NVS Novartis AG

 

As filed with the Securities and Exchange Commission on February 15, 2024 

Registration No. 333-250207

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

POST-EFFECTIVE AMENDMENT NO. 3

TO

FORM S-8

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

Novartis AG

(Exact name of registrant as specified in its charter)

 

Switzerland		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

Lichtstrasse 35

CH-4056 Basel, Switzerland

(Address of principal executive offices)

 

Novartis AG Long Term Incentive Plan

Novartis AG Deferred Share Bonus Plan

Novartis Corporation 2011 Stock Incentive Plan for North American Employees

(Full title of the plan)

 

Karen L. Hale

Chief Legal Officer

Novartis AG

Lichtstrasse 35

CH-4056 Basel, Switzerland

(Name and address of agent for service)

 

+41 61 324 1111

(Telephone number, including area code, of agent for service)

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company ¨

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

 

 

 

EXPLANATORY NOTE

 

This Post-Effective Amendment No. 3 (the “Post-Effective Amendment”) to the Registration Statement on Form S-8, File No. 333-250207 (the “Registration Statement”) is filed by Novartis AG for the purpose of filing: (i) the Novartis AG Long Term Incentive Plan, adopted on January 22, 2014, and amended and restated effective January 1, 2024, as Exhibit 4.5 to the Registration Statement; (ii) the Novartis AG Deferred Share Bonus Plan, adopted on January 22, 2014, and amended and restated effective January 1, 2024, as Exhibit 4.6 to the Registration Statement; and (iii) the Novartis Corporation 2011 Stock Incentive Plan for North American Employees, adopted on November 11, 2010, and amended and restated effective January 1, 2024 as Exhibit 4.7 to the Registration Statement. No additional securities are being registered. All items have been omitted from the Post-Effective Amendment other than the facing page, this explanatory note, Item 8, the signature page, Exhibit 4.5, Exhibit 4.6 and Exhibit 4.7.

 

 

PART II

 

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

 

Item 8.

EXHIBITS

 

Exhibit Number		Exhibit
4.1		Articles of Incorporation of Novartis AG, as amended September 15, 2023 (English translation) (incorporated by reference to Exhibit 1.1 to the Annual Report of Novartis AG on Form 20-F (File No. 001-15024) as filed with the Commission on January 31, 2024).
4.2		Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG, effective March 7, 2023 (incorporated by reference to Exhibit 4.2 to Amendment No. 2 to Novartis AG’s registration statement on Form S-8 (File No. 333-250207) as filed with the Commission on March 23, 2023).
4.3		Form of Second Amended and Restated Deposit Agreement among Novartis AG, JPMorgan Chase Bank, N.A., as depositary, and all Holders and Beneficial Owners from time to time of American Depositary Receipts (“ADRs”) issued thereunder, including the Form of ADR attached as Exhibit A thereto (incorporated by reference to Exhibit (a) to Novartis AG’s registration statement on Form F-6 (File No. 333-198623) as filed with the Commission on December 16, 2022)
4.4		Form of American Depositary Receipt (included as Exhibit A to Exhibit 4.3)
4.5*		Novartis AG Long Term Incentive Plan, adopted on January 22, 2014, and amended and restated effective January 1, 2024
4.6*		Novartis AG Deferred Share Bonus Plan, adopted on January 22, 2014, and amended and restated effective January 1, 2024
4.7*		Novartis Corporation 2011 Stock Incentive Plan for North American Employees, adopted on November 11, 2010, and amended and restated effective January 1, 2024
5.1		Opinion of Bär & Karrer AG (incorporated by reference to Exhibit 5.1 to Novartis AG’s registration statement on Form S-8 (File No. 333-250207) as filed with the Commission on November 19, 2020)
23.1		Consent of Independent Auditors - PricewaterhouseCoopers AG (incorporated by reference to Exhibit 23.1 to Novartis AG’s registration statement on Form S-8 (File No. 333-250207) as filed with the Commission on November 19, 2020)
24		Powers of Attorney (incorporated by reference to the signature page of Novartis AG’s registration statement on Form S-8 (File No. 333-250207) as filed with the Commission on November 19, 2020)

 

* Filed herewith.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Post-Effective Amendment No. 3 to the Registration Statement on Form S-8 (File No. 333-250207) to be signed on its behalf by the undersigned, thereunto duly authorized, in Basel, Switzerland on February 15, 2024.

 

	NOVARTIS AG
	By:	/s/ Christian Rehm
		Name:	Christian Rhem
		Title:	Authorized Signatory

 

	By:	/s/ Daniel Weiss
		Name:	Daniel Weiss
		Title:	Authorized Signatory

 

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 3 to the Registration Statement on Form S-8 (File No. 333-250207) has been signed by the following persons in the capacities indicated on February 15, 2024.

 

SIGNATURE		TITLE
*		Chief Executive Officer
Vasant Narasimhan, M.D.		(principal executive officer)
*		Chief Financial Officer
Harry Kirsch		(principal financial and accounting officer)
*		Chair of the Board of Directors
Joerg Reinhardt, Ph.D.
*		Vice-Chair of the Board of Directors
Simon Moroney, D.Phil.
*		Director
Nancy C. Andrews, M.D. Ph.D.
*		Director
Ton Buechner
*		Director
Patrice Bula
*		Director
Elizabeth Doherty
*		Director
Bridgette Heller
*		Director
Frans van Houten

 

 

SIGNATURE		TITLE
*		Director
Charles L. Sawyers, M.D.
*		Director
William T. Winters

 

*By:	/s/ Christian Rehm
	Christian Rehm
	As Attorney-In-Fact

 

AUTHORIZED REPRESENTATIVE

 

Pursuant to the requirements of the Securities Act of 1933, the undersigned certifies that it is the duly authorized United States representative of the Registrant and has duly caused this Post-Effective Amendment No. 3 to Registration Statement on Form S-8 (File No. 333-250207) to be signed on its behalf by the undersigned, thereunto duly authorized, in East Hanover, New Jersey on February 15, 2024.

 

	/s/ Jaime Huertas
	Jaime Huertas

 

 

Exhibit 4.5

 

Novartis AG

 

Long Term Incentive Plan

 

Adopted by the Board of Directors on January 22, 2014 and amended thereafter with latest adjustments made on December 13, 2023 with effect in relation to awards made on or after January 1, 2024.

 

 

Contents

 

NOVARTIS AG LONG TERM INCENTIVE PLAN		3
1.	PURPOSE OF THE PLAN	3
2.	GRANTING OF AWARDS	3
3.	DIVIDENDS AND DIVIDEND EQUIVALENTS	5
4.	VESTING OF AWARDS	6
5.	LAPSE OR FORFEITURE OF AWARDS	8
6.	CESSATION OF EMPLOYMENT	8
7.	CORPORATE EVENTS	10
8.	PARTