraph 5 of this Schedule and (if necessary) having regard to the Economic Benefit Objective;

9.13.2the decision of the Economic Benefit Expert shall, in the absence of fraud or manifest error, be final and binding on the parties, and the Draft Economic Benefit

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Statement shall be amended as necessary to reflect the decision of the Economic Benefit Expert and, as amended, shall be the “Economic Benefit Statement” in respect of the relevant Quarterly Accounting Period to which that Economic Benefit Statement relates;

9.13.3the costs of the Economic Benefit Expert shall be paid by the Purchaser; and

9.13.4the parties shall respectively provide or procure the provision of the Economic Benefit Expert of all such information as the Economic Benefit Expert shall reasonably require, including access to their respective advisers and their respective books, records and personnel.

9.14As soon as reasonably practicable, and in any event within five Business Days following the agreement or determination of the Economic Benefit Statement in respect of any Quarterly Accounting Period:

9.14.1the Seller or its nominated Affiliate shall, if the Economic Benefit Amount set out in the Economic Benefit Statement is a positive number, pay the Purchaser or its nominated Affiliate, or procure the payment to the Purchaser or its nominated Affiliate of, an amount in cleared funds equal to that Economic Benefit Amount, such payment being an “Economic Benefit Payment”;

9.14.2the Purchaser shall, if the Economic Benefit Amount set out in the Economic Benefit Statement is a negative number, pay to the Seller or its nominated Affiliate, or procure the payment to the Seller of or its nominated Affiliate, an amount in cleared funds equal to that Economic Benefit Amount expressed as a positive number, such payment being a “Reverse Payment”; and

9.14.3any Economic Benefit Payment made by the Seller or its nominated Affiliate to the Purchaser or its nominated Affiliate and any Reverse Payment made by the Purchaser or its nominated Affiliate to the Seller or its nominated Affiliate shall be treated:

(i)so far as possible, as an adjustment of the consideration paid by Seqirus UK Limited for the Swiss Transferred Intellectual Property (provided that in no circumstances shall the adjustment result in an allocation to the Swiss Transferred Intellectual Property of less than [***]); thereafter:

(ii)first as an adjustment of the consideration paid for the Delayed Businesses pro rata to the initial allocation of the Purchase Price among the Businesses; and

(iii)second, as an adjustment of the consideration paid by Seqirus Inc. for the US Business,

and in each case the consideration shall be deemed to have been reduced or increased (as applicable) by the amount of such payment.

9.15If the Purchaser reasonably believes that an Economic Benefit Payment made or procured by the Seller to the Purchaser in accordance with paragraph 9.14.1 will be subject to Tax in the hands of the Purchaser or any member of the Purchaser’s Group:

9.15.1the Purchaser shall, as soon as reasonably practicable, give the Seller written notice of such belief; and

9.15.2following the giving of such notice, the Seller and the Purchaser shall, and shall

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procure that the members of their respective Groups will (at the Purchaser’s cost), co-operate with each other in good faith and use all commercially reasonable efforts to reduce or mitigate the amount of any such Tax without prejudicing the interests of the Seller.

9.16If the Seller reasonably believes that a Reverse Payment made or procured by the Purchaser to the Seller in accordance with paragraph 9.14.2 will be subject to Tax in the hands of the Seller or any member of the Seller’s Group:

9.16.1the Seller shall, as soon as reasonably practicable, give the Purchaser written notice of such belief; and

9.16.2following the giving of such notice, the Seller and the Purchaser shall, and shall procure that the members of their respective Groups will (at the Seller’s cost) co-operate with each other in good faith and use all commercially reasonable efforts to reduce or mitigate the amount of any such Tax without prejudicing the interests of the Purchaser.

10Preparation of Economic Benefit Statements

10.1For the purposes of this paragraph 10:

“Bad Debt”	has the meaning given in paragraph 10.2.13;
“Customer”	means any person or entity that acquires and/or intends to acquire any of the Products or services provided by the Delayed Business (including any members of the Seller’s Group or the Purchaser’s Group);
“Employee Costs”	means the FTE Costs incurred by the Seller’s Group in connection with the employment of the Delayed Employees of the relevant Delayed Business by the Seller’s Group, as provided in paragraph 11.3 of Schedule 9;
“FTE Costs”	the actual costs incurred by Seller or its Affiliates (less for the avoidance of doubt any costs the provisions of Schedules 9 and 10 state to be for the Seller’s account or which have actually been recovered under any policy of insurance held by the Seller or any member of the Seller’s Group), plus all documented costs and expenses incurred by Seller or its Affiliates in connection with providing and administering all Employee related services including, but not limited to, statutory benefits, third party fees, costs and expenses that are directly or indirectly charged to Seller or its Affiliates, out-of-pocket costs, personnel costs including personnel costs for administrative tasks, IT costs including incremental costs for IT licenses required to perform the Employee related services but only to the extent not otherwise covered by the Transitional Services Agreement, materials, supplies and travel expenses;
“Landed Cost”	means, in respect of each Product, any costs incurred by the relevant Local Seller Entity in relation to that Product in

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	respect of freight, insurance, duty, import and transportation costs;
“Local Seller Entity”	means, in respect of a Delayed Business, the member of the Seller’s Group that owns and operates such Delayed Business;
“Net Sales”	means net sales received from the sale and distribution of Products or the provision of services, in each case, by the relevant Local Seller Entity to any Customer plus any other revenue received in respect of the Delayed Business, but excluding (for the avoidance of doubt) any amounts received by the Seller, any other member of the Seller’s Group or any sub-contractor in respect of VAT for which any member of the Seller’s Group is liable to account to any Tax Authority. For these purposes, net sales shall be determined in accordance with Accounting Standards. The deductions booked by the Seller to calculate the recorded net sales from gross sales shall include the following: (a)normal trade, quantity and cash discounts; (b)VAT and other Taxes levied from Customers in relation to the sale of Products to the extent included in the gross amount invoiced; (c)amounts repaid or credited by reasons of defects, rejections, recalls or returns, excluding amounts in respect of VAT included in the amounts so repaid or credited, unless the Seller or a member of the Seller’s Group is unable (having used reasonable diligent commercial endeavours) to recover such amounts in respect of VAT by way of repayment or credit; (d)rebates and chargebacks to Customers and Third Parties, excluding amounts in respect of VAT included in such rebates and chargebacks, unless the Seller or a member of the Seller’s Group is unable (having used reasonable diligent commercial endeavours) to recover such amounts in respect of VAT by way of repayment or credit); (e)any amounts recorded in gross sales associated with goods provided to customers for free, with the exception of samples; (f)amounts provided or credited to customers through coupons, other discount programmes and co-pay assistance programmes, and with respect to the calculation of Net Sales: (i)Net Sales shall only include the value charged or invoiced on the first sale to a Customer; (ii)if a Product is delivered to the Customer before

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	being invoiced (or is not invoiced), Net Sales will be calculated at the time all the revenue recognition criteria under Accounting Standards are met; and (iii)revenue deduction adjustments which relate to any event prior to Closing shall be excluded;
“Product”	means any of the products Commercialised by the relevant Delayed Business, and “Products” shall be construed accordingly;
“Third Party”	means any person other than (i) the Purchaser and members of the Purchaser’s Group and (ii) the Seller and members of the Seller’s Group;
“Transfer Price”	means: (a)in respect of each Product supplied to the Local Seller Entity by a member of the Purchaser’s Group for distribution, any amount to be paid by the Seller (or its Affiliate) for the Product, as agreed between the Seller (or its Affiliate) and the Purchaser in writing from time to time; (b)in respect of each Product provided to the Local Seller Entity by a Local Purchaser Entity for distribution, any amount paid by the Local Seller Entity for the Product, as agreed between the Seller (or its Affiliate) and the Purchaser in writing from time to time; and (c)in respect of each Product provided to the Local Seller Entity by a Third Party supplier for distribution, any amount paid by the Local Seller Entity for the Product to such Third Party; and
“Working Hours”	means 9 a.m. to 5 p.m. on a Business Day at the relevant working location.

10.2The “Economic Benefit Amount” of a Delayed Business in respect of a given period shall be calculated as:

[***]

10.3The parties agree that:

[***]

10.4The Seller will provide the Draft Economic Benefit Statement together with such supporting information as is reasonably required to enable the Purchaser to review the Economic Benefit Statement, and the Seller and the Purchaser shall meet together regularly to agree the scope of such supporting information.

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Appendix 1
Delayed Businesses

[***]

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Schedule 25
Delayed Local Payments

[***]

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Schedule 26
Supplementary provisions relating to management of claims and investigations (Clause 8.15)

1General provisions

1.1This Schedule 26 shall take effect from Closing.

1.2In this Schedule 26:

“Privileged Information” has the meaning given to it in paragraph 2.1 of this Schedule;

“Claims Contact” means an individual that shall be nominated by a party to act as the contact point in relation to one or more claims or investigations relating to the Flu Group, including in relation to new claims or investigations that may arise in the future; and

“Claims Dispute” has the meaning given to it in paragraph 4.1 of this Schedule.

2Common Interest

2.1The parties recognise that there is a common interest between them in respect of all factual and legal issues in connection with claims and investigations relating to the Flu Group, and that these mutual interests may be best served by sharing information in relation to such issues that is confidential and protected by a legal privilege, including attorney work-product and legal advice, in relation to those claims and investigations (“Privileged Information”).

2.2The provision of Privileged Information by one party to the other party is not intended to and does not amount to a waiver of legal privilege and the party receiving such information shall continue to ensure that the legal privilege attaching to it is maintained accordingly. Any privilege may be waived only by the party that discloses the Privileged Information.

2.3Except where disclosure of Privileged Information to a third party is permitted by another provision of this paragraph 2, each party shall to the extent permitted by Applicable Law take reasonable steps to ensure that the Privileged Information remains privileged against any other third party including, for the avoidance of doubt, by giving evidence that the Privileged Information remains privileged as against any other third party.

2.4Any Privileged Information shared by a party is to be used solely for matters arising out of, or related to, the management, prosecution or defence of the claim or investigation relating to the Flu Group to which that Privileged Information relates.

2.5Each party agrees to keep all Privileged Information disclosed to it by or on behalf of the other strictly confidential and not to disclose it, other than as required by law or as permitted by this Agreement, without the prior written consent of the other party. By way of exception to the foregoing, a party may disclose such Privileged Information to its employees, legal representatives, or agents who (in each case) need to have access to such materials for the purposes of the joint defence or common legal interest in the management and prosecution or defence of claims and investigations relating to the Flu Group, provided that any such recipient agrees, and the party disclosing the Privileged Information undertakes to procure that such recipient agrees, to keep the Privileged Information strictly confidential and privileged on substantially identical terms to those set out in this paragraph 2.

2.6If required by any Applicable Law or any Governmental Entity, a party may disclose

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Privileged Information disclosed to it by or on behalf of the other to the minimum extent required, provided that it shall, so far as permitted by law:

2.6.1inform the other party promptly upon becoming aware of such requirement; and

2.6.2reasonably cooperate with any lawful effort of the other party to protect such Privileged Information from such disclosure.

2.7Each party shall ensure that the sharing of any competitively sensitive information, to the extent necessary for present purposes, is in strict compliance with all Applicable Laws including, all applicable competition and antitrust laws.

2.8For the purposes of this paragraph 2, references to the parties shall include, in each case, their respective Affiliates and each party shall procure that each of its Affiliates shall comply with the requirements set out in this paragraph 2.

3Litigation Holds

3.1Each party shall ensure that, as from Closing, it and its Affiliates maintain any litigation hold put in place by the Seller or any of its Affiliates before Closing in relation to any claim or investigation relating to the Flu Group Companies that was in existence, known, pending or threatened before Closing.

4Disputes relating to claims and investigations relating to the Flu Group

4.1Where a dispute, controversy or claim arises between the parties concerning:

4.1.1any claim or investigation brought or made by a third party (including, without limitation any governmental Entity) against either Party or an Affiliate relating to the Flu Group (other than such a dispute, controversy or claim that relates to the existence, validity or termination of this Agreement, which shall, for the avoidance of doubt, be resolved in accordance with Clause 15.14.2 of this Agreement); or

4.1.2the exercise of either Party’s rights or obligations pursuant to Clauses 8.9, 8.10, 8.12 and 8.13 of this Agreement (each a “Claims Dispute”),

then, unless otherwise agreed:

4.1.3within five Business Days of either party giving notice of a Claims Dispute to the other, the parties shall refer the Claims Dispute to their respective Group Heads of Litigation, who shall meet (in person, by video or telephonically) and attempt in good faith to resolve the Claims Dispute as soon as reasonably practicable; and

4.1.4if the respective Group Heads of Litigation do not resolve the Claims Dispute within five Business Days of either party giving notice of a Claims Dispute to the other, then the parties shall refer the Claims Dispute to their respective General Counsel, who shall meet (in person, by video or telephonically) and attempt in good faith to resolve the Claims Dispute as soon as reasonably practicable.

4.2If the Claims Dispute remains unresolved following the resolution process described at paragraph 4.1 or in any event within 15 Business Days of either party giving notice of a Claims Dispute to the other, the parties shall consult on whether to refer the Claims Dispute to confidential mediation or arbitration, rather than to the courts of England and Wales as provided for by Clause 15.14.2 of this Agreement.

4.3If the Claims Dispute remains unresolved within 20 Business Days of either party giving notice of a Claims Dispute to the other, either party may submit the Claims Dispute for

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resolution in accordance with Clause 15.14.2 of this Agreement.

4.4Nothing in this paragraph 4 shall prevent either party from applying for interim relief whilst the parties attempt to resolve a Claims Dispute.

5Claims Contact

5.1Provided that reasonable notice is provided to the other party:

5.1.1each party may appoint an additional Claims Contact or replace an existing Claims Contact; and

5.1.2a Claims Contact may appoint or designate another person to act as the Claims Contact in respect of a specific claim or group of claims or investigations.

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Table of Contents

Contents	Page
1Interpretation	1
2Sale and Purchase of the Flu Group	28
3Consideration	33
4Conditions	35
5Pre-Closing	39
6Closing	50
7Post-Closing Adjustments	52
8Post-Closing Obligations	54
9Warranties	68
10Limitation of Liability	69
11Claims	74
12Confidentiality	76
13Insurance	77
14Netherlands Business	79
15Other Provisions	79
Schedule 1 Details of the Share Sellers, Shares, etc. (Clause 2.1)	87
Schedule 2 Flu Group Companies	88
Schedule 3 The Properties Part 1 (Company Real Property)	90
Schedule 3 The Properties Part 2 (Transferred Real Property)	91
Schedule 3 The Properties Part 3 Terms relating to the Company Real Property	92
Schedule 3 The Properties Part 4A Terms relating to the Transferred Real Property (United States)	93
Schedule 3 The Properties Part 4B Terms relating to the German Carve-out Leases	98
Schedule 4 Flu Group Intellectual Property Rights and Flu Group Intellectual Property Contracts (Clause 2.3)	104
Schedule 5 Excluded Contracts (Clause 1.1)	106
Schedule 6 Permitted Encumbrances (Clause 1.1)	107
Schedule 7 Product Approvals, Pipeline Product Approvals and Product Applications Part 1 Terms relating to the Product Approvals, Pipeline Product Approvals and Product Applications	108
Schedule 7 Product Approvals, Pipeline Product Approvals and Product Applications Part 2 List of Products, Products Under Registration and Pipeline Products	111
Schedule 8 Transferred Contracts (Clause 2.3)	112
Schedule 9 Employees (Clause 2.4.1)	118
Schedule 10 Group Retirement Benefit Arrangements (Clause 2.4.2)	130
Schedule 11 Allocation of Purchase Price (Clause 3.3)	134
Schedule 12 VAT (Clause 3.4)	135
Schedule 13 Closing Obligations (Clause 6)	136
Schedule 14 Post-Closing Adjustments (Clause 7)	139
Schedule 15 US Government Contracts (Clause 1.1)	145
Schedule 16 Warranties given under Clause 9.1	149
Schedule 17 Warranties given by the Purchaser under Clause 9.4	168
Schedule 18 Excluded Employees (Clause 1.1)	169
Schedule 19 International Assignees (Clause 1.1)	170
Schedule 20 Statement of Net Assets (Clause 1.1) Part 1 Statement of Net Assets	171
Schedule 20 Statement of Net Assets (Clause 1.1) Part 2 Statement of Net Assets Rules	172

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Schedule 21 Exceptions to Pre-Closing Obligations (Clause 5.2)	175
Schedule 22 Competition Authorities	177
Schedule 23 MF59® Platform Intellectual Property Rights	178
Schedule 24 Delayed Jurisdictions	179
Schedule 25 Delayed Local Payments	201
Schedule 26 Supplementary provisions relating to management of claims and investigations (Clause 8.15)	202

TABLE OF SCHEDULES

(The following schedules and exhibits to the agreement identified above have been omitted in reliance upon Rule 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish such schedules and exhibits to the Commission supplementally upon request.)

Schedule No.	Schedule Name
Schedule 3, Part 1	Company Real Property
Schedule 3, Part 2	Transferred Real Property
Schedule 4	Flu Group Intellectual Property Rights and Flu Group Intellectual Property Contracts
Schedule 5	Excluded Contracts
Schedule 6	Permitted Encumbrances
Schedule 7, Part 2	List of Products, Products under Registration and Pipeline Products
Schedule 11	Allocation of Purchase Price
Schedule 14, Part 3	Illustrative Closing Statement
Schedule 15, Part 1	List of US Government Contracts
Schedule 18	Excluded Employees
Schedule 19	International Assignees
Schedule 20, Part 1	Statement of Net Assets
Schedule 23	MF59® Platform Intellectual Property Rights
Schedule 24 Appendix 1	Delayed Businesses
Schedule 25	Delayed Local Payments

206

EX-4.8

Exhibit 4.8

Confidential portions of this exhibit have
been omitted and filed separately with the
Securities and Exchange Commission

EXECUTION VERSION

DATED          2 March                           2015

SETFIRST LIMITED

and

NOVARTIS HOLDING AG

and

NOVARTIS FINANCE CORPORATION

and

GLAXOSMITHKLINE PLC

and

NOVARTIS AG

and

GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED

SHAREHOLDERS’ AGREEMENT
in relation to GlaxoSmithKline Consumer Healthcare Holdings Limited

Slaughter and May
One Bunhill Row
London EC1Y 8YY
(RJZS/SVKW/CLXJ)

CONTENTS

		Page
1.	DEFINITIONS AND INTERPRETATION	1
2.	ESTABLISHMENT OF THE COMPANY	22
3.	BUSINESS OF THE COMPANY’S GROUP	23
4.	RESERVED MATTERS	24
5.	BUSINESS PLAN	30
6.	SHAREHOLDER APPOINTMENTS	30
7.	EXECUTIVE MANAGEMENT	32
8.	PROCEEDINGS OF DIRECTORS	33
9.	ACCESS TO INFORMATION AND ACCOUNTS	36
10.	ALLIANCE MARKETS	39
11.	DIVIDENDS	39
12.	PRESENTATIONAL CURRENCY	41
13.	FUNDING AND CASH MANAGEMENT	41
14.	TAXATION	42
16.	RESTRICTIONS ON DEALING WITH SHARES	50
17.	PERMITTED TRANSFERS	50
18.	NOVARTIS TRANSFER AND GSK RIGHT OF FIRST REFUSAL	51
19.	GSK TRANSFER AND NOVARTIS RIGHT OF FIRST REFUSAL AND TAG RIGHT	54
20.	NOVARTIS PUT OPTION	57
21.	TRANSFER OF SHARES ON DEFAULT	63
22.	COMPLETION OF SHARE TRANSFERS	67
23.	INTERACTION OF NOTICES	68
24.	EFFECT OF DEED OF ADHERENCE	68

25.	SHAREHOLDER UNDERTAKINGS	68
26.	UNDERTAKINGS BY THE COMPANY	71
27.	PROTECTIVE COVENANTS	71
28.	CONFIDENTIALITY	74
29.	ANNOUNCEMENTS	76
30.	TERMINATION	76
31.	GUARANTEE	77
32.	MISCELLANEOUS	79
33.	ENTIRE AGREEMENT	80
34.	DISPUTE RESOLUTION	81
35.	CONFLICT WITH ARTICLES OF ASSOCIATION	82
36.	NOTICES	82
37.	REMEDIES AND WAIVERS	83
38.	THIRD PARTY RIGHTS	84
39.	FURTHER ASSURANCE	84
40.	NO PARTNERSHIP	85
41.	COSTS AND EXPENSES	85
42.	INVALIDITY	85
43.	COUNTERPARTS	85
44.	LANGUAGE	86
45.	GOVERNING LAW AND JURISDICTION	86
46.	AGENT FOR SERVICE	86
SCHEDULE 1 Business Plan		88
SCHEDULE 2 Form of Deed of Adherence		89
SCHEDULE 3 Price Determination		90

SCHEDULE 4 ABAC Certification	93
SCHEDULE 5 Shareholder Loans: Terms	94

AGREED TERMS DOCUMENTS

[***]

TABLE OF SCHEDULES

(The following schedules and exhibits to the agreement identified above have been omitted in reliance upon Rule 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish such schedules and exhibits to the Commission supplementally upon request.)

Schedule No.	Schedule Name
List of Agreed Terms Documents	Articles of Association CEO Terms of Reference Completion Board Resolutions Alliance Market Reporting Template
Schedule 1	Business Plan
Schedule 2	Form of Deed of Adherence
Schedule 4	ABAC Certification
Schedule 5	Shareholder Loans: Terms

THIS AGREEMENT is made on         2 March                       2015

BETWEEN:

1.SETFIRST LIMITED, a company incorporated under the laws of England under registered number 2332323 whose registered office is at 980 Great West Road, Brentford, Middlesex TW8 9GS  (the “First GSK Shareholder”);

2.NOVARTIS HOLDING AG, a company limited by shares (Aktiengesellschaft) registered in the Commercial Register of Basel-Stadt, Switzerland under number CHE-103.959.690 whose registered office is at Lichstrasse 35, 4056 Basel (the “First Novartis Shareholder”);

3.NOVARTIS FINANCE CORPORATION, a company incorporated under the laws of New York with an office at 230 Park Avenue, New York, NY 10169 (the “Second Novartis Shareholder”);

4.GLAXOSMITHKLINE PLC, a company incorporated under the laws of England under registered number 3888792 whose registered office is at 980 Great West Road, Brentford, Middlesex TW8 9GS (“GSK”);

5.NOVARTIS AG, a share corporation (Aktiengesellschaft) registered in the Commercial Register of the Canton of Basel-Stadt, Switzerland under number CHE-103.867.266 and whose address is Lichstrasse 35, 4056 Basel (“Novartis”); and

6.GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED, a company incorporated under the laws of England under registered number 8998608 whose registered office is at 980 Great West Road, Brentford, Middlesex TW8 9GS (the “Company”).

WHEREAS:

(A)The Shareholders (as defined below) have agreed to establish the Company to own and operate the Business (as defined below) and to enter into this agreement for the purpose of regulating the management of the Company, their relationship with each other and certain aspects of the affairs of, and their dealings with, the Company.

(B)Each Guarantor (as defined below) has agreed to guarantee the obligations of its Guaranteed Parties (as defined below) under this agreement.

IT IS AGREED as follows:

1.DEFINITIONS AND INTERPRETATION

1.1In this agreement:

[***] [***];

“A Director”	means a Director appointed by the First GSK Shareholder pursuant to clause 6.1 (Shareholder Appointments) and unless otherwise stated includes the duly appointed alternate of such a Director (with the initial A Directors being those persons notified to the Company pursuant to clause 2.1(B) (Establishment of the Company));
“A Share Acquisition Notice”	has the meaning given in clause 19.3 (GSK Transfer and Novartis Right of First Refusal and Tag Right);
“A Share Conditions”	has the meaning given in clause 19.3(A) (GSK Transfer and Novartis Right of First Refusal and Tag Right);
“A Share Offer”	has the meaning given in clause 19.2 (GSK Transfer and Novartis Right of First Refusal and Tag Right);
“A Share Offer Notice”	has the meaning given in clause 19.2 (GSK Transfer and Novartis Right of First Refusal and Tag Right);
“A Share Offer Period”	has the meaning given in clause 19.3 (GSK Transfer and Novartis Right of First Refusal and Tag Right);
“A Share Offer Price”	has the meaning given in clause 19.2(J) (GSK Transfer and Novartis Right of First Refusal and Tag Right);
“A Shares”	means the A ordinary shares in the capital of the Company having the rights and restrictions set out in the Articles of Association, and which, as at the date of this agreement, represent 63.5 per cent. of the ordinary share capital of the Company;
“A/B Share Purchaser”	has the meaning given in clause 19.2 (GSK Transfer and Novartis Right of First Refusal and Tag Right);
“ABAC Policies and Procedures”	means, in relation to any company, its policies, systems, controls and procedures applicable from time to time that (i) are designed to prevent it and its Associated Persons from violating any applicable Anti-Bribery Law, and (ii) provide for internally reporting violations and suspected violations of any applicable Anti-Bribery Law and

2

	any applicable generally accepted standards of business ethics and conduct, and for ensuring that all such reports are fully investigated and acted upon as appropriately;
“ABAC Programme”	has the meaning given in clause 25.4(B) (Shareholder Undertakings);
“Accounting Period”	means the period commencing on 1 January in any year and ending on 31 December in the same year or such other accounting period as may be adopted by the Company in accordance with clause 4 (Reserved Matters);
“Accounting Policies”	means the accounting policies, practices and procedures of GSK’s Group as at the Completion Date, as they may be amended or varied from time to time in accordance with the provisions of this agreement, including clause 4 (Reserved Matters);
“Accounts”	in respect of any Accounting Period, means the audited consolidated accounts of the Company’s Group for such Accounting Period produced in accordance with the Accounting Policies;
“Adjusted Put Closing Balance Sheet”	has the meaning given in clause 20.12 (Novartis Put Option);
“Affiliate”	means, in relation to any person (the “relevant person”): (i)any person Controlled by the relevant person (whether directly or indirectly); (ii)any person Controlling (directly or indirectly) the relevant person; and (iii)any person Controlled (whether directly or indirectly) by any person Controlling the relevant person, provided that any Delayed Business shall not constitute an “Affiliate” of the Company unless, and until, the relevant Delayed Closing Date for such Delayed Business.
“Agreed Terms”	means, in relation to a document, such document in the terms agreed between the Shareholders’ and initialled for identification purposes by GSK’s

3

	Lawyers and Novartis’s Lawyers, with such alterations as may be agreed in writing between the parties from time to time;
“Alliance Market Business”	has the meaning given to it in the Contribution Agreement;
“Alliance Market Distribution Agreement”	has the meaning given in clause 10.1;
“Alliance Market Financial Target Report”	means an annual report on performance targets (on an aggregate basis) in respect of Alliance Market Businesses in the form set out in the Alliance Market Reporting Template;
“Alliance Market Quarterly Report”	means a quarterly report in respect of the Alliance Market Businesses in the form set out in the Alliance Market Reporting Template;
“Alliance Market Reporting Template”	means the document entitled “Alliance Markets Reporting: Information and Governance Requirements” in the Agreed Terms;
“Alliance Market Transfer Pricing Report”	means an annual report setting out any transfer pricing changes and underlying margin analysis, in particular gross margin and advertising and promotion spend actuals and targets by market, in the form set out in the Alliance Market Reporting Template;
“Anti-Bribery Law”	means (i) the Bribery Act, (ii) the FCPA, as amended, and the rules and regulations issued thereunder, and (iii) any other Law that relates specifically to bribery and/or corruption;
“Articles of Association”	means the articles of association of the Company, in the Agreed Terms, as amended from time to time in accordance with the provisions of this agreement, including clause 4 (Reserved Matters);
“Associated Person”	means, in relation to a person, a person (including any director, officer, employee, agent or other intermediary) who performs services for or on behalf of that person or who holds shares of capital stock, partnership interests, limited liability company membership interests or units, shares, interests or other participations in that person (in each case when performing such services or acting

4

	in such capacity);
“B Director”	means a director of the Company appointed by the First Novartis Shareholder pursuant to clause 6.2 (Shareholder Appointments) and unless otherwise stated includes the duly appointed alternate of such a Director (with the initial B Directors being those persons notified to the Company pursuant to clause 2.1(C) (Establishment of the Company));
“B Share Acquisition Notice”	has the meaning given in clause 1.3 (Novartis Transfer and GSK Right of First Refusal);
“B Share Conditions”	has the meaning given in clause 18.3(A) (Novartis Transfer and GSK Right of First Refusal);
“B Share Offer”	has the meaning given in clause 18.2 (Novartis Transfer and GSK Right of First Refusal);
“B Share Offer Notice”	has the meaning given in clause 18.2 (Novartis Transfer and GSK Right of First Refusal);
“B Share Offer Period”	has the meaning given in clause 18.3 (Novartis Transfer and GSK Right of First Refusal);
“B Share Offer Price”	has the meaning given in clause 18.2(J) (Novartis Transfer and GSK Right of First Refusal);
“B Share Purchaser”	has the meaning given in clause 18.2 (Novartis Transfer and GSK Right of First Refusal);
“B Shares”	means the B ordinary shares in the capital of the Company having the rights and restrictions set out in the Articles of Association and which, as at the date of this agreement, represent 36.5 per cent. of the ordinary share capital of the Company;
“Base Cash Amount”	means an amount equal to [***];
“Board”	means the board of directors of the Company;
“Borrowings”	means, in relation to any person or persons, the aggregate of all borrowings and indebtedness in the nature of borrowings of such person or persons for the payment or repayment of money, including any bank debit balances, bonds, notes, loan stock, debentures or other debt instruments, forex, interest rate or other swaps, hedging obligations, bills of exchange, recourse obligations on factored

5

	debts and obligations under other derivative instruments, any overdraft or any finance lease and also any interest on the foregoing items, but excluding:
	(i)any amount owing under any Shareholder Loans;
	(ii)trade credit and bank account overdraft positions, each in the ordinary course of trading (including any intra-day or daylight bank overdraft facilities);
	(iii)interest rate and foreign exchange hedging activities carried out in the ordinary course for non-speculative purposes;
	(iv)acceptances of trade bills in respect of purchases in the ordinary course of trading; and
	(v)any amount owing from one member of the Company’s Group to another member of the Company’s Group;
“Bribery Act”	means the UK Bribery Act 2010;
“Business”	means the business of the Company’s Group from time to time, as described in clause 3 (Business of the Company’s Group), as may be amended in accordance with the provisions of this agreement, including clause 4 (Reserved Matters);
“Business Day”	means a day which is not a Saturday, a Sunday or a public holiday in the Canton of Basel-Stadt (Switzerland), New York or the United Kingdom;
“Business Plan”	means any initial or revised business plan for the Company’s Group (including any Delayed Businesses and Alliance Market Businesses, each as defined in the Contribution Agreement) adopted by the Board from time to time in accordance with the provisions of this agreement, including clause 5 (Business Plan);
“Cash”	means cash at bank and cash in hand (and not cash equivalents or other instruments);

6

“CEO”	means the chief executive officer of the Company;
“CEO Terms of Reference”	means the terms of reference under and subject to which management authority is delegated by the Board to the CEO (the initial form of which is in the Agreed Terms) or, as the context requires, any subsequent or amended terms of reference adopted by the Company in accordance with the provisions of this agreement, including clause 4 (Reserved Matters);
“CFO”	means the chief financial officer of the Company;
“Chairman”	means the chairman of the Board;
“Company D&O Policy”	has the meaning given in clause 25.3 (Shareholder Undertakings);
“Competing Business”	means any business involved in the researching and developing, manufacturing, distributing, marketing, selling, promotion and/or other commercialisation of any Consumer Healthcare Product(s);
“Completion”	has the same meaning as given to the defined term “Closing” in the Contribution Agreement;
“Completion Board Resolutions”	means the written resolutions of the Board, in the Agreed Terms, authorising certain matters pursuant to the Articles of Association, as amended from time to time in accordance with this agreement, including clause 4 (Reserved Matters);
“Completion Date”	means the date on which Completion occurs;
“Connected Persons”	means, in relation to a party, any member of its Group and any officer, employee, agent, adviser or representative of that party or any member of its Group, in each case, from time to time;
“Consumer Healthcare Product”	means, in respect of any jurisdiction, any oral care, nutritional care, skin care or other cosmetic or healthcare product or device of any kind, in each case, for the treatment of, or use by, human beings which is available without, or both with and without, a prescription, but excluding any such product or device that is subject to the same regulatory classification and/or regulatory treatment (including in relation to advertising) as a product or device

7

	that is available only with a prescription;
“Contribution Agreement”	means the contribution agreement entered into on 22 April 2014, and as amended and/or restated from time to time, between GSK, Novartis and the Company, pursuant to which GSK and Novartis agree to transfer (or procure the transfer of) their respective businesses in relation to (amongst other things) Consumer Healthcare Products (subject to the exclusions and terms and conditions of such agreement) to the Company;
“Control”	means, in relation to a person, the ability of another person to ensure that the activities and business of the first mentioned person are conducted in accordance with the wishes of that other person (whether by exercise of contractual rights, ownership of shares or otherwise), and a person shall be deemed to have Control of a body corporate if that person has the contractual right to procure that the activities and business of that body corporate are conducted in accordance with that person’s wishes or if that person possesses the majority of the issued share capital or the voting rights in that body corporate or the right to receive the majority of the income of that body corporate on any distribution by it of all of its income or the majority of its assets on a winding up (and “Controller”, “Controlled” and “Controlling” shall be construed accordingly);
“CTA 2010”	means the UK Corporation Tax Act 2010;
“Default Notice”	has the meaning given in clause 21.2(B) (Transfer of Shares on Default);
“Default Price”	has the meaning given in clause 21.2(A) (Transfer of Shares on Default);
“Default Transfer Conditions”	has the meaning given in clause 21.2(C)(i) (Transfer of Shares on Default);
“Default Valuation Notice”	has the meaning given in clause 21.2(A) (Transfer of Shares on Default);
“Defaulting Grouping”	has the meaning given in clause 21.2 (Transfer of Shares on Default);

8

“Delayed Business”	has the meaning given to it in the Contribution Agreement;
“Delayed Closing Date”	has the meaning given to it in the Contribution Agreement;
“Directors”	means the directors of the Company from time to time;
“Disposal” or “Disposes”	means, in relation to any Share, any disposition of any right or interest in any Share and includes:
	(i)any sale, assignment or transfer;
	(ii)creating or permitting to subsist any pledge, charge, mortgage, lien or other security interest or encumbrance;
	(iii)creating any trust or conferring any interest;
	(iv)any agreement, arrangement or understanding in respect of votes or the right to receive dividends (other than this agreement);
	(v)the renunciation or assignment of any right to subscribe or receive any Share or any legal or beneficial interest in any Share;
	(vi)any sale, assignment or transfer in any person that holds a direct or indirect interest in the Company and whose only or principal asset is such interest;
	(vii)any agreement to do any of the above; and
	(viii)the transmission of any Share by operation of Law, or the holder of such Share (or any other member of its Group) entering into or agreeing any arrangement whatsoever which has a similar economic effect to any such disposition;
“EMA”	means the European Medicines Agency, or any successor agency;

9

“Event of Default”	has the meaning set out in clause 21.1 (Transfer of Shares on Default);
“Excluded Businesses”	means the GSK Excluded Businesses and the Novartis Excluded Businesses;
“Executive Management”	means the CEO, the CFO, the Head of OTC and such other individuals appointed by the CEO as members of the executive management pursuant to clause 7.1(G) (Executive Management);
“Exit Notice”	means any notice served by any party to this agreement pursuant to any of clauses 18 (Novartis Transfer and GSK Right of First Refusal) to 21 (Transfer of Shares on Default) (inclusive);
“FCPA”	means the US Foreign Corrupt Practices Act of 1977;
“FDA”	means the US Food and Drug Administration, or any successor agency;
[***]	[***];
“Governmental Entity”	means any supra national, national, state, municipal or local government (including any subdivision, court, administrative agency or commission or other authority thereof) or any quasi governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi governmental authority, including the European Union;
“Group”	means, in relation to any body corporate, that body corporate and its Affiliates from time to time, provided that for the purposes of this agreement (i) the Company and any person Controlled by the Company (whether directly or indirectly) from time to time shall not be included in the Group of any Shareholder, and (ii) no Shareholder or any other member of a Shareholder’s Group shall be included in the Company’s Group;
“Group Transferee”	has the meaning given in clause 17.1 (Permitted Transfers);
“GSK Acquirer”	has the meaning given in the definition of GSK Change of Control;

10

“GSK Alliance Market Businesses”	has the meaning given to “GlaxoSmithKline Alliance Market Businesses” in the Contribution Agreement;
“GSK Change of Control”	means, in relation to GSK, any person or persons acting in concert or any person acting on behalf of any such person(s) (the “GSK Acquirer”) acquiring Control of GSK (or the ultimate holding company of GSK from time to time), provided that a GSK Change of Control shall be deemed not to have occurred if all or substantially all of the shareholders of the GSK Acquirer are or, immediately prior to the event which would otherwise have constituted a GSK Change of Control, were the shareholders of GSK (or the relevant ultimate holding company) with the same (or substantially the same) pro rata interests in the share capital of the GSK Acquirer as such shareholders have, or, as the case may be, had, in the share capital of GSK (or the relevant ultimate holding company);
“GSK D&O Policy”	has the meaning given in clause 25.3 (Shareholder Undertakings);
“GSK Excluded Businesses”	means (a) the GSK Excluded Businesses and (b) any other GSK Excluded Assets (each as defined in the Contribution Agreement as the “GlaxoSmithKline Excluded Businesses” and the “GlaxoSmithKline Excluded Assets”, respectively);
“GSK’s Lawyers”	means Slaughter and May of One Bunhill Row, London EC1Y 8YY;
“GSK Restricted Period”	means the period from (and including) Completion to (and including) the third anniversary of the Completion Date;
“GSK Shareholder Loan”	has the meaning given in clause 13.4(B) (Funding and Cash Management);
“GSK Shareholders”	means, together, the First GSK Shareholder and any Group Transferee within GSK’s Group to which any Share has been transferred in accordance with clause 17 (Permitted Transfers);
“Guaranteed Party”	has the meaning given in clause 31.1 (Guarantee);

11

“Guarantor”	has the meaning given in clause 31.1 (Guarantee);
“Half-Yearly Accounting Period”	means (i) the period commencing on 1 January in any year and ending on 30 June in the same year and (ii) the period commencing on 1 July in any year and ending on 31 December in the same year, or such other half-yearly accounting periods as may be adopted by the Company in accordance with clause 4 (Reserved Matters);
“Half-Yearly Accounts”	means, in respect of the first Half-Yearly Accounting Period in any year, the second Quarterly Accounts delivered to the Shareholders pursuant to clause 9.1(C) showing the items set out in clause 9.1(C) in respect of such Half-Yearly Accounting Period and, in respect of the second Half-Yearly Accounting Period in any year, the Accounts for the year in which such Half-Yearly Accounting Period falls;
“Head of OTC”	means the head of the wellness division of the Business, a position which sits alongside and is separate from the heads of the oral care, skin care and nutritional care divisions of the Business and from any country and regional heads of the wellness division of the Business;
“HMRC”	means Her Majesty’s Revenue & Customs;
“Implementation Agreement”	means the implementation agreement in relation to Project Constellation entered into by GSK and Novartis on 22 April 2014, and as amended and/or restated;
[***]	[***];
“Intellectual Property”	means patents, trademarks, rights in designs, copyrights, database rights (whether or not any of these is registered and including applications and rights to apply for registration of any such thing) and all rights or forms of protection of a similar nature or having equivalent or similar effect to any of these which may subsist anywhere in the world;
“Initial Business Plan”	means the business plan relating to the period from the Completion Date up to and including 31 December 2017, which was agreed by GSK and Novartis prior to the date of this agreement pursuant to the terms of the Implementation

12

	Agreement, and including at least such items as are listed in Schedule 1 (Business Plan);
“Joint Shareholder Loans”	has the meaning given in clause 13.4(A) (Funding and Cash Management);
“Law”	means any statute, law, rule, regulation, ordinance, code or rule of common law issued, administered or enforced by any governmental authority, or any judicial or administrative interpretation thereof, including the rules of any stock exchange;
“Major Competitor”	has the meaning given in clause 4.3 (Reserved Matters);
“Material Competing Business”	has the meaning given in clause 4.2 (Reserved Matters;
“Net Debt”	has the meaning given in clause 20.12 (Novartis Put Option);
“Net Shareholder Loans”	has the meaning given in paragraph 6 of Schedule 3 (Price Determination);
“Non-Compete Exclusivity Period”	has the meaning given in clause 27.6 (Protective Covenants);
“Non-Defaulting Grouping”	has the meaning given in clause 21.2(A) (Transfer of Shares on Default);
“Novartis Acquirer”	has the meaning given in the definition of Novartis Change of Control;
“Novartis Alliance Market Businesses”	has the meaning given in the Contribution Agreement;
“Novartis Change of Control”	means, in relation to Novartis, any person or persons acting in concert or any person acting on behalf of any such person(s) (the “Novartis Acquirer”) acquiring Control of Novartis (or the ultimate holding company of Novartis from time to time), provided that a Novartis Change of Control shall be deemed not to have occurred if all or substantially all of the shareholders of the Novartis Acquirer are or, immediately prior to the event which would otherwise have constituted a Novartis Change of Control, were the shareholders of Novartis (or the relevant ultimate holding company) with the same (or substantially the same) pro rata

13

	interests in the share capital of the Novartis Acquirer as such shareholders have, or, as the case may be, had, in the share capital of Novartis (or the relevant ultimate holding company);
“Novartis Excluded Businesses”	means (a) the Novartis Excluded Businesses and (b) any other Novartis Excluded Assets (each as defined in the Contribution Agreement);
“Novartis’s Lawyers”	means Freshfields Bruckhaus Deringer LLP of 65 Fleet Street, London EC4Y 1HS;
“Novartis Shareholders”	means, together, the First Novartis Shareholder and the Second Novartis Shareholder (and any Group Transferee within Novartis’ Group to which any Share has been transferred in accordance with clause 17 (Permitted Transfers));
“Payment”	has the meaning given in clause 1.2(J) (Definitions and Interpretation);
“Payment Obligation”	has the meaning given in clause 1.2(J) (Definitions and Interpretation);
“Percentage Interests”	in respect of any Shareholder, means X/Y expressed as a percentage, where X equals the number of A Shares or B Shares (as the case may be) held by such Shareholder and Y equals the aggregate amount of A Shares and B Shares;
“Pharmaceutical Regulatory Authority”	means, with respect to any regulatory jurisdiction, any national, federal, supranational, regional, state, provincial or local governmental or regulatory authority, agency, department, bureau, commission, council or other government entity, including FDA and EMA, regulating or otherwise exercising authority with respect to the development of pharmaceutical products in such regulatory jurisdiction;
“Pre-Put Quarterly Balance Sheet”	means the consolidated balance sheet for the Company included in the last Quarterly Accounts delivered to the Shareholders pursuant to clause 9.1(B) prior to a Put Exercise Notice Date;
[***]	[***];
“Proceedings”	means any proceeding, suit or action arising out of or in connection with this agreement, whether

14

	contractual or non-contractual;
“Put Closing Balance Sheet”	has the meaning given in clause 20.12 (Novartis Put Option);
“Put Excess Cash”	has the meaning given in clause 20.11 (Novartis Put Option);
“Put Exercise Notice”	has the meaning given in clause 20.2 (Novartis Put Option);
“Put Exercise Notice Date”	has the meaning given in clause 20.2 (Novartis Put Option);
“Put Option Market Value”	has the meaning given in paragraph 5 of Schedule 3 (Price Determination);
“Put Option Period”	means the period beginning on the date falling three years after the Completion Date and ending on the date falling twenty years after the Completion Date;
“Put Option Price”	has the meaning given in clause 20.6 (Novartis Put Option);
“Put Option Prohibited Period”	means: (i)the period of four weeks beginning on the date falling one week after the last day of GSK’s annual accounting period; and (ii)the period of two weeks beginning on the date falling one week after the last day of each of the first three calendar quarters of any accounting period, save that each such period shall terminate immediately if (and at the time that) GSK publishes its results announcement for (in the case of (i)) that accounting period or (in the case of (ii)) that quarter;
“Put Shares”	has the meaning given in clause 20.3 (Novartis Put Option);
“Quarterly Accounts”	has the meaning given in clause 9.1(C) (Access to Information and Accounts);

15

“Readily Available Cash”	means: (i)cash at bank and in hand; (ii)bank deposits of up to three months; (iii)short-term and liquid or easily realisable securities; and (iv)any positive net position held by the Company’s Group as against the GSK cash pooling arrangement (as described in clause 13.7) (principal and interest) (and including, for the avoidance of doubt, any commercial paper held by a member of the Company’s Group issued by a member of GSK’s Group and deposits held on demand on behalf of the Company’s Group by GSK’s Group in each case as part of such cash pooling arrangements), excluding any items set out in paragraphs (i) to (iii) (inclusive) above that are held by any member of the Company’s Group in any jurisdiction that has any cross-border restrictions on transfers of cash between members of the Company’s Group and excluding any items set out in paragraphs (i) to (iv) (inclusive) above to the extent that they are held in respect of Delayed Businesses otherwise than by a member of the Company’s Group (regardless of whether such amounts are consolidated within the Company’s accounts in respect of such Delayed Businesses);
“Reduced Default Price”	means [***] per cent. of the Default Price;
“Relevant Matter”	means: (i)any proposed or actual legal proceedings by any Relevant Party against any member of the Company’s Group or vice versa;
	(ii)any matter relating to a determination or dispute under, exercising rights under, or breach or alleged breach of, any agreement or other arrangement between any member of the Company’s Group and a Relevant Party with regard to which matter the relevant member(s) of the

16

	Company’s Group is (or, if the only Directors were A Directors or B Directors, as the case may be, would be) in dispute with any Relevant Party;
	(iii)any matter relating to the actions or steps to be taken by the Company in connection with the process in relation to any [***] of any Relevant Party as set out in clause 15 ([***]); or
	(iv)any matter relating to the actions or steps to be taken by the Company in connection with the process in relation to any acquisition of any Competing Business from any Relevant Party as set out in clauses 27.3 to 27.7 (Protective Covenants) (inclusive);
“Relevant Party”	has the meaning given in clause 8.5(A)(i) (Proceedings of Directors);
“Relevant Pre-Existing Arrangement”	means: (i)the amended and restated agreement of limited partnership between Marion Merrell Consumer Products Inc., GlaxoSmithKline Consumer Healthcare LP and SmithKline Beecham Corporation dated 10 September 1998, as amended; and (ii)the joint venture contract between Tianjin Pharmaceutical Corporation and SmithKline Beckman Corporation dated April 1984, as amended;
“Relevant Third Party”	has the meaning given in clause 38.1(A) (Third Party Rights);
“Required Funds”	has the meaning given in clause 13.2 (Funding and Cash Management);
“Revised Draft Business Plan”	has the meaning given in clause 5.1 (Business Plan);
[***]	[***];
“Service Document”	has the meaning set out in clause 46.5 (Agent for

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	Service);
“Shareholders”	means the First GSK Shareholder, the First Novartis Shareholder and the Second Novartis Shareholder or any other person to whom the benefit of this agreement is extended in accordance with clause 24 (Effect of Deed of Adherence) in the capacity of a shareholder (and not as a guarantor);
“Shareholder Grouping”	means, together: (i)the GSK Shareholders; or (ii)the Novartis Shareholders, as the case may be;
“Shareholder Loan”	means any shareholder loan granted by any GSK Shareholder (or any member of its Wholly-Owned Group) or any Novartis Shareholder (or any member of its Wholly-Owned Group) (as lender) to the Company (as borrower) pursuant to the provisions of clause 13.4 (Funding and Cash Management);
“Shares”	means the A Shares and the B Shares and any other class of shares in the capital of the Company as may subsequently be created and/or issued and/or allotted in accordance with the provisions of this agreement, including clause 4 (Reserved Matters);
“Sterling” and “£”	means the lawful currency of the United Kingdom;
[***]	[***];
[***]	[***];
[***]	[***];
“Tag Share Offer”	has the meaning given in clause 19.4 (GSK Transfer and Novartis Right of First Refusal and Tag Right);
“Tag Share Offer Notice”	has the meaning given in clause 19.4 (GSK Transfer and Novartis Right of First Refusal and Tag Right);

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“Tax”, Taxes” or “Taxation”	means all taxes, levies, duties, imposts, charges and withholdings of any nature whatsoever, including taxes on gross or net income, profits or gains and taxes on receipts, sales, use, employment, payroll, land, stamp, transfer, occupation, franchise, value added, wealth and personal property, together with all penalties, charges and interest relating to any of them, and regardless of whether any such amounts are chargeable or attributable directly or primarily to any other person or are recoverable from any other person;
“Tax Authority”	means any taxing, revenue or other authority competent to impose any liability to, or to assess or collect, any Tax, including, without limitation, HMRC and the Swiss Federal Tax Administration;
“Tax Covenant”	means the deed of tax covenant between GSK, Novartis and the Company entered into on the Completion Date;
“TDSA”	means the transitional distribution services agreement between Novartis and GSK;
“Third Party”	means a person who: (i)is not a Shareholder; and
	(ii)is not connected with any Shareholder,
	and, for the purposes of paragraph (ii) above of this definition, a body corporate is connected with another body corporate if:
	(a)one body corporate has Control over the other; or
	(b)any person has Control over both;
“Tranche Percentage”	has the meaning given in clause 20.3 (Novartis Put Option);
“Transaction Documents”	means the Implementation Agreement, the Contribution Agreement, the Tax Covenant and such other documents and/or agreements entered into pursuant to the same;

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“Trapped Cash”	has the meaning given in paragraph 6 of Schedule 3 (Price Determination);
“Valuation Balance Sheet”	has the meaning given in paragraph 6 of Schedule 3 (Price Determination);
“Wholly-Owned Group”	in relation to: (i)the GSK Shareholders, means GSK and any body corporate that is a 100 per cent. owned and controlled subsidiary or subsidiary undertaking of GSK; and (ii)the Novartis Shareholders, means Novartis and any body corporate that is a 100 per cent. owned and controlled subsidiary or subsidiary undertaking of Novartis; and
“Working Hours”	means 9.30 a.m. to 5.30 p.m. on a Business Day.

1.2In construing this agreement, unless otherwise specified:

(A)references to clauses and schedules are to clauses of, and schedules to, this agreement;

(B)use of any gender includes the other genders and (unless the context otherwise requires) the singular shall include the plural and vice versa;

(C)references to a “person” shall be construed so as to include any individual, firm, company or other body corporate, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality);

(D)“body corporate” shall have the meaning given in section 1173 of the Companies Act 2006, “subsidiary” and “holding company” shall have the meanings given in section 1159 of the Companies Act 2006, “subsidiary undertaking” shall have the meaning given in section 1162 of the Companies Act 2006, “wholly-owned subsidiary” shall have the meaning given in section 1159 of the Companies Act 2006 and “parent undertaking” shall have the meaning given in section 1162 and Schedule 7 of the Companies Act 2006;

(E)a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted;

(F)any reference to a “day” (including within the phrase “Business Day”) shall mean a period of 24 hours running from midnight to midnight;

(G)references to times are to London times;

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(H)references to “include” and “including” shall be deemed to be followed by the words “without limitation”;

(I)references to “indemnify” any person against any circumstance shall include indemnifying and keeping it or him harmless from all actions, claims and proceedings from time to time made against it or him and all loss, damage, payments, costs or expenses suffered made or incurred by it or him as a consequence of that circumstance and, unless otherwise specified, any indemnity given in this agreement shall be deemed to have been given on an after Tax basis;

(J)any indemnity or covenant to pay (the “Payment Obligation”) being given on an “after Tax basis” or expressed to be “calculated on an after Tax basis” means that the amount payable pursuant to such Payment Obligation (the “Payment”) shall be adjusted so as to ensure that, after taking into account:

(i)any amount in respect of Tax required to be deducted or withheld from, and any Tax chargeable on, such amount (including on the increased amount); and

(ii)any Tax credit, repayment or other Tax benefit which is available to the indemnified party or the recipient of the Payment (or, in each case, any member of such person’s Group) solely as a result of the matter giving rise to the Payment Obligation or as a result of receiving the Payment,

(which amount of Tax and Tax credit, repayment or other Tax benefit is to be determined by the auditors of the recipient at the shared expense of both the recipient and the party making the Payment, and is to be certified as such to the party making the Payment), the recipient of the Payment is in the same position as it would have been in if there had been no such Tax or Tax credit, repayment or other Tax benefit;

(K)“person or persons acting in concert” shall be given the meaning as set out in the Law applicable to the person with whom persons are acting in concert;

(L)where any obligation in this agreement is expressed to be undertaken or assumed by any party, that obligation is to be construed as requiring the party concerned to exercise all rights and powers of control over the affairs of any other person which it is able to exercise (whether directly or indirectly) in order to secure performance of the obligation;

(M)a reference to any other document referred to in this agreement is a reference to that other document as amended, varied, novated or supplemented (other than in breach of the provisions of this agreement or that other document) at any time;

(N)headings and titles are for convenience only and do not affect the interpretation of this agreement;

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(O)a reference to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than England be treated as a reference to any analogous term in that jurisdiction;

(P)the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things;

(Q)general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words; and

(R)unless expressly provided otherwise in this agreement: (i) the GSK Shareholders shall be jointly and severally liable for their obligations, undertakings and liabilities arising under this agreement; and (ii) the Novartis Shareholders shall be jointly and severally liable for their obligations, undertakings and liabilities arising under this agreement.

1.3The schedules (other than Schedule 2 (Form of Deed of Adherence)) form part of this agreement and shall have the same force and effect as if expressly set out in the body of this agreement, and any reference to this agreement shall include the schedules.

2.ESTABLISHMENT OF THE COMPANY

2.1Immediately following the execution of this agreement:

(A)the Articles of Association and the Completion Board Resolutions shall be adopted;

(B)the First GSK Shareholder shall nominate seven individuals by notice in writing to the Company prior to Completion (who it is agreed shall include Emma Walmsley as CEO), and the Company shall appoint them (to the extent not already appointed), as the initial A Directors;

(C)the First Novartis Shareholder shall nominate four individuals by notice in writing to the Company prior to Completion, and the Company shall appoint them (to the extent not already appointed), as the initial B Directors;

(D)Sir Andrew Witty shall be appointed as the initial Chairman;

(E)Emma Walmsley shall be appointed as CEO, the individual nominated by the First GSK Shareholder by notice in writing to the Company prior to Completion shall be appointed CFO and (subject to approval by the CEO) the individual nominated by the First Novartis Shareholder by notice in writing to the Company prior to Completion shall be appointed Head of OTC;

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(F)the accounting reference date of the Company shall be, or if necessary be changed to, 31 December in each year;

(G)PricewaterhouseCoopers LLP (or such other accountancy firm referred to in clause 4.1(R) (Reserved Matters) as the First GSK Shareholder may have notified to the other relevant parties) shall be appointed as the auditors of the Company;

(H)subject and without prejudice to clause 8.5 (Proceedings of Directors), the CEO Terms of Reference shall be adopted and the Board shall delegate operational control of the Company’s Group in accordance therewith;

(I)the Accounting Policies shall be adopted; and

(J)the Shareholders shall procure that all meetings (or resolutions) of the Directors and/or of the Shareholders as are reasonably required to implement all the above matters are held at Completion (or prior to Completion with effect from Completion).

2.2Following Completion, the Shareholders shall procure that the Company’s share capital shall be reduced by the cancellation of such amount of the share premium on each Share, and in such manner, as the Shareholders agree (acting reasonably) with the objective of creating significant distributable reserves.

2.3The headquarters of the Company’s Group shall be in London.

2.4The parties acknowledge that, subject to the provisions of this agreement, the Company’s Group shall be consolidated in GSK’s consolidated accounts and that, as a subsidiary of GSK, shall be subject to, and operate strictly on, the internal GSK Group platforms, systems, policies and procedures, including as to compliance and public policy matters, anti-bribery and corruption and dealings in securities as well as externally applicable matters, including any corporate integrity agreements.

3.BUSINESS OF THE COMPANY’S GROUP

3.1Except to the extent that a change in the business of the Company’s Group is not prohibited by, or is approved in accordance with, clause 4 (Reserved Matters), the business of the Company’s Group shall be to conduct, for itself or by means of investments in other entities, either directly or indirectly, anywhere in the world, the business of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise commercialising Consumer Healthcare Products and any other products transferred to the Company’s Group in accordance with the Contribution Agreement, including all related and supporting activities thereto.

3.2The Business shall be conducted in accordance with the Business Plan including synergy plans reflected in the Business Plan, subject always to the fiduciary duties of the Directors and the provisions of clause 4.1 (Reserved Matters).

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3.3For the avoidance of doubt, the parties agree that, upon Completion, the Business shall only include the business, assets, rights and/or obligations transferred to the Company or any other member of its Group pursuant to the Contribution Agreement (and shall not include, without limitation and for the avoidance of doubt, the Excluded Businesses).

4.RESERVED MATTERS

4.1Subject to clauses 4.2, 4.3, 5.5 and 20.10(C), each of the Shareholders shall, so far as it is legally able, exercise its rights in relation to the Company to procure that none of the actions listed below shall be taken by the Company (or members of its Group where expressly referred to) without the prior written approval of Novartis:

(A)any of the following:

(i)changing or varying the share capital of the Company (including the creation, consolidation, sub-division, conversion or (other than as provided in clause 2.2 (Establishment of the Company) cancellation of any share capital of the Company or the modification, variation or abrogation of any rights attaching to any Shares);

(ii)the issue or allotment of any shares or share capital of;

(a)the Company; or

(b)any other member of the Company’s Group (other than to another member of the Company’s Group);

(iii)the creation of, or issue of any instrument, document or security granting, any option or right to subscribe or acquire, or convert any security into, any shares or share capital of:

(a)the Company; or

(b)any other member of the Company’s Group (other than where granted to another member of the Company’s Group);

(iv)the purchase or redemption of any share capital of the Company or any other member of the Company’s Group (other than any such purchase or redemption between members of the Company’s Group); or

(v)the disapplication of section 561 of the Companies Act 2006 in respect of the share capital of the Company pursuant to sections 570 or 571 of the Companies Act 2006,

provided that, for the avoidance of doubt, this clause 4.1(A) shall not restrict any action: (i) expressly provided for in this agreement, including any of clauses 17 (Permitted Transfers) to 21 (Transfer of Shares on Default) (inclusive); or (ii) required to be done by any member of the Company’s Group pursuant to any Relevant Pre-Existing Arrangement; or

24

(B)any amendment to the Articles of Association or the Completion Board Resolutions;

(C)any material reorganisation or change (including cessation) to the nature or scope of the Business, other than pursuant to any applicable Law or to meet the requirements of any governmental or regulatory authority;

(D)(i)any acquisition or disposal (other than a disposal implemented pursuant to (a) any obligations under any Relevant Pre-Existing Arrangement, or (b) any Transaction Document by the Company or any other member of its Group of any asset or collection of assets (including shares and/or businesses)); or

(ii)any merger or entry into or termination of any joint venture, profit-sharing agreement, collaboration agreement or other partnership transaction (other than any of the same implemented pursuant to an obligation under any Relevant Pre-Existing Arrangement) involving the Company or any other member of its Group,

in each case, with a transaction value in excess of [***], whether by a single transaction or a series of related transactions completed during the 12 month period ending on the date of the last transaction (x) entered into with the same person (or persons which are members of the same Group) or (y) involving the acquisition or disposal of shares or any interest in one particular company or undertaking.  For the purposes of this clause 4.1(D):

(a)the term “acquisition” shall include an in-licensing transaction;

(b)the term “disposal” shall include an out-licensing transaction; and

(c)the transaction value of a merger, joint venture, profit-sharing agreement, collaboration agreement or other partnership transaction shall be the value of any assets which the Company and/or any other member of its Group contributes (or has contributed) to the merger, joint venture, profit-sharing agreement, collaboration agreement or partnership transaction (together with any consideration paid by the Company or any member of its Group to the counterparty or its Group) and no account shall be taken of the value of any assets which the other parties to the merger, joint venture, profit-sharing agreement, collaboration agreement or partnership transaction contribute thereto;

(E)entering into or renewing any transaction, arrangement or agreement by the Company or any other member of its Group with any member of GSK’s Group which is outside the ordinary course of business of the Company’s Group or not on arm’s length terms or any material (i) amendment to, (ii) variation of, or (iii) consent or waiver under, any such transaction, arrangement or agreement,

25

save that this clause 4.1(E) shall not prohibit any transaction, arrangement or agreement effected pursuant to this agreement, including clause 13 (Funding and Cash Management), or pursuant to any Transaction Document;

(F)in respect of agreements the entry into or renewal of which is not prohibited by clause 4.1(E), including any Transaction Document to which any member of GSK’s Group is a party, any material (i) amendment to, (ii) variation of, or (iii) consent or waiver under, any agreement between any member of the Company’s Group and any member of GSK’s Group (other than where such amendment, variation, consent or waiver is on arm’s length terms);

(G)any resolution or proceeding to wind up the Company or any member of the Company’s Group or other proceeding seeking liquidation, administration (whether out of court or otherwise), reorganisation, readjustment or other relief, in each case, under any bankruptcy, insolvency or similar Law or the consent by any member of the Company’s Group to a decree or order for relief or any filing of a petition, application or document under such Law or to the appointment of a trustee, receiver, administrator (whether out of court or otherwise) or liquidator or the making of any arrangement with creditors generally, save in any case only in relation to the voluntary solvent liquidation or other voluntary solvent process relating to a wholly-owned subsidiary of the Company;

(H)the adoption of any new CEO Terms of Reference or any material amendment to the applicable CEO Terms of Reference;

(I)in respect of any Accounting Period, the declaration and/or payment of any dividend by the Company to the Shareholders below the level specified in, or not otherwise in accordance with the provisions of, clause 11.1 (Dividends);

(J)any member of the Company’s Group making any Borrowings;

(K)in respect of any Accounting Period, the Company and/or any other member of the Company’s Group incurring any capital expenditure in excess of [***]% of the forecast net sales for such Accounting Period as set out in the Business Plan;

(L)[***];

(M)creating or redeeming by the Company or any other member of its Group any mortgage, charge, pledge, lien, option, debenture, third party right or interest or other encumbrance or security interest of any kind over any assets of the Company’s Group (other than by operation of Law or in the ordinary course of business);

(N)save as required by Law or accounting standards or where any alteration is being applied generally across GSK’s Group, altering the accounting reference date of any member of the Company’s Group or the Accounting Policies where such alteration would, or might reasonably be expected to adversely impact, other than to an extent which is not material, items relating to the Company’s

26

Group that are included in the consolidated financial statements of Novartis’ Group as prepared pursuant to the accounting principles, practices and policies of Novartis’ Group as at the date of this agreement;

(O)changing the entity classification of the Company for US federal income tax purposes;

(P)at any time when no GSK Shareholder is resident in the United States for Tax purposes, changing the entity classification of any member of the Company’s Group (other than the Company) for US federal income tax purposes;

(Q)changing the tax residence of any material member of the Company’s Group or establishing or closing a material permanent establishment of any material member of the Company’s Group.  For the purposes of this clause 4.1(Q), a member of the Company’s Group or a permanent establishment shall be regarded as “material” if that member of the Company’s Group or permanent establishment generates or is likely to generate a material proportion of the Company’s Group’s profits or which holds assets or has liabilities which are material in the context of the Company’s Group taken as a whole;

(R)changing the auditors of the Company or any other member of its Group to an accountancy firm which is not one of the following:

(i)a member of the network of member firms of PricewaterhouseCoopers International Limited;

(ii)a member firm of the KPMG network of independent firms which are affiliated with KPMG International;

(iii)a member firm of Ernst & Young Global Limited;

(iv)a member firm of Deloitte Touche Tohmatsu;

(v)any successor to any of the foregoing; or

(vi)to the extent not one of the above, any accountancy firm which is GSK’s auditor or (in respect of a non-UK subsidiary of the Company) an auditor of a non-UK member of GSK’s Group;

(S)other than as expressly provided for in any Transaction Document and without prejudice to clause 4.1(D), the Company or any other member of its Group assigning, charging, abandoning, ceasing to prosecute or otherwise disposing of or failing to take all reasonable action to maintain the interest of any member of the Company’s Group in any of the Intellectual Property owned by the Company’s Group or accepting any restrictions on the use of any of the Intellectual Property owned by the Company’s Group, in each case, where to do so would have a material adverse effect on the Business taken as a whole;

27

(T)the Company or any other member of its Group taking any action or deciding not to take an action in relation to the conduct of any legal proceedings, arbitration, administrative proceedings or investigation by any Governmental Entity (including the settlement thereof) which would result in the Company or any other member of its Group making or incurring any payment or liability in excess of [***] or otherwise where such action or inaction would reasonably be considered to have a material adverse effect on the Business taken as a whole;

(U)(i)adopting any new ABAC Policies and Procedures of any member of the Company’s Group or making any material amendments to any existing ABAC Policies and Procedures of any member of the Company’s Group that in either case are not also being adopted or made by GSK’s Group more generally; or

(ii)resolving on any remedial actions to be taken by any member of the Company’s Group in order to address any violation by any member of the Company’s Group or its Associated Persons of applicable Anti-Bribery Law or any breach of the ABAC Policies and Procedures of any member of the Company’s Group, which remedial actions in either case do not comply with the ABAC Policies and Procedures;

(V)any material change to the name of the Company, other than a change to the name of the Company to accord with any change that is generally being made to the name of GSK’s Group;

(W)subject to clause 7.1(D) (Executive Management), the appointment and/or any removal of any CFO (other than the appointment of the initial CFO which shall be dealt with in accordance with clause 2.1(D) (Establishment of the Company);

(X)any member of the Company’s Group entering into any contract, liability or commitment which could involve a liability in excess of [***], other than any such contract, liability or commitment entered into by a member of the Company’s Group with another member of the Company’s Group that is (directly or indirectly) wholly owned by the Company; or

(Y)[***];

and provided that clauses 4.1(A) to (Y) (inclusive) shall apply equally in respect of any Delayed Business (as defined in the Contribution Agreement), pending the Delayed Closing Date in respect of such Delayed Business, as if the relevant Delayed Business were legally and beneficially owned by the Company.

4.2In the event that:

(A)any member of Novartis’ Group does any of the things specified in clause 27.2(B) or clause 27.2(C) (Protective Covenants) or enters into any agreement, arrangement or understanding to do any of such things, unless, in any such case, it is permitted by clause 27.9 (Protective Covenants); or

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(B)a Novartis Change of Control occurs,

and as a result any member of Novartis’ Group owns or is committed to acquire a Competing Business which [***] (a “Material Competing Business”) then Novartis shall:

(i)take all actions as are necessary or desirable to ensure that no confidential information that is provided to Novartis’ Group, the B Directors or any Associated Person of any member of Novartis’ Group in relation to the Company’s Group pursuant to this agreement shall be disclosed to or shall be in any way accessible by any person who has any material involvement with the operations, strategy or business affairs of the Material Competing Business;

(ii)if and to the extent necessary in order to ensure that paragraph (i) is satisfied, remove (pursuant to clause 6.2) any B Director who may following the relevant event specified in clause 4.2(A) or clause 4.2(B) be reasonably expected to have any material future involvement with the Material Competing Business (provided that it shall not be required to remove the CEO or CFO of Novartis, if they are B Directors and have no day-to-day involvement in the running of the Material Competing Business, unless the Material Competing Business is a Major Competitor and the CEO or CFO as appropriate could reasonably be expected to have any material future involvement with that Major Competitor); and

(iii)take all such other reasonable actions as are necessary or desirable to ensure that the provision of information pursuant to this agreement and the performance of any other obligations pursuant to this agreement will not breach any Law,

in each case unless and until that Material Competing Business has been disposed of in its entirety by the relevant member(s) of Novartis’ Group to the Company (or another member of the Company’s Group) or to a person outside Novartis’ Group or has otherwise ceased to be a Material Competing Business.  Nothing in this clause 4.2 shall prevent the provision of information to any member of Novartis’ Group or to any of its Associated Persons pursuant to clause 9 (Access to Information and Accounts) where such information is required in relation to the reporting obligations of Novartis’ Group provided that Novartis shall take reasonable steps to ensure that any underlying information made available pursuant to that clause which is not at that time publicly reported by Novartis’ Group in accordance with its accounting requirements shall not be accessible by any person who has any material involvement with the operations, strategy or business affairs of the Material Competing Business.

4.3In the event that any member of Novartis’ Group Disposes of all (but not some only) of the B Shares in accordance with the provisions of this agreement to a person which owns (directly or indirectly) a Competing Business which [***] (a “Major Competitor”), then the provisions of:

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[***]

in each case, shall cease to have any force and effect.

5.BUSINESS PLAN

5.1Subject to clauses 5.3, 5.4 and 5.5, the Company shall procure that, by no later than 15 days prior to the end of each Accounting Period commencing after Completion, the Executive Management shall have prepared and submitted to the Board a revised draft of the Business Plan for the Company’s Group covering the three year period commencing at the start of the next following Accounting Period to replace the prior existing Business Plan (a “Revised Draft Business Plan”).

5.2Each Revised Draft Business Plan submitted to the Board in accordance with clause 5.1 shall include, but not be limited to, the items and subject matter of the Initial Business Plan.

5.3Each Revised Draft Business Plan shall be reviewed by the Board in conjunction with the Executive Management and shall be finalised by the Board prior to the start of the first Accounting Period to which it relates.  Promptly following such finalisation, the Revised Draft Business Plan shall be approved and (subject to clause 4.1(L) (Reserved Matters)) adopted as the Business Plan by the Board in accordance with clause 8.4 (Proceedings of Directors).

5.4[***]

5.5[***]

6.SHAREHOLDER APPOINTMENTS

6.1Subject to clause 7.1 (Executive Management), the First GSK Shareholder shall be entitled, by notice in writing to the Company and to the Novartis Shareholders, to nominate up to seven Directors and to direct the Company to remove any such nominee from office as a Director (with such notice, if any, as the First GSK Shareholder may require) from time to time, and the Company shall give effect to any such nomination (by appointing any nominee as a Director) or direction for removal (by removing the relevant Director from office).

6.2Subject to clauses 7.1 (Executive Management) and 20.10 (Novartis Put Option), the First Novartis Shareholder shall be entitled, by notice in writing to the Company and to the GSK Shareholders, to nominate up to four Directors and to direct the Company to remove any such nominee from office as a Director (with such notice, if any, as the First Novartis Shareholder may require) from time to time and the Company shall give effect to any such nomination (by appointing any nominee as a Director) or direction for removal (by removing the relevant Director from office).

6.3Any First GSK Shareholder or First Novartis Shareholder that removes a Director from office in accordance with the provisions of clause 6.1 or clause 6.2, respectively, or whose nominee Director vacates office, shall indemnify each other Shareholder (on its

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behalf and on behalf of each other member of its Group) and the Company (on its behalf and on behalf of each other member of its Group) against any claim, whether for compensation for loss of office, wrongful dismissal or otherwise, which arises out of such Director ceasing to hold office.

6.4The First GSK Shareholder shall be entitled, by notice in writing to the Company and the First Novartis Shareholder, to nominate any A Director to be Chairman and to direct the Company to remove any such nominee from office (with such notice, if any, as the First GSK Shareholder may require) from time to time and the Company shall give effect to any such nomination (by appointing such nominee as Chairman) or direction for removal (by removing such nominee from office).  The Chairman shall preside at any Board meeting and general meeting at which he is present.  If such Chairman is not present at any Board meeting, the A Directors present (in person or by way of an alternate) may (acting by simple majority) appoint any one of their number to act as Chairman for the purpose of that meeting.  The Chairman or person chairing the meeting shall not have a casting vote.

6.5Each A Director shall be entitled, by notice in writing to the Company, to appoint any person as his or her alternate director to attend, speak and vote on behalf of such A Director at any one or more Board meetings.  Each B Director shall be entitled, by notice in writing to the Company, to appoint any person as his or her alternate director to attend, speak and vote on behalf of such B Director at any one or more Board meetings.  For the avoidance of doubt, any one person may be appointed as an alternate director for any one or more A Directors or B Directors, as the case may be, and any such person appointed by multiple Directors shall possess their combined voting power at any meeting.

6.6Each Shareholder shall, so far as it is legally able, exercise its rights in relation to the Company to procure that:

(A)any person nominated as a Director or Chairman by the First GSK Shareholder or the First Novartis Shareholder pursuant to this clause 6 shall be appointed as such as soon as reasonably practicable and any direction requiring the Company to remove such person shall be implemented as soon as reasonably practicable (or with such other notice as may have been directed by such Shareholder);

(B)no person is appointed as a Director other than pursuant to the First GSK Shareholder’s and the First Novartis Shareholder’s rights of appointment under clauses 6.1 and 6.2, respectively; and

(C)without prejudice to clause 6.7, no person is removed from his or her office as a Director other than pursuant to the First GSK Shareholder’s and the First Novartis Shareholder’s rights under clauses 6.1 and 6.2 respectively.

6.7In the event that the GSK Shareholders or the Novartis Shareholders cease to hold any A Shares or B Shares (as the case may be) in accordance with the provisions of this agreement, the First GSK Shareholder or the First Novartis Shareholder (as the case may be) shall procure that any and all of its nominee Directors resign from their office as

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Director as soon as reasonably practicable thereafter (and with effect from the date on which such Shareholders ceased to hold any Shares and waive any and all rights they have as against the Company and/or any other member of its Group.

6.8The Company shall purchase and maintain with a reputable insurer, insurance effective from and including the date of this agreement, for or for the benefit of any person who is or was at any time a Director or director or officer of any member of the Company’s Group, including insurance against, subject to Law, any liability incurred by or attaching to him or her in respect of any act or omission in the actual or purported exercise of his or her powers, in each case, from and including the date of this agreement (or, if later, the date of appointment of such Director or director or officer of any member of the Company’s Group), and/or otherwise in relation to his or her duties, powers or offices in relation to any member of the Company’s Group (and all costs, charges, losses, expenses and liabilities incurred by him or her in relation thereto).

6.9The provisions of this clause 6 shall be subject to the provisions of clause 4.3 (Reserved Matters).

7.EXECUTIVE MANAGEMENT

7.1The parties acknowledge and agree that:

(A)the initial CEO has been appointed by the Board as referred to in clause 2.1(E) (Establishment of the Company);

(B)any removal of the initial CEO and any appointment and/or removal of any subsequent CEO shall be a matter for the Board;

(C)the initial CFO has been appointed by the Board as referred to in clause 2.1(E) (Establishment of the Company);

(D)any removal of the initial CFO and any appointment and/or removal of any subsequent CFO shall be a matter for the Board, but subject to the provisions of clause 4.1(W) (Reserved Matters);

(E)the initial Head of OTC has been appointed by the Board as referred to in clause 2.1(E) (Establishment of the Company);

(F)any removal of the initial Head of OTC and any appointment and/or removal of any subsequent Head of OTC shall be a matter for the Board;

(G)the appointment of the members of the Executive Management (other than the CFO, the Head of OTC and, for the avoidance of doubt, the CEO) shall be a matter for the CEO, who shall be entitled to make such appointment from any employees, officers or directors of any member of the Company’s Group or from any other external sources, including GSK’s Group and Novartis’ Group, as specified in the CEO Terms of Reference;

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(H)the members of Executive Management (other than the CEO) shall not be Directors;

(I)the CEO shall be an A Director; and

(J)subject and without prejudice to clause 8.5 (Proceedings of Directors) and clause 4 (Reserved Matters), the Board shall delegate operational control of the Company’s Group to the CEO in accordance with the CEO Terms of Reference.

7.2Subject to clause 7.3, the Board shall be responsible for the overall direction, supervision and management of the Company’s Group in accordance with the provisions of this agreement and subject always to the fiduciary duties of the Directors, save that the Board shall not pass or implement any resolutions in respect of any Reserved Matter unless the requisite approval from Novartis has first been obtained in accordance with clause 4 (Reserved Matters).

7.3The parties agree that the Executive Management shall have full operational control of the Business, subject to the CEO Terms of Reference, review by the Board and the provisions of clause 4 (Reserved Matters) and otherwise as provided for in this agreement, any of the Transaction Documents or any other agreement or document entered into by the Shareholders (or any of their Affiliates) in connection with any such document.

8.PROCEEDINGS OF DIRECTORS

8.1Any Director may, and the secretary of any Company at the request of any Director or Shareholder shall, call a Board meeting.  Board meetings shall be held at least four times a year.  The following provisions shall apply in respect of the location of Board meetings:

(A)all Board meetings shall be held in the United Kingdom; and

(B)any Director not physically present at a Board meeting shall be entitled to participate in such meeting by telephone, provided that a majority of the Directors attending such meeting are physically present in the United Kingdom.

8.2Unless otherwise agreed in writing by the Shareholders or where shorter notice is reasonably determined to be necessary by the Chairman or the CEO to deal with any emergency or urgent issue, at least ten Business Days’ notice of each Board meeting shall be given to each Director entitled to attend and the notice shall be accompanied by an agenda, setting out in such detail as is reasonable and practicable in the circumstances, the subject matter of the meeting.  The Company shall procure that any papers to be circulated to the Directors in respect of such meeting, if not circulated with the notice and the agenda, shall be circulated as soon as reasonably practicable thereafter and in any event not less than 48 hours prior to such meeting.  Breach of this clause 8.2 shall not affect the validity of any Board meeting which has otherwise been validly convened and which is quorate.

8.3Subject to clause 8.5, the following provisions shall apply in respect of quorum:

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(A)a Board meeting (including any reconvened Board meeting held pursuant to clause 8.3(C)) shall be quorate if at least two Directors, including at least one A Director and at least one B Director, are present or represented by an alternate; save that, where no A Director has attended or been represented by an alternate at the previous two Board meetings or where no B Director has attended or been represented by an alternate at the previous two Board meetings, such a meeting shall be quorate if at least two Directors (whether or not an A Director and a B Director are amongst their number) are present or represented by an alternate;

(B)a Director present or represented by an alternate shall be counted in the quorum and be entitled to vote at a Board meeting on any resolution to be put to the Directors at such meeting; and

(C)if a quorum is not present at a Board meeting at the time when any business is considered any Director may require that such meeting be reconvened.  At least five Business Days’ notice of any reconvened meeting shall be given to the Directors unless otherwise agreed in writing by the Shareholders.

8.4Resolutions of the Directors shall be decided by a majority of the votes cast and each Director present or represented by an alternate shall have one vote, save that, in the event that at any meeting not all the A Directors or B Directors (as the case may be) are present, the A Directors or the B Directors (as the case may be) that are present shall possess in that meeting the combined voting power of all of the A Directors or the B Directors (as the case may be) at such meeting.  In the case of an equality of votes, the Chairman of the meeting shall not have a casting vote.

8.5The following provisions shall apply in the event of a Relevant Matter:

(A)a Director shall not be:

(i)entitled to attend or vote at the part of any Board meeting at which any Relevant Matter is considered in respect of any GSK Shareholder or any other member of its Group (if he or she is an A Director) or any Novartis Shareholder or any other member of its Group (in he or she is a B Director) (each a “Relevant Party” in relation to such Director); or

(ii)counted in the quorum (nor shall his or her presence be required in order to constitute a quorum if it would otherwise be required under this agreement) for any part of a Board meeting referred to in clause 8.5(A)(i) and, in such circumstances:

(a)where the Relevant Party is a member of GSK’s Group, a quorum shall exist if at least two B Directors are present or represented by an alternate; and

(b)where the Relevant Party is a member of Novartis’ Group, a quorum shall exist if at least two A Directors are present or represented by an alternate,

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save that, in respect of the matters referred to in paragraphs (iii) and (iv) of the definition of Relevant Matter, the provisions of clause 8.5(A)(i) and 8.5(A)(ii) shall not apply to the CEO, who shall therefore be entitled to attend, vote and be counted in the quorum at any part of any Board meeting, regardless of whether any Relevant Matter is being considered in respect of any GSK Shareholder (or such other member of its Group) during such part;

(B)any decisions, actions or negotiations to be taken or conducted by any member of the Company’s Group in relation to a Relevant Matter shall be delegated to those Directors (including, where relevant, the CEO) that are entitled, in accordance with clause 8.5(A)(ii), to count in the quorum for the relevant part of the relevant Board meeting referred to in clause 8.5(A)(i), and that delegation shall be on terms which give those Directors (including, where relevant, the CEO), acting on a majority basis, full authority on behalf of the relevant member of the Company’s Group to take such decisions and actions and conduct such negotiations as they shall (acting in good faith in the best interests of the relevant member of the Company’s Group, having regard to their fiduciary duties and subject always to clause 24.1 (Shareholder Undertakings), but otherwise acting in their absolute discretion) think fit; and

(C)any right of action which the Company or another member of its Group may have in respect of breach of any Transaction Document or of any other obligation owed to the Company or any other member of its Group where a Shareholder or another member of its Group is responsible for the breach or responsible for performance of the obligation shall be prosecuted as follows:

(i)where the responsible person is a member of GSK’s Group, by the B Directors; and

(ii)where the responsible person is a member of Novartis’ Group, by the A Directors,

and, in each case, those Directors, acting on a majority basis, shall have full authority on behalf of the Company or the relevant member of its Group to notify, commence proceedings in respect of, negotiate, litigate and settle any claim arising out of the breach or exercise any right (including any right of termination) arising out of the breach (acting in good faith in the best interests of the relevant member of the Company’s Group, having regard to their fiduciary duties and subject always to clause 25.1 (Shareholder Undertakings) but otherwise acting in their absolute discretion) and the Shareholders shall take all steps within their power to give effect to the provisions of this clause 8.5(C).

Subject to clause 4 (Reserved Matters), the Board may delegate any of its powers, authorities and discretions (with power to sub-delegate) to any committee consisting of such persons (whether or not Directors) as it sees fit, provided that the Novartis Shareholders shall have the right to appoint such number of its representatives to any such committee as results in those representatives comprising the same proportion (or as nearly the same proportion as may be practicable) of that committee as the proportion that the B Directors represent to the total number of Directors on the Board (and, for the avoidance of doubt, clause 8.4 shall apply

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mutatis mutandis in relation to the voting rights of such representatives on the committee).  Any committee so formed shall, in the exercise of its powers, authorities and discretions so delegated, conform to any regulations which may be imposed on it by the Board.  The meetings and proceedings of any such committee shall be governed by the provisions contained in this clause 8, unless the parties otherwise agree.

9.ACCESS TO INFORMATION AND ACCOUNTS

9.1Subject to clauses 9.3 and 9.4, the Company shall provide each Shareholder with access to and copies of the following:

(A)any Business Plan as soon as reasonably practicable and, in any event, within 5 Business Days following finalisation of the same in accordance with clause 5 (Business Plan);

(B)within 25 days of each calendar month end (except for December), the monthly management accounts of the Company’s Group prepared on the basis of the Accounting Policies, which shall, among other things, (i) include a turnover analysis by major product; (ii) include a consolidated core income statement down to core operating profit; and (iii) show the carrying value allocated to the assets contributed by Novartis to the Company pursuant to the Contribution Agreement and the related amortisation and depreciation, in each case for that month and for the year to that month end;

(C)within 30 days of the end of each of the first three quarters in any Accounting Period, an unaudited quarterly report of the Company’s Group prepared by the Executive Management on the basis of the Accounting Policies showing, amongst other things, the geographic analysis of turnover by major product, consolidated balance sheet, consolidated income statement (including the split between core and non-core income), consolidated statement of comprehensive income and consolidated cash flow statement, Readily Available Cash and supporting notices for each of the foregoing as appropriate, for that quarter and for the year to that quarter end (such quarterly report for each quarter being the “Quarterly Accounts”);

(D)by no later than 15 December in each Accounting Period, a report from the auditors of the Company’s Group in relation to the results for the 9-month period ended 30 September in such Accounting Period in a customary form for a report on such a period;

(E)as soon as reasonably practicable and, in any event, no later than 28 February in each Accounting Period, the draft Accounts (prepared in accordance with the Accounting Policies) for the immediately preceding Accounting Period;

(F)as soon as reasonably practicable and, in any event, no later than 15 April in each Accounting Period, the Accounts (prepared in accordance with the Accounting Policies) for the immediately preceding Accounting Period;

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(G)as part of the Board papers circulated for each quarterly Board meeting, an Alliance Market Quarterly Report in respect of the previous quarter;

(H)as soon as reasonably practicable and, in any event, by no later than 28 February in each Accounting Period, an Alliance Market Transfer Pricing Report for the immediately preceding Accounting Period; and

(I)as part of each Revised Draft Business Plan, the Alliance Market Annual Financial Targets;

(J)as soon as reasonably practicable following the entry into or material amendment of any Alliance Market Distribution Agreement or other arrangement between the Company’s Group and the Alliance Market Businesses, details of the material terms of such amendments or arrangements;

(K)all such other information and records of the Company and/or any other member of its Group as such Shareholder may reasonably require from time to time in connection with the following (such information and records to be provided as soon as reasonably practicable after any such request and, in any event, the Company shall use reasonable endeavours to provide such information within 20 Business Days of any such request):

(i)the preparation and filing of such Shareholder’s accounts (and/or the accounts of any other member of such Shareholder’s Group);

(ii)the preparation and filing of the Tax returns or other Tax filings or correspondence with a Tax Authority of that Shareholder (and/or any other member of such Shareholder’s Group) in relation to any jurisdiction in which such returns or filings are required to be made;

(iii)the compliance by such Shareholder or any other member of such Shareholder’s Group with any reporting obligation if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject, wherever situated, including (amongst other bodies) the Financial Conduct Authority, the London Stock Exchange plc, The Panel on Takeovers and Mergers, the U.S. Securities Exchange Commission, the New York Stock Exchange or the SIX Swiss Exchange, whether or not the requirement for information has the force of law; and/or

(iv)the compliance by such Shareholder or any member of such Shareholder’s Group with any requirement of any Pharmaceutical Regulatory Authority,

and for the avoidance of doubt, such information may include any raw data which is used to generate financial information in respect of the Company’s Group (or any individual member of the Company’s Group) including, for the avoidance of doubt, the information referred to in this clause 9.1.

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9.2Subject to clauses 9.3 and 9.4, the Company shall provide each Shareholder with all such other information and/or records of the Company and/or any other member of its Group as such Shareholder and/or any other member of its Group may reasonably request from time to time in relation to the Company and its Group to the extent that any such request is consistent with the information that a Director may reasonably request from time to time in connection with the discharge of his or her duties as a Director (all such information and/or records to be provided as soon as reasonably practicable after the request).  The Company shall be deemed to have complied with its obligations under this clause 9.2 if it has dedicated a reasonable amount of time (to be judged by the Board acting in good faith) to collecting and gathering any such information and/or records.

9.3No Shareholder shall be entitled to require the Company or any member of its Group to restate financial or other information for any purpose (including the preparation of such Shareholder’s: (i) accounts (or the accounts of that Shareholder’s Group); or (ii) Tax returns or other Tax filings or correspondence with a Tax Authority).

9.4All material records of the Company’s Group shall be retained in accordance with and for the same period of time as required by the document retention policies of GSK’s Group from time to time.  Subject to clauses 9.2 and 9.3, the Company shall maintain the necessary records and prepare the necessary information reasonably required by any Shareholder (or any members of its Group) in relation to the earnings and foreign Taxes paid by each member of the Company’s Group for US federal tax purposes, Swiss tax purposes or UK tax purposes (and similar records/information reasonably required for other jurisdictions notified to the Company by any Shareholder).

9.5Each Director is irrevocably authorised by the Company to disclose to the Shareholder that nominated such Director and the other members of such Shareholder’s Group any information or records belonging to or concerning the Company, any other member of its Group or the Business and/or assets of the Company and/or any other member of its Group that it receives during the course of his or her office, subject to the provisions of clauses 4.2 (Reserved Matters) and 28 (Confidentiality).

9.6In relation to any public disclosure of financial information to be made by Novartis (or any other member of its respective Group), the financial information to be taken into account in respect of the Company’s Group may be the latest financial information provided to Novartis pursuant to this clause 9 and may include estimated financial information for a maximum period of one month, provided that (i) Novartis continues to report before GSK and (ii) if any such estimated financial information is included, that public disclosure makes it clear on the face of it that it is estimated (and not actual) financial information.

9.7Pursuant to the terms of the Implementation Agreement, GSK and Novartis agreed to use reasonable endeavours to procure that their respective external auditors cooperated prior to Completion to agree the necessary processes and reporting procedures in relation to the Company’s Group that would be required to ensure that Novartis’ external auditors are able to meet their obligations in relation to the US Securities and Exchange Commission and Public Company Accounting Oversight Board auditing requirements.  The Shareholders shall procure, to the extent they are

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legally able, that the Company takes reasonable steps from Completion to implement any such agreed processes and reporting procedures and to provide Novartis’ external auditors with reasonable access to the Company’s external auditors to enable Novartis to finalise its annual reporting procedures if and to the extent required in connection with such agreed processes and procedures.

10.ALLIANCE MARKETS

Alliance Market Distribution Agreements

10.1GSK shall procure that the relevant entity in GSK’s Group shall and the Company shall procure that the relevant entity in the Company’s Group shall, enter into a distribution agreement in respect of each Alliance Market in the form to be agreed between GSK and Novartis:

(A)in respect of the Novartis Alliance Market Businesses, with effect from the date on which distribution transfers from the relevant Novartis entity to the relevant GSK entity in such Alliance Market in accordance with the TDSA; or

(B)in respect of the GSK Alliance Market Businesses, within 90 days following Completion.

(in each case, an “Alliance Market Distribution Agreement”).

10.2The transfer pricing, gross margins and operating performance for Alliance Market Businesses shall be reviewed by the Board and the Executive Management on a regular basis in accordance with clause 9 and the CEO Terms of Reference.

10.3[***]

10.4[***]

10.5If the Company reasonably believes that a payment by GSK to the Company in accordance with clause 10.4 will be subject to Tax in the Company’s hands, the Company shall give GSK written notice of such belief no later than 5 Business Days before the payment is due to be made.  If such notice is given to GSK, GSK shall procure that the payment is made by way of a payment by one holder of the A Shares to subscribe for one deferred ordinary share (other than an A Share or B Share) in the capital of the Company.  On each occasion (if any) that a holder of A Shares is required to subscribe for one deferred ordinary share, immediately after such subscription, Novartis shall procure that one holder of the B Shares subscribes for one deferred ordinary share (other than an A Share or a B Share) in the capital of the Company at nominal value.

11.DIVIDENDS

11.1Subject to clause 11.2, in respect of each Half-Yearly Accounting Period (beginning with the first full Half-Yearly Accounting Period falling after Completion), the Company shall distribute to the Shareholders, in proportion to their respective Percentage Interests, an

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amount equal to the aggregate amount of Readily Available Cash held by the Company’s Group in excess of the Base Cash Amount on the date on which such dividend is paid.

11.2The Company shall only be required to declare and/or pay dividend(s) in accordance with clause 11.1 to the extent that:

(A)it has sufficient distributable reserves to do so; and

(B)there are no amounts outstanding (in respect of interest, principal or otherwise) under any Shareholder Loan(s).

11.3The Company shall not declare and/or pay a dividend in respect of any Half-Yearly Accounting Period any later than four months following the end of such Half-Yearly Accounting Period, unless otherwise agreed between the parties.

11.4Dividends shall be paid in Sterling.  All dividends in respect of any Half-Yearly Accounting Period shall be paid to all the Shareholders on the same day and by way of inter-bank transfer or by other electronic means for same day value directly to an account with a bank or other financial institution (or other organisations operating deposit accounts) as notified in writing by the relevant Shareholder to the Company.  In the absence of any such notification, the Company shall hold the amount of the relevant dividend on trust for the relevant Shareholder for a period of 12 months.  In the event that no such notification is given within such 12 month period, the Company shall cease to hold the amount of such dividend on trust for the relevant Shareholder and shall be entitled to treat the amount of such dividend as its own.

11.5The Shareholders and the Company shall cooperate and take such steps as are reasonably required in connection with distributable reserves planning for the Company and its Group, and they confirm that they intend to seek to maximise the amount of the dividends payable pursuant to clause 11.1 in respect of any Half-Yearly Accounting Period, subject always to the best interests of the Company and its Group.  Other than in compliance with the provisions of this agreement, no party to this agreement shall:

(A)employ (or procure the employing of) any device or technique; or

(B)participate (or procure participation) in any transaction or arrangement,

in each case with the purpose of circumventing or restricting the amount of the dividends payable by the Company pursuant to clause 11.1 (including by seeking to minimise Readily Available Cash for that purpose).

11.6The Company shall instruct its auditors to report on the distributable reserves position of the Company at the same time as they sign their report on the Accounts.

11.7The Company shall, so far as it is legally able, procure that (and the Shareholders shall, so far as they are legally able, exercise their rights in relation to the Company to procure that) all resolutions for the declaration or payment of dividends or other payments

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consistent with this clause 11 are duly passed by the relevant members of the Company’s Group and the Board (as applicable).

12.PRESENTATIONAL CURRENCY

The presentational currency of the Company shall be Sterling.  The presentational currency of all other members of the Company’s Group shall be as determined by the Board from time to time.

13.FUNDING AND CASH MANAGEMENT

13.1The parties intend that the Company’s Group will always maintain a level of Readily Available Cash at or above the Base Cash Amount.

13.2In the event that the Board determines that the Company’s Group requires funds (for the purposes of working capital, acquisitions, capital expenditure or otherwise) in excess of any funding it then currently has in place and other than in relation to a matter that would require the consent of Novartis pursuant to clause 4.1 (Reserved Matters), such funds (the “Required Funds”) will be requested by the Company from the Shareholders in proportion to their respective Percentage Interests.

13.3The Novartis Shareholders shall notify the Company in writing within 10 Business Days of receipt of any request from the Company pursuant to clause 13.2 as to whether or not they (or any other member of their Wholly-Owned Group) are willing to fund their aggregate proportionate amount of the Required Funds as set out in such request, there being no obligation on the Novartis Shareholders to do so.  In the event the Novartis Shareholders fail to so notify the Company within that time, the Novartis Shareholders shall be deemed to have notified the Company that neither they nor any member of their Wholly-Owned Group are willing to fund their proportionate amount of the Required Funds as set out in the relevant request from the Company pursuant to clause 13.2.

13.4In the event that the Novartis Shareholders:

(A)notify the Company that they (or a member of their Wholly-Owned Group) are willing to fund their proportionate amount of the Required Funds requested from the Shareholders pursuant to the relevant request referred to in clause 13.2, the Novartis Shareholders (or such other member of their Wholly-Owned Group) together shall, and the GSK Shareholders (or such other member of their Wholly-Owned Group) together shall, each enter into a loan agreement with the Company in respect of the relevant portion of such Required Funds in accordance with Schedule 5 (Shareholder Loans: Terms) (any such loans being “Joint Shareholder Loans”); or

(B)notify (or are deemed to have notified) the Company that they are not willing to fund their proportionate amount of the Required Funds, the GSK Shareholders (or any other member of their Wholly-Owned Group) shall fund the entirety of the Required Funds requested from the Shareholders pursuant to the relevant request referred to in clause 13.2 and the GSK Shareholders (or such other member of their Wholly-Owned Group) shall together enter into a loan

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agreement with the Company in respect of the entirety of the Required Funds on terms and conditions set out in Schedule 5 (Shareholder Loans: Terms) (any such loan being a “GSK Shareholder Loan”).

13.5The total amount of all Shareholder Loans outstanding at any given time shall be aggregated and repayments made to each Shareholder (or members of their Wholly-Owned Groups, as relevant) pro rata in proportion to the amount (principal and interest) owed to each Shareholder (or members of their Wholly-Owned Groups, as relevant) in relation to the aggregate amount of the Shareholder Loans.

13.6The Board shall determine the amount of Readily Available Cash held by the Company’s Group promptly following the finalisation of the Half-Yearly Accounts and of the Accounts and thereafter shall promptly and, in any event, prior to the declaration and/or payment of any dividend in respect of the relevant Half-Yearly Accounting Period pursuant to clause 11.1 (Dividends), first apply any amount of Readily Available Cash above the Base Cash Amount in repayment of any amounts outstanding under any Shareholder Loans on the basis set out in clause 13.5.

13.7The parties shall procure that GSK shall be permitted, for treasury purposes, to manage the Cash of the Company’s Group on a consolidated basis with the Cash of GSK’s Group on arm’s length terms provided that: (i) internal records are kept so that the Cash of the Company’s Group is readily capable of calculation and assessment; (ii) the Cash of the Company’s Group shall otherwise be managed on a basis consistent in all material respects with that on which the Cash of GSK’s Group is managed; and (iii) GSK’s Group retains a rating of at least BBB from Standard and Poor’s and Baa2 from Moody’s.

13.8Each of Novartis and GlaxoSmithKline shall, and shall procure that the relevant members of its Wholly-Owned Group shall, use commercially reasonable efforts to ensure that any member of Novartis’ Wholly-Owned Group or GlaxoSmithKline’s Wholly-Owned Group (as applicable) which enters into a loan agreement with the Company under clause 13.4(A) or 13.4(B) (as the case may be) is a person to which the Company will, under applicable law and relevant Tax Authority published practice as at the date of entry into such loan agreement, be entitled to make payments of interest without withholding or deduction for or on account of Tax (and for this purpose, it shall be assumed that any necessary procedural formalities are satisfied).  This clause 13.8 is without prejudice to the right of the Novartis Shareholders under clause 13.3 to refuse or to fail to respond to a request made under clause 13.2.

14.TAXATION

Surrenders of Tax losses

14.1If, in respect of any accounting period ending after Completion, any member of GSK’s Group or Novartis’ Group (as the case may be) has available an amount which it is able and willing to surrender by way of Consortium Relief (or otherwise) to the Company or to any member of the Company’s Group, and, in respect of its corresponding accounting period, the Company or such member of the Company’s Group (as the case may be) (the “claimant company”) is able to utilise all or any part of such amount, then that

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member of GSK’s Group or Novartis’ Group (as the case may be) which has such amount available (the “surrendering company”) shall be permitted to surrender it, or any part of it, to the claimant company, and the claimant company shall be obliged to accept such surrender, to the extent that the claimant company is able to utilise it, and the claimant company shall pay to the surrendering company such amount for that surrender as is equal to the Payment Amount, payable on the date or dates that the claimant company would have been liable for an amount of Tax but for that surrender (and, where there is more than one such date, in proportion to the amounts of Tax which would have been payable on each such date).

14.2In the event that any payment of a Payment Amount is made in respect of any surrender of Consortium Relief by a member of GSK’s Group or Novartis’ Group under clause 14.1, and Tax falls nevertheless to be charged in respect of the taxable profits that the relevant surrender was intended to relieve from such Tax (whether as a result of a Tax Authority refusing to allow Consortium Relief or subsequently withdrawing Consortium Relief in respect of the relevant claim, or for any other reason whatsoever), GSK or Novartis (as the case may be) shall procure that the surrendering company in respect of the relevant surrender shall forthwith repay to the claimant company such part of the Payment Amount as is attributable to the element of the surrender that did not have the effect of relieving from Tax the taxable profits intended to be relieved by virtue of the surrender together with interest at the rate or rates applicable to underpaid corporation tax for the period from payment to repayment of the relevant part of the Payment Amount.

Transfer pricing

14.3If and to the extent that a transfer pricing adjustment applies to adjust the profits and losses of the Company or any member of its Group after Completion and such transfer pricing adjustment:

(A)arises in respect of any transaction or series of transactions entered into between the Company (or any other member of its Group) and GSK (or any person connected with GSK) or Novartis (or any person connected with Novartis); and

(B)leads or may lead to a liability or an increased liability to Tax of the Company or a member of its Group,

then:

(i)GSK agrees (where such transaction or series of transactions were entered into with GSK or any person connected with GSK) to make a payment to the Company or the relevant member of the Company’s Group equal (on an after Tax basis) to such liability, or such increase in a liability, to Tax; and

(ii)Novartis agrees (where such transaction or series of transactions were entered into with Novartis or any person connected with Novartis) to make a payment to the Company or the relevant member of the

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Company’s Group equal (on an after Tax basis) to such liability, or such increase in a liability, to Tax.

14.4If and to the extent that GSK (or any person connected with GSK) or Novartis (or any person connected with Novartis) has or may have an increased liability to Tax as a result of a transfer pricing adjustment in respect of which the Company or any member of the Company’s Group is able to claim a compensating adjustment, then:

(A)the Company shall, or shall procure that the relevant member of the Company’s Group shall, if GSK or Novartis (as the case may be) so requests, claim the compensating adjustment; and

(B)if the Company (or the relevant member of the Company’s Group) receives or obtains a payment or other Relief which comprises or would not have arisen but for such compensating adjustment, then the lesser of the amount received or the amount that the person concerned will save by virtue of the payment or other Relief (less any reasonable costs of recovering or obtaining such payment or other Relief and any Tax actually suffered thereon) shall be paid by the Company (or the relevant member of the Company’s Group) by way of balancing payment to GSK (or the relevant person connected with GSK) or Novartis (or the relevant person connected with Novartis), as the case may be.

14.5A balancing payment to be made under clause 14.4 shall be made (i) within ten Business Days from the date on which notice setting out the amount due is received by the Company or relevant member of the Company’s Group from GSK or Novartis (as the case may be) or, if later, (ii) in the case of a repayment of any Tax, five Business Days after such repayment is received by the Company or the relevant member of the Company’s Group, or in the case of the receipt of any other Relief, the date which is two Business Days prior to the last day on which the Company or the relevant member of the Company’s Group would have been due to make an actual payment of Tax had it not been for such Relief.

Secondary tax liabilities

14.6Subject to the provisions of clause 14.8, GSK covenants with the Company to pay to the Company an amount equal (on an after Tax basis) to:

(A)any payment of Tax for which any member of the Company’s Group is liable that would not have arisen but for the failure of any member of GSK’s Group to discharge that Tax; and

(B)any out-of-pocket costs or expenses reasonably and properly incurred by a member of the Company’s Group solely and directly in connection with any payment of Taxation as is referred to in clause 14.6(A) or in connection with any action taken in avoiding, resisting or settling any such payment of Taxation or in connection with taking or defending any action under this clause 14.6.

14.7Subject to the provisions of clause 14.8, Novartis covenants with the Company to pay to the Company an amount equal (on an after Tax basis) to:

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(A)any payment of Tax for which any member of the Company’s Group is liable that would not have arisen but for the failure of any member of Novartis’ Group to discharge that Tax; and

(B)any out-of-pocket costs or expenses reasonably and properly incurred by a member of the Company’s Group solely and directly in connection with any payment of Taxation as is referred to in clause 14.7(A) or in connection with any action taken in avoiding, resisting or settling any such payment of Taxation or in connection with taking or defending any action under this clause 14.7.

14.8The covenants contained in clauses 14.6 and 14.7 shall not extend to any liability otherwise falling therein to the extent that:

(A)the liability is interest, a penalty or a fine arising from a failure to pay Tax to a Tax Authority within a reasonable time after GSK or Novartis (as the case may be) has made a payment of an amount in respect of that liability to Tax under clauses 14.6 or 14.7 (as the case may be);

(B)the liability is paid or discharged by a person other than a member of the Company’s Group (except where a member of the Company’s Group is required to reimburse such person for such payment or discharge) or is otherwise compensated for without cost to any member of the Company’s Group; or

(C)a claim in respect of the liability can be made against GSK or Novartis (as the case may be) under clause 2 of the Tax Covenant.

14.9If any member of the Company’s Group receives any Secondary Liability Claim, the Company shall give notice in writing, or procure that notice in writing is given, to GSK and Novartis as soon as is reasonably practicable.  If GSK (in the case of a Secondary Liability Claim for which it may be liable) or Novartis (in the case of a Secondary Liability Claim for which it may be liable) shall indemnify the Company and any relevant member of the Company’s Group to the Company’s reasonable satisfaction against any liabilities, costs, damages, Tax, losses or expenses which may be incurred thereby, the Company shall, and shall procure that any relevant member of its Group shall, take such reasonable action as GSK (in the case of a Secondary Liability Claim for which it may be liable) or Novartis (in the case of a Secondary Liability Claim for which it may be liable) may by written notice request to dispute, resist or compromise such Secondary Liability Claim.

Structure and timing of indemnity payments

14.10A payment to be made by GSK or Novartis (as the case may be) under clauses 14.3, 14.6, or 14.7 shall be made (i) subject to clause 14.11, within ten Business Days from the date on which notice setting out the amount due is received by GSK or Novartis (as the case may be) from the Company or a member of the Company’s Group or, if later, (ii) on the date which is two Business Days prior to the last date on which that payment of Tax may be made in order to avoid incurring a liability to interest or penalties.

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14.11Where it is agreed or determined that an amount is payable by GSK or Novartis (as the case may be) to the Company or to another member of the Company’s Group pursuant to clauses 14.3, 14.6 or 14.7, GSK, Novartis and the Company shall consult in good faith for a period of not less than ten Business Days (or such longer or shorter period as the parties may agree) with a view to agreeing an acceptable arrangement for satisfying the obligation to pay the amount so claimed in an efficient manner that does not prejudice the interests of the Company’s Group (which may involve, by way of example only, the GSK Shareholders or an Novartis Shareholders, as the case may be, subscribing for deferred shares in the Company or making an additional contribution to the Company in respect of shares in the Company which continue to be held by those persons).  If GSK, Novartis and the Company fail to agree on any particular manner of payment during the course of such consultations (but not before), the party which is liable to make the payment under clauses 14.3, 14.6 or 14.7 shall make that payment in Cash to the person entitled to it in accordance with clause 14.10.

14.12At any time when a GSK Shareholder is resident in the United States for Tax purposes, a proposed change to the entity classification of each member of the Company’s Group (other than the Company) for US federal income tax purposes may be effected only after good faith negotiations, for a reasonable period, between the GSK Shareholders and the Novartis Shareholders, as to whether it is appropriate to make the proposed change.  Any such negotiations shall take into account the impact (if any) which that change in entity classification is reasonably likely to have on the US federal income tax position of GSK’s Group and of Novartis’ Group.

Novartis Nominated Tax Representative

14.13The Company shall procure that the CFO, and any other relevant members of Executive Management, shall consult in good faith with the Novartis Nominated Tax Representative (if any) in relation to the development of and any significant changes to the Tax strategy of the Company’s Group.  For the purposes of this clause 14, the “Novartis Nominated Tax Representative” shall mean the B Director nominated as such by the First Novartis Shareholder, by notice in writing to the Company and the GSK Shareholders.

Section 7701(a)(30) of the Code

14.14The parties shall use all commercially reasonable endeavours to ensure that any interests in the Company held by Shareholders that are US persons (within the meaning of section 7701(a)(30) of the Code) shall not be sufficiently large to make the Company a controlled foreign corporation for US federal Tax purposes.

Taxation definitions

14.15In this clause:

(A)“balancing payment” means a payment made by a person to whom a compensating adjustment is available to a person who has suffered the transfer pricing adjustment to which the compensating adjustment relates;

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(B)“Code” means the U.S. Internal Revenue Code of 1986, as amended, together with its implementing regulations;

(C)“compensating adjustment” means any Relief available to a person as a consequence of a transfer pricing adjustment made in respect of another person;

(D)a person is “connected” with GSK or Novartis (as the case may be) if it is connected with GSK or Novartis (as the case may be) for the purposes of the transfer pricing legislation in force in the territory in which a transfer pricing adjustment is imposed, provided that the Company and its Group shall be deemed not to be “connected” with GSK or Novartis;

(E)“Consortium Relief” means (in the United Kingdom) group relief (as defined in section 97 CTA 2010), available upon the making of a claim based on one of the three consortium conditions (as set out in sections 132 and 133 CTA 2010), and (in any other jurisdiction) any Relief which is equivalent to such United Kingdom relief;

(F)“Payment Amount” means, in respect of any surrender of Consortium Relief, an amount equal to the amount by which the claimant company’s liability to make an actual payment of or in respect of Tax is reduced as a result of such surrender of Consortium Relief;

(G)“Relief” means any loss, allowance, credit, relief, deduction or set-off in respect of, or taken into account (or capable of being taken into account) in the calculation of a liability to, Taxation, or any right to a repayment of Taxation;

(H)“Secondary Liability Claim” means any notice, enquiry, demand, assessment, determination, letter or other document issued by a Tax Authority from which it appears that a member of the Company’s Group may be required to make an actual or suffer a deemed payment of Tax or may suffer the non-availability, loss, reduction or cancellation of a Relief, in each case, which may give rise to a claim against GSK or Novartis (as the case may be) under clause 14.6 or clause 14.7;

(I)“transfer pricing adjustment” means the computation of profits or losses for tax purposes in relation to any transaction or series of transactions on a basis which substitutes arm’s length terms for the actual terms agreed, as finally determined by a Tax Authority;

(J)a member of the Company’s Group shall be deemed to be liable for a payment of Tax, and to make that payment of Tax, if that member of the Company’s Group would be liable for a payment of Tax but for the use or setting off against profits or against a liability to pay Tax of any Relief, and such deemed payment of Tax shall be deemed to be due on the earliest possible date on which that Tax could have been due (ignoring for this purpose any application to postpone payment of, appeal against or amendment of any assessment or other notification of that Tax) but for the use or setting off of the Relief concerned;

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(K)any reference to an obligation of a member of the Company’s Group (other than the Company) to perform any action shall be construed as an obligation of the Company to procure that such member of the Company’s Group performs such action; and

(L)other than for the purposes of clause 14.6 to clause 14.9 (inclusive), each Delayed Group Company shall be treated as part of the Company’s Group, and not as part of either Shareholder’s Group, in relation to the period beginning with Closing and ending immediately before the Delayed Group Company Closing in relation to that Delayed Group Company, and in this Clause 14.15(L) “Delayed Group Company” and “Delayed Group Company Closing” shall have the same meaning as in the Tax Covenant.

15.

15.1Each Shareholder Grouping hereby grants to the Company a right of first negotiation in relation to the disposal or other transfer of any [***] from time to time of any member of their respective Groups, such right of first negotiation and right of first refusal to be on the terms set out in the remainder of this clause 15.

15.2If at any time any [***] from time to time of any member of any Shareholder Grouping’s Group is or becomes a [***], the relevant Shareholder Grouping (the “[***]”) shall be required to notify the Company in writing of the same reasonably promptly (and in any event within 15 Business Days following the [***] and prior to the [***]) where:

(A)the [***] shall mean, [***]; and

(B)the [***] shall mean, [***];

and shall provide with such notification a copy of each of the items specified in clauses 15.2(A)(i) to 15.2(A)(iii) (inclusive), together with reasonable supporting materials and evidence.

15.3Following the service of any such notification (or the point at which such notification should have been made) in accordance with clause 15.2, the [***] shall not be permitted to make any application that would result in the [***] being achieved unless:

(A)one of the matters referred to in clauses 15.6(A) to 15.6(C) (inclusive) has occurred;

(B)pursuant to and in accordance with any binding documentation entered into between the Company and the relevant [***] (or the other relevant member(s) of their respective Groups) in relation to (amongst other things) the acquisition of the relevant [***] (or all rights and interests therein) pursuant to the process referred to in clause 15.6(B); or

(C)otherwise agreed between the parties.

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15.4Subject to clause 15.9, no later than 60 days after the date on which the Company receives any notification in accordance with clause 15.2, the Company shall notify the relevant [***] in writing as to whether it is interested in acquiring the relevant [***] (or all rights and interests therein), upon [***].

15.5Subject to clause 15.9, if the Company notifies the relevant [***] in accordance with clause 15.4 that it is interested in acquiring the relevant [***] (or all rights and interests therein), from the relevant [***], upon [***], then, during the 3 month period from the date of such notification (the “[***]”):

(A)the relevant [***] shall not (and shall procure that no other member of its Group shall) enter into any discussions or negotiations with any Third Party in relation to the disposal or other transfer of, or actually dispose of or otherwise transfer (or agree to do so), the relevant [***] (or any rights or interests therein) to any person outside its Group; and

(B)the relevant [***] and the Company shall negotiate in good faith with a view to agreeing the terms and conditions upon which the Company (or another member of its Group) shall:

(i)acquire the relevant [***] (or any rights and/or interests therein) from the relevant [***] (or another member of its Group); and

(ii)fund the subsequent costs in connection with [***].

15.6Subject to clause 15.9, in the event that:

(A)the Company notifies the relevant [***] under clause 15.4 that it is not interested in acquiring the relevant [***] (or all rights and interests therein), upon [***];

(B)the Company fails to notify the relevant [***] under clause 15.4 as to whether or not it is interested in acquiring the relevant [***] (or all rights and interests therein), upon [***]; or

(C)the [***] expires and the Company and the relevant [***] (or the other relevant member(s) of their respective Groups) have not entered into a binding agreement in relation to the acquisition of the relevant [***] (or all rights and interests therein) and the funding of the costs in connection with [***];

the relevant [***] (and any other member of its Group) shall be free to:

(i)enter into discussions and/or negotiations with a Third Party in relation to the disposal or other transfer of the relevant [***] (or all rights and interests therein), subject to clause 15.7; and

(ii)notwithstanding the provisions of clause 27 (Protective Covenants) research, develop, manufacture, distribute, market, sell, promote and otherwise commercialise the relevant [***] upon [***] (and, for the avoidance of doubt, the relevant [***] (and any other member of its

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Group) would be, subject to the provisions of this agreement, including this clause 15, free to research, develop, manufacture, distribute, market, sell, promote and otherwise commercialise the [***] until [***].

15.7The provisions of clause 8.5 (Proceedings of Directors) shall apply in relation to those actions or steps to be taken by the Company in connection with the process set out in this clause 15.

15.8This clause 15 shall not apply to any [***] owned or managed by any of the GSK Excluded Businesses or Novartis Excluded Businesses (if any).

15.9Notwithstanding the above provisions of this clause 15, in the event that the relevant [***] does not have the rights in relation to the relevant [***] to comply with the above provisions of this clause 15, the relevant [***] shall be under no obligation to comply with such provisions, but shall use its reasonable endeavours to obtain such rights so as to enable it to do so.

16.RESTRICTIONS ON DEALING WITH SHARES

16.1No Disposal of any Share or any legal or beneficial interest in any Share shall be permitted except a transfer of the entire legal and beneficial interest in the Share:

(A)that is permitted by any of clauses 17 (Permitted Transfers) to 23 (Interaction of Notices) (inclusive);

(B)in the case of a transfer of A Shares, with the prior written consent of the Novartis Shareholders (acting in their absolute discretion); or

(C)in the case of a transfer of B Shares, with the prior written consent of the GSK Shareholders (acting in their absolute discretion).

16.2Except pursuant to clause 17.1 (Permitted Transfers) or as otherwise agreed between the parties, no Disposal of any B Shares or A Shares shall be made unless all of the B Shares or A Shares (as the case may be) are Disposed of pursuant to the same transaction as if there were only one holder of B Shares and one holder of A Shares.

16.3If a Disposal of any Shares is permitted pursuant to this agreement, otherwise than to a member of the transferring Shareholder’s Group, that Shareholder must procure that any Shareholder Loans that are owed and outstanding to a member of that Shareholder’s Group at the time of transfer shall be transferred to the relevant transferee of those Shares (or a member of its Group) at the same time.

17.PERMITTED TRANSFERS

17.1A Shareholder may transfer all (but not some only) of its Shares to any other body corporate in the same Wholly-Owned Group (a “Group Transferee”), provided that the transferee shall first have entered into a Deed of Adherence in the form set out in Schedule 2 (Form of Deed of Adherence).

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17.2A holder of Shares that is a member of GSK’s Wholly-Owned Group shall transfer, in a manner and to a transferee permitted by this agreement, all (but not some only) of the Shares held by it before it ceases to be in GSK’s Wholly-Owned Group.  A holder of Shares that is a member of Novartis’ Wholly-Owned Group shall transfer, in a manner and to a transferee permitted by this agreement, all (but not some only) of the Shares held by it before it ceases to be in Novartis’ Wholly-Owned Group.

17.3The transferor and the transferee of any Shares transferred under this clause 17 and the relevant Shareholder shall each provide to any other Shareholder at their own expense any information and evidence reasonably requested in writing by such other Shareholder for the purpose of determining whether the transfer to the proposed transferee complies with the terms of this clause 17.

17.4Without prejudice to clause 17.1, any Shareholder that transfers all (but not some only) of its Shares pursuant to this clause 17 shall procure that its relevant Group Transferee complies with the provisions of this agreement.

17.5The GSK Shareholders shall ensure at all times that the Company satisfies the requirements of Article 23(2)(c)(ii) of the income tax treaty dated 24 July 2001 between the United Kingdom and the United States.  For the purposes of this clause 17.5, no account shall be taken of any amendment, modification or replacement of that treaty which enters into force after the date of this agreement.

18.NOVARTIS TRANSFER AND GSK RIGHT OF FIRST REFUSAL

18.1Following the expiry of the Put Option Period, the Novartis Shareholders may only Dispose of the entire legal and beneficial interest in all (but not some only) of the B Shares, in accordance, and subject to compliance, with the remaining provisions of this clause 18.

18.2In the event that, following the expiry of the Put Option Period, the Novartis Shareholders (or any other member of their Group) receive an offer from a Third Party (the “B Share Purchaser”) to acquire the entire legal and beneficial interest in all (but not some only) of the B Shares, which the Novartis Shareholders (or such other member of their Group) intends to accept and which is:

(A)a bona fide offer in writing;

(B)from a Third Party that either already has the financial resources to fund the Cash consideration payable in connection with such offer or, on the basis of at least a highly confident letter(s) from a reputable financial institution(s) in connection with such offer, is highly likely to be able to fund the Cash consideration payable in connection with such offer;

(C)for consideration solely in the form of Cash and expressed as a fixed amount per Share and which contains, and is subject to or affected by, no other economic, price or value terms (and, accordingly, does not involve any form of contingent or deferred consideration);

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(D)accompanied by a final draft share purchase agreement and a final draft of all other contractual documentation to be entered into with the B Share Purchaser and/or any other member of its Group, in relation to the acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares;

(E)unconditional in all respects, except for any conditions relating to the obtaining of (i) any anti-trust approvals or consents, (ii) any other legal and/or regulatory approvals or consents, and (iii) any shareholder and/or Third Party consents, in any case, that are mandatorily required by Law in connection with the proposed acquisition, or that, if not obtained, would result in a material adverse effect on one or more of the parties to the proposed acquisition; and

(F)not part of, linked to or connected with, any other agreement, arrangement or understanding,

such offer being, the “B Share Offer”, the Novartis Shareholders shall notify the GSK Shareholders in writing (such notice being the “B Share Offer Notice”), specifying and providing in or attached to such notice the following:

(G)that Novartis wishes to transfer the entire legal and beneficial interest in all (but not some only) of the B Shares;

(H)that Novartis has received a bona fide offer in writing from the relevant B Share Purchaser to acquire the entire legal and beneficial interest in all (but not some only) of the B Shares and that such B Share Purchaser satisfies the criteria set out in clause 18.2(B);

(I)the identity of the relevant B Share Purchaser;

(J)the Cash consideration payable in respect of the B Share Offer, expressed as a fixed amount per Share (the “B Share Offer Price”) and confirming that the B Share Offer Price is not subject to or affected by any other economic, price or value terms (and, accordingly, does not involve any form of contingent or deferred consideration); and

(K)a copy of the documents referred to in clause 18.2(D) unredacted and unamended in any way such that the GSK Shareholders would be able to have a full and accurate understanding of all matters agreed or understood between the Novartis Shareholders and the relevant B Share Purchaser which would be considered relevant for the operation of this clause 18.

18.3The GSK Shareholders shall have 60 days from the date of the B Share Offer Notice (the “B Share Offer Period”) in which to notify the Novartis Shareholders in writing (such notice being the “B Share Acquisition Notice”) that they wish to acquire the entire legal and beneficial interest in all (but not some only) of the B Shares for the B Share Offer Price and otherwise on the following terms:

(A)completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares shall be conditional only upon (i) the obtaining

52

within a period of six months of any anti-trust approvals or consents, (ii) the obtaining of any other legal and/or regulatory approvals or consents, and (iii) the obtaining of any shareholder and/or Third Party consents, in any case, as are mandatorily required by Law in connection with the proposed acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares, or that, if not obtained, would result in a material adverse effect on either or both of the GSK Shareholders (or any other members of their Group) and/or either or both of the Novartis Shareholders (or any other members of their Group) (such conditions being the “B Share Conditions”);

(B)the Shareholders shall (and shall procure that each other relevant member of their respective Groups shall) cooperate with one another (acting reasonably) with a view to satisfying the B Share Conditions as soon as reasonably practicable following receipt by the Novartis Shareholders of the B Share Acquisition Notice;  and

(C)completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares shall occur in accordance with the provisions of clause 22 (Completion of Share Transfers) on the tenth Business Day following the later of:

(i)the day on which all of the B Share Conditions have all been satisfied (or waived (in whole or in part) by the GSK Shareholders); and

(ii)3 months following the date of the B Share Acquisition Notice,

and, upon receipt of any such notification, there shall be a binding agreement between the GSK Shareholders and the Novartis Shareholders in respect of the same.

18.4In the event that no such B Share Acquisition Notice is delivered in the relevant B Share Offer Period in response to the relevant B Share Offer Notice (or the agreement resulting from clause 18.3 lapses or terminates other than as a result of the Novartis Shareholders’ default), the Novartis Shareholders may dispose of their entire legal and beneficial interest in all (but not some only) of the B Shares to the relevant B Share Purchaser, provided that definitive documentation in respect of such disposal is entered into:

(i)within 10 Business Days of the expiry of the B Share Offer Period; and

(ii)on terms and conditions that are no less onerous and no more generous to the relevant B Share Purchaser than those set out in the B Share Offer Notice,

and, prior to completion of such disposal, the relevant B Share Purchaser and the ultimate parent company of such Third Party (if any) enters into a Deed of Adherence in the form set out in Schedule 2 (Form of Deed of Adherence).

18.5The parties agree that no B Share Offer Notice may be served until at least twelve months following the termination of any previous process pursuant to this clause 18.

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18.6Notwithstanding any other provisions of this agreement, the parties further agree that in the event that the B Share Purchaser becomes a Shareholder pursuant to clause 18.4, such B Share Purchaser shall not, and shall be prohibited from, exercising any rights under this clause 18 until the day following the fifth anniversary of the date on which it became a Shareholder.

19.GSK TRANSFER AND NOVARTIS RIGHT OF FIRST REFUSAL AND TAG RIGHT

19.1Following the expiry of the GSK Restricted Period, the GSK Shareholders may only Dispose of the entire legal and beneficial interest in all (but not some only) of the A Shares, in accordance, and subject to compliance, with the remaining provisions of this clause 19.

19.2In the event that, following the expiry of the GSK Restricted Period, the GSK Shareholders (or any other member of their Group) receive an offer from a Third Party (the “A/B Share Purchaser”) to acquire the entire legal and beneficial interest in all (but not some only) of the A Shares, which the GSK Shareholders (or such other member of their Group) intends to accept and which is:

(A)a bona fide offer in writing;

(B)from a Third Party that either already has the financial resources to fund the Cash consideration payable in connection with such offer or, on the basis of at least a highly confident letter(s) from a reputable financial institution(s) in connection with such offer, is highly likely to be able to fund the Cash consideration payable in connection with such offer;

(C)for consideration solely in the form of Cash and expressed as a fixed amount per Share and which contains, and is subject to or affected by, no other economic, price or value terms (and, accordingly, does not involve any form of contingent or deferred consideration);

(D)accompanied by a final draft share purchase agreement and a final draft of all other contractual documentation to be entered into with the relevant A/B Share Purchaser and/or any other member of its Group, in relation to the acquisition of the entire legal and beneficial interest in all (but not some only) of the A Shares;

(E)unconditional in all respects, except for any conditions relating to the obtaining of (i) any anti-trust approvals or consents, (ii) any other legal and/or regulatory approvals or consents, and (iii) any shareholder and/or Third Party consents, in any case, that are mandatorily required by Law in connection with the proposed acquisition, or that, if not obtained, would result in a material adverse effect on one or more of the parties to the proposed acquisition; and

(F)not part of, linked to or connected with, any other agreement, arrangement or understanding,

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such offer being the “A Share Offer”, the GSK Shareholders shall notify the Novartis Shareholders in writing (such notice being the “A Share Offer Notice”), specifying and providing in or attached to such notice the following:

(G)that the GSK Shareholders wish to transfer the entire legal and beneficial interest in all (but not some only) of the A Shares;

(H)that the GSK Shareholders (or any other member of their Group) has received a bona fide offer in writing from the relevant A/B Share Purchaser to acquire the entire legal and beneficial interest in all (but not some only) of the A Shares and that such A/B Share Purchaser satisfies the criteria set out in clause 19.2(B);

(I)the identity of the relevant A/B Share Purchaser;

(J)the Cash consideration payable in respect of the A Share Offer, expressed as a fixed amount per Share (the “A Share Offer Price”) and confirming that the A Share Offer Price is not subject to or affected by any other economic, price or value terms (and, accordingly, does not involved any form of contingent or deferred consideration); and

(K)a copy of the documents referred to in clause 19.2(D) unredacted and unamended in any way such that the Novartis Shareholders would be able to have a full and accurate understanding of all matters agreed or understood between the GSK Shareholders (or any other member of their Group) and the relevant A/B Share Purchaser which would be considered relevant for the operation of this clause 19.

19.3The Novartis Shareholders shall have 60 days from the date of the A Share Offer Notice (the “A Share Offer Period”) in which to notify the GSK Shareholders in writing (such notice being, the “A Share Acquisition Notice”) that they wish to acquire the entire legal and beneficial interest in all (but not some only) of the A Shares for the A Share Offer Price and otherwise on the following terms:

(A)completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the A Shares shall be conditional only upon (i) the obtaining within a period of six months of any anti-trust approvals or consents, (ii) the obtaining of any other legal and/or regulatory approvals or consents, and (iii) the obtaining of any shareholder and/or Third Party consents, in any case, as are mandatorily required by Law in connection with the proposed acquisition of the entire legal and beneficial interest in all (but not some only) of the A Shares, or that, if not obtained, would result in a material adverse effect on either or both of the GSK Shareholders (or any other member of their Group) and/or either or both of the Novartis Shareholders (or any other member of their Group) (such conditions being, the “A Share Conditions”);

(B)the Shareholders shall (and shall procure that each other relevant member of their respective Groups shall) cooperate with one another (acting reasonably) with a view to satisfying the A Share Conditions as soon as reasonably

55

practicable following receipt by the GSK Shareholders of the A Share Acquisition Notice; and

(C)completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the A Shares shall occur in accordance with the provisions of clause 22 (Completion of Share Transfers) on the tenth Business Day following the later of:

(i)the day on which all of the A Share Conditions have all been satisfied (or waived (in whole or in part) by the GSK Shareholders); and

(ii)3 months following the date of the A Share Acquisition Notice.

and, upon receipt of any such notification, there shall be a binding agreement between the GSK Shareholders and the Novartis Shareholders in respect of the same.

19.4In the event that no such A Share Acquisition Notice is delivered in the relevant A Share Offer Period in response to the relevant A Share Offer Notice (or the agreement resulting from clause 19.3 lapses or terminates other than as a result of the GSK Shareholders’ default), the GSK Shareholders may dispose of the entire legal and beneficial interest in all (but not some only) of the A Shares to the relevant A/B Share Purchaser, provided that:

(A)prior to entering into definitive documentation in respect of such disposal, they procure that such A/B Share Purchaser makes a further binding offer (by way of notice in writing) to the Novartis Shareholders (which shall be open for acceptance for a period of 10 Business Days following receipt of such notice) to acquire the entire legal and beneficial interest in all (but not some only) of the B Shares for the same per Share consideration as the A Share Offer and otherwise on (and, unless otherwise agreed between the parties, only on) the following terms:

(i)completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares by such A/B Share Purchaser shall be conditional only upon completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the A Shares by the A/B Share Purchaser; and

(ii)completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares shall occur in accordance with the provisions of clause 22 (Completion of Share Transfers) on the same day and subject to the completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the A Shares by the A/B Share Purchaser,

such further binding offer being the “Tag Share Offer” and such notice being the “Tag Share Offer Notice”; and

(B)definitive documentation in respect of such disposal is entered into:

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(i)within 10 Business Days of the expiry of the A Share Offer Period; and

(ii)on terms and conditions that are no less onerous and no more generous to the relevant A/B Share Purchaser than those set out in the A Share Offer Notice,

and, in the event that the Novartis Shareholders do not accept the Tag Share Offer within the timeframe specified in clause 19.4(A) (or the agreement resulting from the Novartis Shareholders’ acceptance of the Tag Share Offer lapses or terminates), then, prior to completion of such disposal, the A/B Share Purchaser and the ultimate parent company of the A/B Share Purchaser (if any) enters into a Deed of Adherence in the form set out in Schedule 2 (Form of Deed of Adherence).

19.5The parties agree that no A Share Offer Notice may be served until at least twelve months following the termination of any previous process pursuant to this clause 19.

19.6Notwithstanding any other provisions of this agreement, the parties further agree that in the event that the A/B Share Purchaser becomes a Shareholder pursuant to clause 19.4, such A/B Share Purchaser shall not, and shall be prohibited from, exercising any rights under this clause 19 until the day following the fifth anniversary of the date upon which it became a Shareholder.

20.NOVARTIS PUT OPTION

Grant and exercise of Put Option

20.1The “Put Option” is the right of the Novartis Shareholders to require the GSK Shareholders to acquire the B Shares in a maximum of four tranches (each a “Tranche”) in consideration for the payment by the GSK Shareholders to the Novartis Shareholders of the Put Option Price in respect of the relevant Tranche, which shall be exercisable by the Novartis Shareholders in accordance with, and on the terms set out in, this clause 20.

20.2Subject to clauses 20.4, 20.5 and 20.13, at any time during the Put Option Period except during a Put Option Prohibited Period, the Novartis Shareholders may exercise the Put Option by serving notice on the GSK Shareholders (a “Put Exercise Notice” and the date on which any Put Exercise Notice is served being the “Put Exercise Notice Date”) in accordance with the provisions of this clause 20.  Once a Put Exercise Notice is served in accordance with this agreement, that Put Exercise Notice shall be irrevocable and may not be amended.

20.3The Novartis Shareholders shall only be permitted to serve a Put Exercise Notice under clause 20.2 in respect of B Shares representing:

(A)in any first Tranche:

(i)7.5 per cent. of the Shares; or

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(ii)36.5 per cent. of the Shares (or such other amount as is, at that time, equal to 100% of the Novartis Shareholders’ B Shares);

(B)in any second Tranche:

(i)7.5 per cent. of the Shares; or

(ii)29 per cent. of the Shares (or such other amount as is, at that time, equal to 100% of the Novartis Shareholders’ B Shares);

(C)in any third Tranche:

(i)7.5 per cent. of the Shares; or

(ii)21.5 per cent. of the Shares (or such other amount as is, at that time, equal to 100% of the Novartis Shareholders’ B Shares); and

(D)in any fourth Tranche, 14 per cent. of the Shares (or such other amount as is, at that time, equal to 100% of the Novartis Shareholders’ B Shares),

in each case, with the B Shares the subject of such Put Exercise Notice being the “Put Shares”, the percentage of the Shares represented by the Put Shares being the “Tranche Percentage” and any Tranche representing less than 100% of the Novartis Shareholders’ remaining B Shares at that time being a “Partial Put”.  Any Put Exercise Notice must state the percentage of the Shares that the Novartis Shareholders are exercising their Put Option in relation to, being one of those set out in clauses 20.3(A) to 20.4(D) (inclusive).

20.4If a Put Exercise Notice is served in accordance with clause 20.2, in respect of a Partial Put, prior to the date falling six years following the Completion Date, the next Put Exercise Notice (if any) shall not be served at any time during the period of 18 months following that prior Put Exercise Notice Date.

20.5Subject to clause 20.4, if a Put Exercise Notice is served in accordance with clause 20.2, in respect of a Partial Put, after the date falling six years following the Completion Date, the next Put Exercise Notice (if any) shall not be served at any time during the period of 12 months following that prior Put Exercise Notice Date.

Put Option Price

20.6The price payable at the Put Option Completion Date for the relevant Put Shares (the “Put Option Price”) shall be the Pounds Sterling amount calculated by multiplying:

(A)the Put Option Market Value (which shall be determined in accordance with Schedule 3 (Price Determination)); and

(B)the Tranche Percentage.

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The Put Option Price shall be adjusted after Put Option Completion pursuant to clause 20.12(A) and such adjusted amount shall be adopted for all tax reporting purposes.  The Put Option Price shall be payable in Pounds Sterling in accordance with the provisions of clause 22.2(B) (Completion of Share Transfers) on the Put Option Completion Date.  Prior to Put Option Completion, GSK and Novartis may discuss between them (acting in good faith) the possibility of the Put Option Price being paid in a different currency to Pounds Sterling, but nothing in this clause 20.6 shall bind them to reaching an agreement in respect of the same.

Put Option Completion

20.7The parties shall cooperate with each other (acting reasonably) and use all reasonable endeavours to effect completion of the Put Option in respect of any Put Shares (“Put Option Completion”) as soon as reasonably practicable following the determination of the Put Option Market Value and the satisfaction of any Put Option Conditions.  In any event, Put Option Completion shall occur [***] (the date of Put Option Completion being the “Put Option Completion Date”).  Put Option Completion shall occur in accordance with clause 22 (Completion of Share Transfers).  At Put Option Completion:

(A)the GSK Shareholders shall pay the Put Option Price to the Novartis Shareholders in Pounds Sterling in accordance with the provisions of clause 22.2(B) (Completion of Share Transfers); and

(B)the GSK Shareholders shall or shall procure that the Company shall (as applicable) take such steps as are set out in clause 20.11.

20.8Put Option Completion shall be conditional only upon (i) the obtaining of any anti-trust approvals or consents, (ii) the obtaining of any other legal and/or regulatory approvals or consents, and/or (iii) the obtaining of any shareholder and/or Third Party consents, in any case as are mandatorily required by Law to be obtained prior to the transfer of the relevant Put Shares pursuant to this clause 20 (such conditions being the “Put Option Conditions”).

20.9The Shareholder Groupings shall (and shall procure that each other relevant member of their respective Groups shall) cooperate with one another (acting reasonably) and shall each take all steps (which they are lawfully able to take) as are necessary in order to satisfy any Put Option Conditions as soon as reasonably practicable following the relevant Put Exercise Notice Date (save only where any such step would have a material adverse effect on their respective Group).

Effect of Put Option Completion

20.10If the Novartis Shareholders exercise the Put Option in more than one Tranche pursuant to clause 20.3, then, without prejudice to clause 6.7 (Shareholder Appointments):

(A)with effect from Put Option Completion in respect of any second Tranche pursuant to clause 20.3(B)(i) (resulting in the Novartis Shareholders then holding B Shares representing 21.5 per cent. of the Shares), the number of Directors that the First Novartis Shareholder shall be entitled to nominate in

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accordance with clause 6.2 shall be reduced to a maximum number of three Directors out of a maximum of ten Directors and clauses 6.1 and 6.2 shall be deemed to have been amended accordingly; and

(B)with effect from Put Option Completion in respect of any third Tranche pursuant to clause 20.3(C)(i) (resulting in the Novartis Shareholders then holding B Shares representing 14 per cent. of the Shares), the number of Directors that the First Novartis Shareholder shall be entitled to nominate in accordance with clause 6.2 shall be reduced to a maximum number of one Director out of a maximum of eight Directors and clauses 6.1 and 6.2 shall be deemed to have been amended accordingly,

and the First Novartis Shareholder shall procure that any one (in the case of clause 20.10(A)) or any two (in the case of clause 20.10(B)) of the B Directors each resigns from his or her office of Director on the relevant Put Option Completion Date and each waives any and all rights he or she has against the Company and/or any other member of its Group, and clause 6.3 shall apply accordingly; and

(C)with effect from Put Option Completion in respect of any third Tranche pursuant to clause 20.3(C)(i) (resulting in the Novartis Shareholders then holding B Shares representing 14 per cent. of the Shares), the provisions of each of clauses 4.1(D), 4.1(H), 4.1(J), 4.1(K), 4.1(L), 4.1(M), 4.1(N), 4.1(O), 4.1(P), 4.1(Q) (Reserved Matters) (in relation to each of 4.1(N) to 4.1(Q) (inclusive), only to the extent that any action listed in such clause is not reasonably likely to have an adverse impact on the Novartis Shareholders on or after Put Option Completion in respect of any third Tranche), 4.1(R), 4.1(S), 4.1(T), 4.1(U), 4.1(V), 4.1(W) and 4.1(X) (Reserved Matters) shall cease to have any force and effect.

Funding and dividends: special arrangements

20.11At Put Option Completion, the GSK Shareholders shall procure that the Company shall apply any Readily Available Cash in excess of the Base Cash Amount as shown in the Pre-Put Quarterly Balance Sheet (such amount being, the “Put Excess Cash”) as follows:

(A)if there is at least one GSK Shareholder Loan and two Joint Shareholder Loans outstanding at that time, the Put Excess Cash shall be applied up to the total drawn amount of the Shareholder Loans (or, if lower, the total amount of the Put Excess Cash) and shall be allocated between the aggregate amount of the GSK Shareholder Loan(s) and the aggregate amount of the Joint Shareholders Loans in proportion to the amount that such GSK Shareholder Loan(s) and Joint Shareholder Loans represent to the aggregate amount of all of the Shareholder Loans and accordingly shall be used to repay such Shareholder Loans in accordance with clauses 20.11(C) and 20.11(D);

(B)in the event that there are only GSK Shareholder Loan(s) or only Joint Shareholders Loans, the Put Excess Cash shall be applied up to the total drawn amount of such GSK Shareholder Loan(s) or Joint Shareholder Loans as the

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case may be (or, if lower, the total amount of the Put Excess Cash) and shall be allocated to and used to repay such GSK Shareholder Loan(s) or Joint Shareholder Loans (as the case may be) in accordance with clauses 20.11(C) and 20.11(D);

(C)in respect of any amount of the Put Excess Cash that has been allocated to any GSK Shareholder Loan(s) in accordance with clauses 20.11(A) or 20.11(B), the Company shall use such Put Excess Cash to repay such GSK Shareholder Loan(s) to the extent of such Put Excess Cash;

(D)in respect of any amount of the Put Excess Cash that has been allocated to any Joint Shareholder Loans in accordance with clauses 20.11(A) or 20.11(B) (such amount being, the “JSL Repayment Amount”), the Company shall use the JSL Repayment Amount to repay such Joint Shareholder Loans to the extent of such JSL Repayment Amount as follows:

(i)it shall repay to the GSK Shareholders the amount resulting from: (i) the JSL Repayment Amount multiplied by the same percentage as the aggregate of their respective Percentage Interests; minus (ii) if the JSL Repayment Amount is less than aggregate amount of the Joint Shareholder Loans (the amount of such shortfall being, the “JSL Shortfall”), the JSL Shortfall multiplied by the same percentage as the relevant Tranche Percentage (the “JSL Rebalancing Amount”) (and provided that if that amount is a negative amount then the GSK Shareholders shall provide additional funding to the Company equal to that negative amount by way of an increase to their portion of the Joint Shareholder Loans to ensure that the Novartis Shareholders receive the JSL Rebalancing Amount at Put Option Completion pursuant to (ii) below); and

(ii)it shall repay to the Novartis Shareholders an amount equal to: (i) the JSL Repayment Amount multiplied by the same percentage as the aggregate of their respective Percentage Interests; plus (ii) if there is a JSL Shortfall, the JSL Rebalancing Amount; and

(E)if the amount outstanding under the Shareholder Loans is less than the Put Excess Cash, such that following the repayments referred to in clauses 20.11(A) to 20.11(D) there is still some Put Excess Cash remaining, the Company shall distribute to the Shareholders, in proportion to their respective Percentage Interests, an amount equal to such remaining Put Excess Cash to the extent that it has sufficient distributable reserves to do so.

For the avoidance of doubt, references to “Percentage Interests” in clause 20.11(D) above are to the pre-Put Option Completion Percentage Interests of the relevant party.

True-up following Put Option Completion

20.12As soon as reasonably practicable and, in any event, within 45 Business Days following any Put Option Completion Date, the Company shall (acting in good faith) prepare (in

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accordance with the Accounting Policies) (a) an audited consolidated balance sheet for the Company as at the Put Option Completion Date showing the same line items as the Pre-Put Quarterly Balance Sheet (the “Put Closing Balance Sheet”); and (b) an audited adjusted version of the Put Closing Balance Sheet (the “Adjusted Put Closing Balance Sheet”) showing the same adjustments for Trapped Cash and Net Shareholder Loans as are set out (in respect of the Valuation Balance Sheet) in paragraph 6 of Schedule 3 (Price Determination).  Within 10 Business Days following the provision of the Put Closing Balance Sheet and the Adjusted Put Closing Balance Sheet:

(A)if the aggregate amount shown on the Adjusted Put Closing Balance Sheet in respect of Net Debt is:

(i)less than the amount of the Net Debt shown on the Valuation Balance Sheet then the GSK Shareholders shall pay to the Novartis Shareholders an amount equal in Pounds Sterling to the difference multiplied by the relevant Tranche Percentage; or

(ii)greater than the amount of the Net Debt shown on the Valuation Balance Sheet then the Novartis Shareholders shall pay to the GSK Shareholders an amount equal in Pounds Sterling to the difference multiplied by the relevant Tranche Percentage;

(B)if the amount of Put Excess Cash actually repaid pursuant to Shareholder Loans and/or distributed to the Shareholders pursuant to clause 20.11 at that Put Option Completion would have been different had the Put Closing Balance Sheet been used for that purpose, then:

(i)if the amount of Put Excess Cash so repaid or distributed would have been less, the GSK Shareholders and the Novartis Shareholders shall make such payments to the Company as are necessary to put the Company into the position that it would have been in had the Put Closing Balance Sheet been used for that purpose (and, if applicable, the Company shall repay to the GSK Shareholders any amount provided to the Company by way of additional funding pursuant to clause 20.11(D)(i)); or

(ii)if the amount of Put Excess Cash so repaid or distributed would have been greater, the Company shall make such repayment or distributions as would otherwise have been made pursuant to clause 20.11 had the Put Closing Balance Sheet been used for that purpose,

and, in each case, the relevant Shareholder Loan balances shall be readjusted accordingly if necessary to reflect such payments.  For the purposes of this clause 20.12, “Net Debt” means the amount calculated as Borrowings plus Net Shareholder Loans minus Trapped Cash.

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[***]

20.13[***]

Conversion of Put Shares to A Shares on transfer under a Tranche

20.14At any Put Option Completion following which the Novartis Shareholders will continue to hold B Shares, the parties to this agreement will do all such things are as necessary to redesignate the relevant Put Shares as A Shares with effect immediately following that Put Option Completion.

Pre-completion undertakings

20.15Between the Put Exercise Notice Date and the relevant Put Option Completion Date, the Company (and, so far as they are legally able, each of the Shareholders) shall procure that the Business is run in the ordinary course of business and consistent with past practice and in accordance with the terms of this agreement.

[***]

20.16[***]

21.TRANSFER OF SHARES ON DEFAULT

21.1The following are “Events of Default”:

(A)any member of any Shareholder Grouping is in material or persistent breach of clause 16 (Restrictions on Dealing with Shares) and such breach has not, if capable of remedy, been remedied to the reasonable satisfaction of the other Shareholder Grouping within 90 days of receipt by the Shareholder Grouping a member of which is in breach of written notice from the other Shareholder Grouping requiring such remedy;

(B)any procedure is commenced with a view to the liquidation, winding-up or re-organisation of a member of any Shareholder Grouping or any of its parent undertakings (other than for the purpose of a solvent amalgamation or reconstruction with the prior approval of the other Shareholder Grouping, such approval not to be unreasonably withheld or delayed) and that procedure (unless commenced by any member of that Shareholder Grouping) is not terminated or discharged within 14 days;

(C)any step is taken or any procedure is commenced with a view to the appointment of an administrator, receiver, administrative receiver or trustee in bankruptcy or similar proceeding (Konkursverwalter or Sachwalter) in relation to any member of any Shareholder Grouping (or any of its parent undertakings) or all or substantially all of its assets and that procedure (unless commenced by any member of that Shareholder Grouping or that parent undertaking) is not terminated or discharged within 14 days;

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(D)the holder of any security over all or substantially all of the assets of any member of any Shareholder Grouping (or any of its parent undertakings) takes any step to enforce that security and that enforcement is not discontinued within 14 days;

(E)all or substantially all of the assets of any member of any Shareholder Grouping (or any of its parent undertakings) is subject to attachment, sequestration, execution or any similar process and that process is not terminated or discharged within 14 days;

(F)any member of any Shareholder Grouping (or any of its parent undertakings) is unable to pay its debts as they fall due;

(G)any member of any Shareholder Grouping (or any of its parent undertakings) enters into, or any step is taken, whether by either of their boards of directors or otherwise, towards entering into a moratorium, composition (Nachlassverfahren), provisorical composition moratorium (Provisorische Nachlassstundung) or arrangement with its creditors or any class of them, including, but not limited to, a company voluntary arrangement or a deed of arrangement;

(H)without prejudice to clauses 21.1(B) to 21.1(G) (inclusive) (i) any member of any Shareholder Grouping files in any court or agency pursuant to any statute or regulation of any state or country, a petition in bankruptcy (Bagehren um Konkurseröffnung) or insolvency or for reorganisation or composition (Nachlasstundung) or for a provisorical composition moratorium (Provisorische Nachlasstundung) for an arrangement or for the appointment of a receiver or trustee of the relevant member of the Shareholder Grouping or of substantially all of its assets, or (ii) any member of any Shareholder Grouping proposes a written agreement of composition or extension of substantially all of its debts, or (iii) any member of any Shareholder Grouping is served with an involuntary petition against it, filed in any insolvency proceeding, and such petition is not dismissed within 90 days of filing thereof, or (iv) any member of any Shareholder Grouping shall propose or be a party to any dissolution or liquidation, or (v) any member of any Shareholder Grouping shall make an assignment of substantially all of its assets for the benefit of creditors;

(I)any member of any Shareholder Grouping (or any of its parent undertakings) ceases or threatens to cease wholly or substantially (where substantially shall be interpreted to mean in respect of at least 90 per cent. or more of the relevant company’s Group’s business) to carry on its business, other than for the purpose of a solvent amalgamation or reconstruction or statutory merger (Fusion) with the prior approval of the other Shareholder Grouping (such approval not to be unreasonably withheld or delayed); and

(J)any member of any Shareholder Grouping (or any of its parent undertakings) enters into, or any step is taken, whether by either of their boards of directors or otherwise, towards any procedure analogous under the laws of any jurisdiction to the procedures set out in clauses 21.1(B) to 21.1(I) (inclusive).

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21.2If an Event of Default occurs and is continuing in relation to any member of any Shareholder Grouping (such Shareholder Grouping being the “Defaulting Grouping”):

(A)the other Shareholder Grouping (the “Non-Defaulting Grouping”) may serve notice (a “Default Valuation Notice”) on the Company and the other Shareholder Grouping requiring that the price (the “Default Price”) of the B Shares (where any GSK Shareholder is a member of the Defaulting Grouping as a result of an Event of Default set out in clause 21.1(A) or where the Novartis Shareholder is a member of the Defaulting Grouping) or the A Shares (where any GSK Shareholder is a member of the Defaulting Grouping as a result of an Event of Default set out in any of the clauses 21.1(B) to 21.1(J)) be determined in accordance with the provisions of Schedule 3 (Price Determination), which shall apply mutatis mutandis and on the basis that all references to the “Put Option Price” or “Put Option Market Value” shall be to the Default Price and all references to the “Put Exercise Notice Date” shall be to the date of the Default Valuation Notice;

(B)within 20 Business Days of the determination of the Default Price (and without prejudice to any other remedy which the Non-Defaulting Grouping may have), the Non-Defaulting Grouping may serve a notice (the “Default Notice”) on the Defaulting Grouping requiring it, subject to clause 21.2(C):

(i)where the Non-Defaulting Grouping is the GSK Shareholders, to sell or procure the sale of the entire legal and beneficial interest in all (but not some only) of the B Shares to the Non-Defaulting Grouping (or another member of its Group as they may nominate) at the Reduced Default Price;

(ii)where the Non-Defaulting Grouping is the Novartis Shareholders and the Defaulting Grouping is the GSK Shareholders as a result of an Event of Default occurring in relation to any GSK Shareholder as set out in clause 21.1(A), to buy (or procure that their nominee buys) the entire legal and beneficial interest in all (but not some only) of the B Shares from the Non-Defaulting Grouping at the Default Price;

(iii)where the Non-Defaulting Grouping is the Novartis Shareholders and the Defaulting Grouping is the GSK Shareholders as a result if an Event of Default occurring in relation to a GSK Shareholder as set out in any of clauses 21.1(B) to 21.1(J) (inclusive) to sell (or procure that their nominee sells) the entire legal and beneficial interest in all (but not some only) of the A Shares to the Non-Defaulting Grouping (or another member of its Group as they may nominate) at the Reduced Default Price,

(C)if a Default Notice is served within the 20 Business Day period referred to in clause 21.2(B) the following provisions shall apply:

(i)completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares or A Shares (as the case may

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be) shall be conditional only upon: (i) the obtaining of any anti-trust approvals or consents; (ii) the obtaining of any other legal and/or regulatory approvals or consents (including pursuant to applicable bankruptcy or liquidation Laws); and/or (iii) the obtaining of any shareholder and/or Third Party consents, in any case, as are mandatorily required by Law in connection with such acquisition (such conditions being the “Default Transfer Conditions”);

(ii)the Shareholders shall (and shall procure that each other relevant member of their respective Groups shall) cooperate with one another (acting reasonably) with a view to satisfying the Default Transfer Conditions as soon as reasonably practicable following receipt by the Defaulting Grouping of the Default Notice;

(iii)completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the A Shares or the B Shares (as the case may be) shall occur in accordance with the provisions of clause 22 (Completion of Share Transfers) on the tenth Business Day following the later of (i) the day on which all of the Default Transfer Conditions have all been satisfied (or waived (in whole or in part) by the Shareholders), and (ii) 3 months following the date of the Default Notice; and

(iv)clauses 20.11 and 20.12 shall apply mutatis mutandis and on the basis that:

(a)all references to “Put Option Completion” or “Put Option Completion Date” shall be to the completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares or A Shares (as the case may be) or the date on which such completion takes place, respectively;

(b)all references to the “Put Exercise Notice Date” shall be to the date of the Default Valuation Notice;

(c)all references to “Pre-Put Quarterly Balance Sheet” shall be to the consolidated balance sheet for the Company included in the last quarterly accounts prior to the date of the Default Valuation Notice;

(d)all references to “Put Excess Cash” shall be to the Readily Available Cash in excess of the Base Cash Amount as shown in the consolidated balance sheet for the Company included in the last quarterly accounts prior to the date of the Default Valuation Notice;

(e)all references to “Put Closing Balance Sheet” shall be to an audited consolidated balance sheet for the Company as at the date of completion of the acquisition of the entire legal and

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beneficial interest in all (but not some only) of the B Shares or  A Shares (as the case may be);

(f)all references to “Adjusted Put Closing Balance Sheet” shall be to an audited adjusted version of the audited consolidated balance sheet for the Company as at the date of completion of the acquisition of the entire legal and beneficial interest in all (but not some only) of the B Shares or A Shares (as the case may be); and

(g)clause 20.11(D) and 20.12(A) shall be amended such that all references to:

(1)the “GSK Shareholders” shall be to the Shareholders that are acquiring the entire legal and beneficial interest in all (but not some only) of the B Shares or the A Shares (as the case may be);

(2)the “Novartis Shareholders” shall be to the Shareholders that are selling the entire legal and beneficial interest in all (but not some only) of the B Shares or the A Shares (as the case may be); and

(3)the “Tranche Percentage” shall be to the percentage of Shares that the A Shares or the B Shares (as the case may be) represent; and

(D)if no Default Notice is served within the 20 Business Day period referred to in clause 21.2(B), no further Default Valuation Notice or Default Notice may be served in respect of the circumstances comprising the relevant Event of Default (without prejudice to any other rights and remedies the Non-Defaulting Grouping may have).

21.3For the avoidance of doubt, the remedies set out in this clause 21 are without prejudice to any other rights, powers or remedies that any party may have following or in anticipation of an Event of Default.

22.COMPLETION OF SHARE TRANSFERS

22.1Where this clause 22 applies to the transfer of any Share, the Share shall be transferred free of encumbrances and with all rights attaching thereto and the transfer shall be governed by the law of England and Wales.

22.2On completion of any transfer of Shares under this agreement where this clause 22 applies:

(A)the seller shall deliver to the purchaser a duly executed transfer in favour of the purchaser together with the certificate(s) representing the relevant Shares and a power of attorney in a form and in favour of a person nominated by the

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purchaser, so as to enable the purchaser, pending registration, to exercise all rights of ownership in relation to the Shares transferred to it including, without limitation, the voting rights;

(B)in the case of clauses 18 (Novartis Transfer and GSK Right of First Refusal), 19.4 (GSK Transfer and Novartis Right of First Refusal and Tag Right), 19 (Novartis Put Option) and 21 (Transfer of Shares on Default), the purchaser shall pay the relevant Cash consideration as referred to in clauses 18.2(J) (Novartis Transfer and GSK Right of First Refusal), clause 19.2(J) (GSK Transfer and Novartis Right of First Refusal and Tag Right), 20.6 (Novartis Put Option), and 21.2(A) (Transfer of Shares on Default) to the seller for value on the date of completion in such manner as may be agreed between the seller and the purchaser before completion or failing any such agreement by telegraphic transfer in immediately available funds to such bank account as may be notified by the seller to the purchaser;

(C)the seller shall do all such other acts and/or execute all such other documents in a form satisfactory to the purchaser as the purchaser may reasonably require to give effect to the transfer of Shares to it (save, for the avoidance of doubt, the payment of any stamp duty or stamp duty reserve tax required in connection with such transfer which shall be for the account of the purchaser); and

(D)the Company shall, subject to the instrument of transfer being duly stamped, procure that the purchaser shall be registered as the holder of the relevant Shares.

23.INTERACTION OF NOTICES

23.1When a Default Notice, B Share Offer Notice, A Share Offer Notice, Tag Share Offer Notice or a Put Exercise Notice has been validly served and/or the resultant process pursuant to the same is subsisting, no other such notice may be served.

23.2No B Share Offer Notice, A Share Offer Notice, Tag Share Offer Notice, Put Exercise Notice or Default Notice may be withdrawn after it has been made.

24.EFFECT OF DEED OF ADHERENCE

The parties agree to extend the benefit of this agreement to any person who enters into a Deed of Adherence in the form set out in Schedule 2 (Form of Deed of Adherence), but without prejudice to the continuation inter se of the rights and obligations of the original parties to this agreement.

25.SHAREHOLDER UNDERTAKINGS

25.1Each Shareholder undertakes with the other Shareholders that it will:

(A)comply with each of the provisions of this agreement;

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(B)exercise its voting rights and other rights as a member of the Company in order (insofar as it is able to do so through the exercise of such rights) to give full effect to the provisions of this agreement and the rights and obligations of the parties as set out in this agreement;

(C)procure that any Director nominated by it from time to time shall (subject to their fiduciary duties to the Company) exercise their voting rights and other powers and authorities in order (insofar as they are able to do so through the exercise of such rights, powers and authorities) to give full effect to the provisions of this agreement and the rights and obligations of the parties as set out in this agreement; and

(D)comply with Section 10 of the Brazilian Merger Control Agreement of February 25, 2015.

25.2Any party may give its approval for any matter for which its consent in writing is required pursuant to this agreement:

(A)in writing on behalf of itself; or

(B)in the case of written consent of GSK, in writing signed by any one A Director appointed by the First GSK Shareholder or by a vote in favour of a separate and specific directors’ resolution on that matter by a majority of the A Directors appointed by the First GSK Shareholder voting on such resolution; or

(C)in the case of any written consent by Novartis, in writing signed by one B Director appointed by the First Novartis Shareholder or by a vote in favour of a separate and specific directors’ resolution on that matter by a majority of the B Directors appointed by the First Novartis Shareholder voting in favour of such resolution.

25.3The parties acknowledge and agree that any insurance policy in respect of directors and officers liability in the name of, or for the benefit of, GSK’s Group (a “GSK D&O Policy”) may also, on its terms, be accessible to certain directors, officers and employees and members of the Company’s Group.  Each of GSK, Novartis and the Company undertakes to procure that no claims under any GSK D&O Policy are made (other than with the consent of GSK) by:

(A)in the case of GSK (a) any directors, officers or employees of members of its Group, (b) any members of its Group, or (c) any A Director nominated by the First GSK Shareholder;

(B)in the case of Novartis (a) any directors, officers or employees of members of its Group, (b) any members of its Group, or (c) any B Director nominated by the First Novartis Shareholder; or

(C)in the case of the Company, (a) any directors (other than the Directors nominated by the First GSK Shareholder or the First Novartis Shareholder),

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officers or employees of members of its Group, or (b) any members of its Group,

in respect of any given period,

(i)unless and until a claim under any directors and officers liability insurance policy in the name of, or for the benefit of, the Company’s Group (the “Company D&O Policy”) in respect of the same period has been made and has fully extinguished all limits of cover provided thereunder in respect of that claim; or

(ii)unless the Company D&O Policy does not for any reason operate so as to provide cover in respect of such liability.

25.4Each party warrants to the other parties as follows:

(A)it adheres to high standards of ethics and integrity, and complies with all applicable Anti-Bribery Laws;

(B)it has a code of conduct setting out the standards of ethics of the corporation, and specifically an anti-corruption policy that applies worldwide to all its employees, subsidiaries and affiliates, and third parties acting for it or on its behalf.  Its anti-bribery and corruption programme (“ABAC Programme”) mandates a robust set of internal controls on its operations around the world, and sets rules of conduct for its employees in interactions with healthcare providers and government officials, third parties in general and business development transactions.  It provides training to its employees and selected third parties on its ABAC Programme;

(C)it has an assurance programme involving the monitoring and auditing of activities to ensure compliance with its anti-corruption policy and the adequacy of internal controls; and

(D)it regularly reviews its ABAC Programme as part of its internal processes of improvement, and benchmarks it against the standards of the industry with the aid of external experts.

25.5The Company agrees to deliver to each Shareholder on request (but no more than once in each calendar year) a certification in the form set out in Schedule 4 (ABAC Certification).

25.6The Company shall ensure that all material analysis and reports produced by any member of the Company’s Group or professional advice received by any members of the Company’s Group in connection with:

(A)any auditing of the activities of the Company’s Group for compliance with its relevant ABAC Policies and Procedures;

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(B)any litigation or arbitration threatened or commenced against any member of the Company’s Group which, if successful, on its own or together with any other related procedures or claims would be likely to have a material adverse effect on GSK’s Group; and

(C)any violation by any member of the Company’s Group of any Law applicable to it which could in any respect materially and adversely affect the Business or reputation of the Company’s Group,

in each case, shall be promptly presented to the Board for its review and consideration and all Directors shall have the opportunity to provide their views to the Board in relation to any such matter and the Company shall ensure that all such views are given due consideration.  In the event that any analysis, reports or professional advice referred to in clause 25.6(A) shows that a member(s) of the Company’s Group has or has potentially committed a breach of such ABAC Policies and Procedures (in which case such analysis, reports or professional advice shall be deemed to be material) or in the event that any analysis, reports or professional advice referred to in clauses 25.6(B) and 25.6(C) are presented to the Board and, in any case, such actual or potential breach, litigation, arbitration or violation could have an adverse effect on the compliance position or reputation of a Shareholder’s Group, any Director may, on behalf of the relevant Shareholder that nominated him or her, make such reasonable requests for further information to be provided in respect of the same as is reasonably necessary for such Shareholder to establish whether and to what extent any such actual or potential breach, litigation, arbitration or violation has any adverse effect on the compliance position or reputation of such Shareholder’s Group.  The Company shall be obliged to dedicate a reasonable amount of time (to be judged by the Board acting in good faith) to the collection and gathering of such information pursuant to such request.  Subject to applicable Law and to the extent that legal privilege would not be prejudicially affected, any such Director may share any such information with the General Counsel of GSK’s Group (in the event that such Director is an A Director) or Novartis’ Group (in the event that such Director is a B Director) and their legal team on a strictly private and confidential basis only, provided that (i) such information is used for the sole purpose of establishing whether and to what extent any such actual or potential breach, litigation, arbitration or violation has any adverse effect on the compliance position or reputation of the relevant Shareholder’s Group, and (ii) such information shall not be disclosed to any other person, except as required by Law.

26.UNDERTAKINGS BY THE COMPANY

To the extent to which it is able to do so by Law, the Company undertakes with each of the Shareholders that it will comply with each of the provisions of this agreement.  Each undertaking by the Company in respect of each provision of this agreement shall be construed as a separate undertaking and if any of the undertakings is unlawful or unenforceable the remaining undertakings shall continue to bind the Company.

27.PROTECTIVE COVENANTS

27.1Subject to clauses 27.2 to 27.9 (inclusive), each member of any Shareholder Grouping undertakes with each member of the other Shareholder Grouping and with the

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Company that it will not and that it will procure that no member of its Group will, either alone or in conjunction with or on behalf of any other person, for a period of two years from Completion, establish, be directly or indirectly engaged in or be directly or indirectly interested in carrying on any Competing Business in any territory or territories, or assist any other person to do any of the foregoing.

27.2Nothing in this agreement shall prevent or prohibit a Shareholder (or any member of its Group) from doing any of the following things:

(A)without prejudice to the remaining provisions of this clause 27.2, being the holder of securities in a body corporate if such securities are listed on any stock market or other investment exchange and (in aggregate with all other such securities held by any other members of its Group) do not result in such Shareholder (or any other member of its Group) Controlling such body corporate;

(B)acquiring, or acquiring an interest in, another entity or business which is directly or indirectly engaged in, or directly or indirectly interested in, carrying on any Competing Business, provided that the relevant Shareholder (or member of its Group) complies with the provisions of clauses 27.3 to 27.8;

(C)being, as at Completion or upon and as a result of a GSK Change of Control or Novartis Change of Control occurring (as the case may be), directly or indirectly engaged in, or directly or indirectly interested in, any Competing Business, provided that the relevant Shareholder (or member of its Group) complies with the provisions of clauses 27.3 to 27.8;

(D)disposing of (or otherwise transferring) any of its (or any member of its Group’s) [***] or manufacturing, marketing, distributing, selling or otherwise commercialising any of its (or any member of its Group’s) [***], in each case, only as permitted by, and strictly in accordance with, clause 15 ([***]);

(E)continuing to own and/or manage the businesses (from time to time) of its Pharmaceuticals Division and developing such businesses in its sole discretion;

(F)owning and operating Delayed Businesses and Alliance Market Businesses in accordance with the provisions of the Contribution Agreement; and

(G)any matter required by the Contribution Agreement.

27.3Each Shareholder Grouping hereby grants to the Company a right of first negotiation in relation to any Competing Business referred to in clause 27.2(B) or clause 27.2(C), such right of first negotiation to be on the terms set out in the remainder of this clause 27.

27.4Within 5 Business Days of (i) any acquisition referred to in clause 27.2(B) or (ii) a GSK Change of Control occurring or an Novartis Change of Control occurring (as the case

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may be) as referred to in clause 27.2(C), the relevant Shareholder Grouping shall notify the Company in writing of the same together with reasonable details thereof.

27.5Subject to clause 27.8, no later than 60 days after the date on which the Company receives any notification in accordance with clause 27.4, the Company shall notify the relevant Shareholder Grouping in writing as to whether it is interested in acquiring the relevant Competing Business (or any rights and/or interests therein) from the relevant Shareholder Grouping (or any other member of its Group).

27.6Subject to clause 27.8, if the Company notifies the relevant Shareholder Grouping in accordance with clause 27.5 that it is interested in acquiring the relevant Competing Business (or any rights and/or interests therein) from the relevant Shareholder Grouping (or any other member of its Group), then, during the [***] period from the date of such notification (the “Non-Compete Exclusivity Period”):

(A)the relevant Shareholder Grouping (and any other member of its Group) shall not enter into any discussions or negotiations with any Third Party in relation to the disposal or other transfer of, or actually dispose of or otherwise transfer (or agree to do so), the relevant Competing Business (or any rights or interests therein) to any person outside its Group; and

(B)the relevant Shareholder Grouping and the Company shall negotiate in good faith with a view to agreeing the terms and conditions upon which the Company (or another member of its Group) shall acquire the relevant Competing Business (or any rights and/or interests therein) from the relevant Shareholder Grouping (or another member of its Group).

27.7Subject to clause 27.8, in the event that:

(A)the Company notifies the relevant Shareholder Grouping under clause 27.5 that it is not interested in acquiring the relevant Competing Business from the relevant Shareholder Grouping (or another member of its Group);

(B)the Company fails to notify the relevant Shareholder Grouping under clause 27.5 as to whether or not it is interested in acquiring the relevant Competing Business from the relevant Shareholder Grouping (or another member of its Group); or

(C)the Non-Compete Exclusivity Period expires and the Company and the relevant Shareholder Grouping (or the other relevant member(s) of their respective Groups) have not entered into a binding agreement in relation to the acquisition of the relevant Competing Business (or any rights and/or interests therein),

the relevant Shareholder Grouping (and any other member of its Group) shall be free to (i) enter into discussions and/or negotiations with a Third Party in relation to the disposal or other transfer of the relevant Competing Business, and/or (ii) continue to own and operate the relevant Competing Business.

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27.8The provisions of clause 8.5 (Proceedings of Directors) shall apply in relation to those actions or steps to be taken by the Company in connection with the process set out in clauses 27.3 to 27.7 (inclusive).

27.9This clause 27 shall not apply, in the case of the GSK Shareholders, to the members of their Group engaged in the GSK Excluded Businesses and, in the case of the Novartis Shareholders, the members of their Group engaged in the Novartis Excluded Businesses.

28.CONFIDENTIALITY

28.1Each party shall treat as confidential all information obtained as a precursor to or as a result of negotiating or entering into or performing this agreement or, in the case of a Shareholder, through its interest in the Company or its Business or its assets and which relates to:

(A)the provisions of this agreement;

(B)the negotiations relating to this agreement;

(C)the subject matter of this agreement;

(D)the Company or members of its Group or their respective businesses or assets (from time to time);

(E)any Shareholder or members of its Group or their respective businesses or assets (from time to time); or

(F)the exercise of a party of its rights under clauses 17 (Permitted Transfers) to 21 (Transfer of Shares on Default) (inclusive),

save that clause 28.1(D) shall not apply to the Company.

28.2Each party shall:

(A)not disclose any such confidential information to any person other than:

(i)a Director nominated by the holders of the class of Shares held by it, or any of its directors or employees whose duties include the management or monitoring of the Business and who needs to know such information in order to discharge his or her duties; or

(ii)other members of its Group (provided, for the purposes of this clause 28.2 only, each of GSK and Novartis shall be deemed to be members of the Company’s Group);

(B)not use any such confidential information other than for the purpose of conducting the Business or managing or monitoring its investment in the Company; and

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(C)procure that any person to whom such confidential information is disclosed by it complies with the restrictions set out in this clause 28 as if such person were a party to this agreement.

28.3Notwithstanding the previous provisions of this clause 28, any party may disclose any such confidential information:

(A)if and to the extent required by Law or for the purpose of any judicial or arbitral proceedings;

(B)if and to the extent required by any securities exchange or regulatory or taxation or other governmental body to which that party or a member of its Group is subject or submits, wherever situated, including (amongst other bodies) the Financial Conduct Authority, the London Stock Exchange plc, the Panel on Takeovers and Mergers, the SIX Swiss Exchange, the U.S. Securities and Exchange Commission or the New York Stock Exchange, whether or not the requirement for information has the force of law;

(C)to a Tax Authority in connection with the disclosing party’s (or a member of its Group’s) Tax affairs;

(D)to its and the Company’s advisers, auditors, actual or proposed debt financiers and bankers, provided they have a duty to keep such information confidential;

(E)to the extent the information has come into the public domain through no fault of that party;

(F)to the extent the party (or parties) to which such information relates has (or have) given prior written consent to the disclosure;

(G)to the extent it is expressly permitted to do so pursuant to any Transaction Document;

(H)if and to the extent required in connection with any regulatory consent or clearance process required by applicable Law; or

(I)if it was in the possession of a party or any of its advisers (in either case as evidenced by written records) without any obligation of secrecy prior to it being received or held.

28.4Any party disclosing information pursuant to clauses 28.3(A) or clause 28.3(B) shall (to the extent permitted by Law) take all such steps as may be reasonable and practicable in the circumstances to agree the contents, form and timing of such disclosure with the party (or parties) to whom such information relates before making such disclosure.

28.5The restrictions contained in this clause 28 shall continue to apply to each party (including any Shareholder who has ceased to hold Shares) without limit in time.

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29.ANNOUNCEMENTS

29.1Other than any announcements agreed by the parties to be made immediately following the execution of the Contribution Agreement, no announcement or other publication concerning this agreement or the Business or the assets of the Company shall be made by any party or member of its Group (other than the Company) without the prior written approval of the others, such approval not to be unreasonably withheld or delayed.

29.2Notwithstanding clause 29.1, any party or member of its Group may, whenever practicable and permissible after consultation with the other parties (but save that the Company or any member of its Group need only to consult where the announcement is outside the ordinary course of business or concerns this agreement), make an announcement concerning this agreement or the Business or the assets of the Company if and to the extent required by:

(A)Law or for the purposes of any judicial or arbitral proceedings; or

(B)any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the Financial Conduct Authority, the London Stock Exchange plc, the Panel on Takeovers and Mergers, HMRC, the SIX Swiss Exchange, the Swiss Federal Tax Administration, the U.S. Securities and Exchange Commission or the New York Stock Exchange, whether or not the requirement has the force of law.

29.3The restrictions contained in this clause 29 shall continue to apply to each party (including any Shareholder who has ceased to hold Shares) without limit in time unless otherwise agreed between the parties.

30.TERMINATION

30.1This agreement shall terminate immediately (except for clause 27 (Protective Covenants), this clause 30, clause 36 (Notices) and clause 46 (Agent for Service) and those provisions expressly stated to continue after termination without limit in time) and without prejudice to any rights or liabilities arising under this agreement prior to such termination to which clause 45 (Governing Law and Jurisdiction) will continue to apply) if (i) only the GSK Shareholders; or (ii) only the Novartis Shareholders, in each case, together with members of its respective Group, remain holding Shares.

30.2Without prejudice to clause 17.4 (Permitted Transfers), in the event that a Shareholder ceases to hold any Shares, its (and, if no member of its Group continues to hold any Shares, all other members of its Group’s) rights and liabilities under this agreement shall terminate from such time:

(A)except for clause 36 (Notices), clause 46 (Agent for Service) and those other provisions expressly stated to continue after termination without limit in time; and

(B)without prejudice to any rights or liabilities of such party under this agreement prior to such time, and

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clause 45 (Governing Law and Jurisdiction) shall apply in respect of the matters specified in clauses 30.2(A) and 30.2(B).

31.GUARANTEE

31.1In consideration of the other parties entering into this agreement:

(A)GSK guarantees to the other parties the due and punctual performance of all obligations of the GSK Shareholders and any Group Transferee of the GSK Shareholders (each a “Guaranteed Party” of GSK) under this agreement.  This guarantee is unconditional and irrevocable; and

(B)Novartis guarantees to the other parties the due and punctual performance of all obligations of the Novartis Shareholders and any Group Transferee of the Novartis Shareholders (each a “Guaranteed Party” of Novartis) under this agreement.  This guarantee is unconditional and irrevocable,

with each of GSK and Novartis being, a “Guarantor”.

31.2The guarantees set out in clause 31.1:

(A)are continuing guarantees.  No payment or other settlement will discharge a Guarantor’s obligations until the obligations of all of its Guaranteed Parties have been discharged in full;

(B)are in addition to, and independent of, any other guarantee or security;

(C)may be enforced before any steps are taken against the relevant Guaranteed Party or under any other guarantee or security;

(D)will only be discharged by the discharge in full of the obligations of the relevant Guarantor’s Guaranteed Parties; and

(E)will not be discharged by any other action, omission or fact.

31.3A Guarantor’s obligations shall, therefore, not be affected by:

(A)the obligations of any of its Guaranteed Parties being or becoming void, invalid, illegal or unenforceable;

(B)any change, waiver or release of the obligations of any of its Guaranteed Parties;

(C)any concession or time being given to any of its Guaranteed Parties;

(D)the winding-up or re-organisation of any of its Guaranteed Parties;

(E)any change in the condition, nature or status of any of its Guaranteed Parties;

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(F)any of the above events occurring in relation to another guarantor or provider of security in relation to the obligations of any of its Guaranteed Parties;

(G)any failure to take, retain or enforce any other guarantee or security;

(H)any circumstances affecting or preventing recovery of amounts expressed to be due by any of its Guaranteed Parties; or

(I)any other matter which might discharge that Guarantor.

31.4Any receipt from any person other than that Guarantor shall reduce the outstanding balance only to the extent of the amount received.

31.5Any settlement with, or discharge of, a Guarantor shall be subject to the condition that the settlement or discharge shall be set aside if any prior payment, or any other guarantee or security, in reliance on which that settlement or discharge was made in whole or in part, is set aside, invalidated or reduced.  In this event each Guarantor agrees to reimburse each other party for the value of the payment, guarantee or security which is set aside, invalidated or reduced.

31.6In addition to each Guarantor’s obligations as guarantor, each Guarantor agrees that any obligation of any of its Guaranteed Parties under this agreement which may not be enforceable against that Guarantor as guarantor shall be enforceable against that Guarantor as though that Guarantor were the principal obligor in respect of the obligation.

31.7In the event that a Guaranteed Party fails to perform or breaches any of its obligations under this agreement, the Guarantor of that Guaranteed Party agrees to indemnify each of the other parties on an after Tax basis for the losses and reasonable expenses (including loss of profit) that party suffers or incurs, or will suffer or incur, as a result.  The Guarantor of that Guaranteed Party also agrees to indemnify each other party on an after Tax basis for all losses and expenses (including loss of profit) arising from any obligation of any of its Guaranteed Parties being or becoming void, invalid, illegal or unenforceable.

31.8The parties agree that:

(A)no Guarantor shall have the benefit of any security in respect of this guarantee and indemnity;

(B)no Guarantor shall:

(i)take the benefit of any right against any of its Guaranteed Parties or any other person in respect of amounts paid under this guarantee and indemnity; or

(ii)claim or exercise against any of its Guaranteed Parties any right to any payment;

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(C)any other party may request a Guarantor to submit a proof for amounts due to it by any of its Guaranteed Parties or any other guarantor.  Each Guarantor agrees to submit a proof promptly in accordance with this request.  All amounts received in respect of this proof shall be held by the Guarantor on trust for the other parties;

(D)notwithstanding any of the other provisions of this agreement, the liability of a Guarantor under this clause 31 shall in no circumstances exceed the liability of the Guaranteed Party whose obligations are guaranteed by that Guarantor; and

(E)the obligations in this clause 31 shall cease to have effect in respect of a Guarantor when the obligations of all of its Guaranteed Parties under this agreement have been discharged in full.

32.MISCELLANEOUS

Assignment

32.1Without prejudice to clauses 17 (Permitted Transfers), 18 (Novartis Transfer and GSK Right of First Refusal), 19 (GSK Transfer and Novartis Right of First Refusal and Tag Right) and 24 (Effect of Deed of Adherence), no party shall, without the prior written consent of the other relevant parties:

(A)assign, or purport to assign all or any part of the benefit of, or its rights or benefits under, this agreement (together with any causes of action arising in connection with any of them);

(B)make a declaration of trust in respect of or enter into any arrangement whereby it agrees to hold in trust for any other person all or any part of the benefit of, or its rights or benefits under, this agreement;

(C)sub-contract or enter into any arrangement whereby another person is to perform any or all of its obligations under this agreement;

(D)transfer, charge or otherwise deal with any of its rights or obligations under this agreement; or

(E)grant, declare, create or dispose of any right or interest in it, in whole or in part,

and any purported assignment in contravention of this clause 32.1 shall be void.

Variation

32.2No variation of this agreement shall be valid unless it is in writing and duly executed by or on behalf of all the parties to it.

32.3If this agreement is varied:

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(A)the variation shall not constitute a general waiver of any provisions of this agreement;

(B)the variation shall not affect any rights, obligations or liabilities under this agreement that have already accrued up to the date of variation; and

(C)the rights and obligations of the parties under this agreement shall remain in full force and effect, except as, and only to the extent that, they are so varied.

Warranties

32.4Each of the parties warrants to each other as at the date of this agreement that:

(A)it is validly existing and is a company duly incorporated and registered under the law of its jurisdiction of incorporation;

(B)it has the legal right and full power and authority to enter into and perform this agreement which will constitute valid and binding obligations on it in accordance with its terms;

(C)except as referred to in this agreement, it:

(i)is not required to make any announcement, consultation, notice, report or filing; and

(ii)does not require any consent, approval, registration, authorisation or permit,

in each case in connection with the performance of this agreement.

33.ENTIRE AGREEMENT

33.1This agreement, the Transaction Documents and any other agreement or document entered into by each of the parties in connection with any such document together constitute the whole and only agreement between the parties relating to the subject matter of this agreement, the Transaction Documents and any other agreement or document entered into by each of the parties in connection with any such document.

33.2Each party acknowledges that in entering into this agreement, the Transaction Documents and any other agreement or document entered into by each of the parties in connection with any such document it is not relying upon any pre contractual statement which is not set out in this agreement, any Transaction Documents or any other agreement or document entered into by each of the parties in connection with any such document.

33.3Except in the case of fraud or fraudulent misrepresentation, no party shall have any right of action against any other party to this agreement (or their respective Connected Persons) arising out of or in connection with any pre contractual statement except to the extent that it is repeated in this agreement or in a Transaction Document or in any other

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agreement or document entered into by each of the parties in connection with any such document.

33.4Except in the case of fraud or fraudulent misrepresentation and for any liability in respect of a breach of this agreement or any other Transaction Document, no party (nor any of its Connected Persons) shall owe any duty of care or have any liability in tort or otherwise to any other party (or its respective Connected Persons) in relation to the Company and the Business.

33.5For the purposes of this clause 33, “pre contractual statement” means any draft, agreement, undertaking, representation, warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter of this agreement or any of the Transaction Documents or in any other agreement or document entered into in connection with any such document (as the case may be) made or given by any person at any time prior to the date of this agreement or any of the Transaction Documents or any other agreement or document entered into in connection with any such document (as the case may be).

33.6Each party agrees to the terms of this clause 33 on its own behalf and as agent for each of its Connected Persons.

34.DISPUTE RESOLUTION

34.1In the event of any deadlock or dispute between the Shareholders Groupings or any of their respective Directors arising out of, or in connection with, this agreement, including in relation to an action for which the approval is required pursuant to clause 4 (Reserved Matters), the Shareholders Groupings agree to use reasonable endeavours to resolve the matter (acting reasonably and in good faith).

34.2If one Shareholder Grouping serves formal written notice on the other that a deadlock or dispute arising out of or in connection with this agreement, including in relation to an action for which the approval is required pursuant to clause 4 (Reserved Matters), has arisen and the Shareholder Groupings are unable to resolve such deadlock or dispute within a period of 21 days of receipt of such notice, then such deadlock or dispute shall be referred to the respective chief executive officers of the respective Shareholder Groupings’ Groups.

34.3In the event that the chief executive officers of the respective Shareholder Groupings’ Groups are unable to resolve the relevant deadlock or dispute within a further period of 21 days of such referral (or such other time as GSK and Novartis may agree), then the status quo of such matter shall continue to apply (save in the case of Novartis’ approval of the 2018/19 Business Plan pursuant to clause 4.1(L) (Reserved Matters)).

34.4This clause 34 shall be without prejudice to clause 45 (Governing Law and Jurisdiction) and shall not restrict or exclude the right of any party to pursue, in accordance with clause 45 (Governing Law and Jurisdiction), any dispute arising out of or in connection with this agreement.

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35.CONFLICT WITH ARTICLES OF ASSOCIATION

In the event of any ambiguity or discrepancy between the provisions of this agreement and the Articles of Association or other constitutional documents of a member of the Company’s Group, the provisions of this agreement shall prevail as between the parties to the extent of the inconsistency for so long as this agreement remains in force.  Each of the parties shall (as applicable) exercise all voting and other rights and powers available to it so as to give effect to the provisions of this agreement and, if necessary, to procure (so far as it is able to do so) any required amendment to the Articles of Association or such other constitutional documents.

36.NOTICES

36.1A notice under this agreement shall only be effective if it is in writing.  E-mail is permitted.  Any notice validly served on one member of any Shareholder Group in accordance with this clause 36 shall be deemed to have been served on both members of such Shareholder Grouping.

36.2Notices under this agreement shall be sent to a party at its address and for the attention of the individual set out below:

Party and title of individual	Address
First GSK Shareholder For the attention of: Company Secretary	Its registered office from time to time
First Novartis Shareholder For the attention of: Head of Legal M&A, Novartis International A/G	Its registered office from time to time
Second Novartis Shareholder For the attention of: Head of Legal M&A, Novartis International A/G	Its registered office from time to time
GSK For the attention of: Company Secretary and General Counsel of Consumer Healthcare	Its registered office from time to time
Novartis For the attention of: Head of Legal M&A, Novartis International A/G	Its registered office from time to time

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Party and title of individual	Address
Company For the attention of: Company Secretary and General Counsel of Consumer Healthcare	Its registered office from time to time

Provided that a party may change its notice details on giving notice to the other parties of the change in accordance with this clause 36.  That notice shall only be effective on the date falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

36.3Any notice given under this agreement shall be deemed to have been duly given as follows:

(A)if delivered personally, on delivery;

(B)if sent by first class inland post, two clear Business Days after the date of posting;

(C)if sent by airmail, six clear Business Days after the date of posting; and

(D)if sent by e-mail, when despatched.

36.4Despite the provisions of clause 36.3, any Exit Notice shall not be effective until received by the intended recipient and the intended recipient shall acknowledge such receipt to the sender(s) promptly following such receipt.

36.5Any notice given under this agreement outside Working Hours in the place to which it is addressed shall be deemed not to have been given until the start of the next period of Working Hours in such place.

36.6No notice given under this agreement may be withdrawn or revoked except with the agreement of the other parties.

36.7The provisions of this clause 36 shall not apply in relation to the service of Service Documents.

37.REMEDIES AND WAIVERS

37.1No delay or omission by any party to this agreement in exercising any right, power or remedy provided by Law or under this agreement shall:

(A)affect that right, power or remedy; or

(B)operate as a waiver or variation of it.

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37.2The single or partial exercise of any right, power or remedy provided by Law or under this agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.

37.3The rights and remedies of each party under, or pursuant to, this agreement are cumulative, may be exercised as often as such party considers appropriate and are in addition to its rights and remedies under general law.

37.4Notwithstanding any express remedies provided under this agreement and without prejudice to any other right or remedy which any party may have, each party acknowledges and agrees that damages alone may not be an adequate remedy for any breach by it of the provisions of this agreement, so that in the event of a breach or anticipated breach of such provisions, the remedies of injunction, an order for specific performance and/or other equitable remedies would in appropriate circumstances be available.  Furthermore, each party acknowledges and agrees that it will not raise any objection to the application by or on behalf of another party or any member of its respective Group for any such remedies.

38.THIRD PARTY RIGHTS

38.1The parties agree that:

(A)certain provisions of this agreement confer a benefit on members of the parties’ respective Groups, their respective Connected Persons and such other Third Parties (each a “Relevant Third Party”) and, subject to the remaining provisions of this clause 38, are intended to be enforceable by each of the Relevant Third Parties by virtue of the Contracts (Rights of Third Parties) Act 1999, provided that the party in the same Group as the Relevant Third Party shall have the sole conduct of any action to enforce such right on behalf of a such Relevant Third Party; and

(B)notwithstanding the provisions of clause 38.1(A), this agreement may be rescinded or varied in any way and at any time by the parties to this agreement without the consent of any Relevant Third Party.

38.2Save as set out in clause 38.1(A), a person who is not a party to this agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 or any other statutory provision to enforce any of its terms.

39.FURTHER ASSURANCE

Each party shall (and shall use reasonable endeavours to procure that any relevant Third Party shall) at its own cost, from time to time on request, do all acts and/or execute all documents in a form reasonably satisfactory to any other party which that other party may reasonably consider necessary for giving full effect to this agreement and securing to that other party the full benefit of the rights, powers and remedies conferred upon that other party in this agreement, in each case subject to the terms and conditions set forth in this agreement.

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40.NO PARTNERSHIP

Nothing in this agreement and no action taken by the parties under this agreement shall constitute a partnership, association or other co operative entity between any of the parties or constitute any party the agent of any other party for any purpose.

41.COSTS AND EXPENSES

41.1Except as otherwise provided for in this agreement, each party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and carrying into effect of this agreement and the Transaction Documents.

41.2The costs of and incidental to the incorporation and the establishment of the Company shall be borne and paid by the Company.

42.INVALIDITY

If at any time any provision (or part of any provision) of this agreement is or becomes illegal, invalid or unenforceable in any respect under the Law of any jurisdiction, that shall not affect or impair:

(A)the legality, validity or enforceability in that jurisdiction of any other (or the remainder of a) provision of this agreement; or

(B)the legality, validity or enforceability under the Law of any other jurisdiction of that or any other provision of this agreement.

42.2Each of the provisions of this agreement is severable.

42.3If and to the extent that any provision of this agreement:

(A)is held to be, or becomes, invalid or unenforceable under the Law of any jurisdiction; but

(B)would be valid, binding and enforceable if some part of the provision were deleted or amended,

then the provision shall apply with the minimum modifications necessary to make it valid, binding and enforceable. All other provisions of this agreement shall remain in force.

43.COUNTERPARTS

43.1This agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this agreement, but all the counterparts shall together constitute but one and the same instrument.

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43.2Delivery of a counterpart of this agreement by e-mail attachment shall be an effective mode of delivery.

44.LANGUAGE

Each notice or communication under or in connection with this agreement shall be in English.

45.GOVERNING LAW AND JURISDICTION

45.1This agreement is to be governed by and construed in accordance with English law.  Any matter, claim or dispute arising out of or in connection with this agreement, whether contractual or non-contractual, is to be governed by and determined in accordance with English law.

45.2The courts of England are to have exclusive jurisdiction to settle any dispute arising out of or in connection with this agreement.  Any Proceedings shall be brought only in the courts of England.

45.3Each party waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any other ground, to the taking of proceedings in the courts of England.  Each party also agrees that a judgment against it in Proceedings brought in England shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

45.4Each party irrevocably submits and agrees to submit to the jurisdiction of the courts of England.

46.AGENT FOR SERVICE

46.1Each of Novartis, the First Novartis Shareholder and the Second Novartis Shareholder irrevocably appoints Hackwood Secretaries Limited of One Silk Street, London, EC2Y 8HQ to be its agent for the receipt of Service Documents.  Each such party agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules.

46.2If the agent at any time ceases for any reason to act as such, Novartis, the First Novartis Shareholder and the Second Novartis Shareholder shall each appoint a replacement agent having an address for service in England or Wales and shall notify the other parties of the name and address of the replacement agent.  Failing such appointment and notification, the Company shall be entitled by notice to Novartis to appoint a replacement agent to act on behalf of Novartis, the First Novartis Shareholder and the Second Novartis Shareholder, provided that Novartis shall be entitled, by notice to the Company, to replace that agent with a replacement agent having an address for service in England and Wales.  The provisions of this clause 46 applying to service on an agent apply equally to service on a replacement agent.

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46.3A copy of any Service Document served on an agent appointed in accordance with clauses 46.1 or 46.2 shall be sent by post to Novartis, the First Novartis Shareholder or the Second Novartis Shareholder (as applicable).  Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

46.4Without prejudice to clauses 46.1 to 46.3 (inclusive), any Shareholder without an address for service in England or Wales shall appoint, and keep appointed at all times, an agent for service with an address for service in England or Wales and shall notify the other parties and Shareholders of the name and address of its appointed agent for service.  Failing such appointment and notification, the Company shall be entitled by notice to such Shareholder to appoint an agent to act on behalf of such Shareholder, provided that that Shareholder shall be entitled, by notice to the parties and other Shareholders, to replace that agent with a replacement agent having an address for service in England and Wales.  Such Shareholder agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules.

46.5“Service Document” means a claim form, application notice, order, judgment or other document relating to any Proceedings.

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SCHEDULE 1
Business Plan

[***]

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SCHEDULE 2
Form of Deed of Adherence

[***]

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SCHEDULE 3
Price Determination

The Put Option Price shall be determined as follows:

1.Within 10 Business Days following any Put Exercise Notice Date:

(A)each of the GSK Shareholders and the Novartis Shareholders shall engage an investment bank of international repute which may be an existing or recent adviser of GSK or Novartis or any of their respective Affiliates and therefore not independent of GSK or Novartis (as the case may be) (the “GSK Bank” and the “Novartis Bank”, respectively); and

(B)the GSK Shareholders and the Novartis Shareholders shall jointly engage two mutually acceptable independent investment banks of international repute that are not then rendering advisory services to any Shareholder or any of its Affiliates (each an “Independent Bank” and together with the GSK Bank and the Novartis Bank, the “Banks”), provided that if the Shareholders fail to agree the identity of either or both of the Independent Banks within that period then either of the Shareholder Groupings may request that the Independent Bank(s) be nominated by the Chairman of the British Bankers Association, who shall be instructed to nominate such Independent Bank(s) within that period (and in any case within 5 Business Days thereafter).

2.The fees for the GSK Bank shall be borne by the GSK Shareholders and the fees for the Novartis Bank shall be borne by the Novartis Shareholders.  The fees for the Independent Banks shall be borne equally by the Shareholders.

3.Each Bank shall be instructed to determine its best estimate of the Put Option Market Value as defined in paragraph 5 below (each a “Bank Valuation”) as a single amount (and not as a range of amounts) in Pounds Sterling in accordance with the methodology set out in paragraph 5 below.  Save as expressly provided for in clause 19 and this Schedule 3, there shall be no communication permitted between the Independent Banks, nor between any Independent Bank and the GSK Bank or the Novartis Bank, nor between any Independent Bank and GSK or Novartis, in connection with the preparation of the Bank Valuations.

4.Within 10 Business Days following the Put Exercise Notice Date, the GSK Bank and the Novartis Bank shall jointly coordinate the preparation of a data room of information in respect of the Company and its Group for the purposes of enabling the Banks to produce the Bank Valuations.  The Company shall, so far as it is legally able, promptly provide to the GSK Bank and the Novartis Bank the following information to be made available in such data room (and all such information shall be available equally and on the same basis to each of the Banks):

(A)the then applicable Business Plan (if any).  In the event that, at such time, the process for revising a Business Plan in clause 5.1 to 5.3 (Business Plan) has started but has not finished, such process shall be completed as soon as

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reasonably practicable and, in any event, within 10 Business Days following the service of any Put Exercise Notice, subject to the provisions of clause 5.4;

(B)any previously applicable Business Plan;

(C)the latest Quarterly Accounts delivered to the Shareholders pursuant to clause 9.1(B) (Access to Information and Accounts);

(D)the Valuation Balance Sheet;

(E)such other information as any of the Shareholders (acting reasonably and in good faith) deem relevant for the purposes of producing the Bank Valuations; and

(F)any questions and answers asked by any of the Banks and answered by the Company or any of the Shareholders in connection with the preparation of any of the Bank Valuations.

For the avoidance of doubt, the Independent Banks shall not be entitled to receive any interim drafts of the information referred to in paragraphs 4(A) to 4(C) (inclusive).  Within 15 Business Days of the service of any Put Exercise Notice:

(i)the Executive Management shall give a presentation to the Shareholders and the Banks in relation to the financial forecasts of the Company’s Group; and

(ii)the Shareholders shall each give a separate presentation to the Executive Management and the Banks in relation to the financial forecasts of the Company’s Group.

The GSK Bank and the Novartis Bank shall assist in respect of the preparation of the management presentations referred to in paragraphs (i) and (ii) above.

5.The “Put Option Market Value” shall mean [***].

6.The “Valuation Balance Sheet” shall be [***].

7.The Shareholders acknowledge that, as at the date of this agreement, [***] are the most comparable Peer Companies, though they recognise that this assessment may change as at any Put Exercise Notice Date and is not binding on them in any way.

8.Each Bank shall be instructed to deliver its Bank Valuation simultaneously to each Shareholder Grouping by no later than the date falling [***] (such delivery to be coordinated by the GSK Bank and the Novartis Bank).  Following receipt of all of the Bank Valuations, the Put Option Market Value shall be determined in accordance with paragraphs 9 or 10 below (as applicable).  For the purposes of paragraph 9 below, “IBA Valuation” means the arithmetic mean of the two Bank Valuations delivered by the Independent Banks.

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9.[***]

10.[***]

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SCHEDULE 4
ABAC Certification

[***]

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SCHEDULE 5
Shareholder Loans: Terms

[***]

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TESTIMONIUM

IN WITNESS of which this agreement has been executed on the date which first appears on page 1 above.

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SIGNED BY Edgar B. Cale	/s/ Edgar B. Cale
duly authorised for and on behalf of	Signature
SETFIRST LIMITED
SIGNED BY Jonathan Emery As Attorney	/s/ Jonathan Emery
duly authorised for and on behalf of	Signature
NOVARTIS HOLDING AG
SIGNED BY Jing Zhao as Attorney	/s/ Jing Zhao
duly authorised for and on behalf of	Signature
NOVARTIS HOLDING AG
SIGNED BY Jonathan Emery As Attorney	/s/ Jonathan Emery
duly authorised for and on behalf of	Signature
NOVARTIS FINANCE CORPORATION
SIGNED BY Jing Zhao as Attorney	/s/ Jing Zhao
duly authorised for and on behalf of	Signature
NOVARTIS FINANCE CORPORATION
SIGNED BY Edgar B. Cale	/s/ Edgar B. Cale
duly authorised for and on behalf of	Signature
GLAXOSMITHKLINE PLC
SIGNED BY Jonathan Emery As Attorney	/s/ Jonathan Emery
duly authorised for and on behalf of	Signature
NOVARTIS AG
SIGNED BY Jing Zhao as Attorney	/s/ Jing Zhao
duly authorised for and on behalf of	Signature
NOVARTIS AG

SIGNED BY Edgar B. Cale	/s/ Edgar B. Cale
duly authorised for and on behalf of	Signature
GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED

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EX-12.1

Exhibit 12.1

CERTIFICATION

I, Joseph Jimenez, certify that:

1. I have reviewed this annual report on Form 20-F of Novartis AG;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: January 27, 2016

By:	/s/  JOSEPH JIMENEZ
	Joseph Jimenez
	Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATION

I, Harry Kirsch, certify that:

1.I have reviewed this annual report on Form 20-F of Novartis AG;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: January 27, 2016

By:	/s/  HARRY KIRSCH
	Harry Kirsch
	Chief Financial Officer

EX-13.1

Exhibit 13.1

CERTIFICATION OF JOSEPH JIMENEZ, CHIEF EXECUTIVE OFFICER OF
NOVARTIS AG PURSUANT TO SECTION 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Novartis AG (the “Company”) on Form 20-F for the period ending December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify that to the best of our knowledge:

1.The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/  JOSEPH JIMENEZ
Name:	Joseph Jimenez
Title:	Chief Executive Officer

Date: January 27, 2016

EX-13.2

Exhibit 13.2

CERTIFICATION OF HARRY KIRSCH, CHIEF FINANCIAL OFFICER OF
NOVARTIS AG PURSUANT TO SECTION 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Novartis AG (the “Company”) on Form 20-F for the period ending December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify that to the best of our knowledge:

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/  HARRY KIRSCH
Name:	Harry Kirsch
Title:	Chief Financial Officer

Date: January 27, 2016

EX-15.1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Exhibit 15.1

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 filed on October 1, 2004 (File No. 333-119475), on Form S-8 filed on September 5, 2006 (File No. 333-137112), on Form S-8 filed on October 29, 2009 (File No. 333-162727), on Form S-8 filed on January 18, 2011 (File No. 333-171739), on Form S-8 filed on April 8, 2011 (File No. 333-173382), on Form S-8 filed on September 12, 2014 (File No. 333-198706), and on Form F-3 filed on September 18, 2015 (File No. 333-207004) of Novartis AG of our report dated January 26, 2016 relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 20-F.

PricewaterhouseCoopers AG

/s/Bruno Rossi	/s/Stephen Johnson
Bruno Rossi	Stephen Johnson
Audit expert	Global Relationship Partner
Auditor in charge

Basel, January 26, 2016

PricewaterhouseCoopers AG, St. Jakobs-Strasse 25, CH-4002 Basel, Switzerland

Telephone: +41 58 792 51 00, Facsimile: +41 58 792 51 10, www.pwc.ch

PricewaterhouseCoopers AG is a member of a global network of companies that are legally independent of one another.

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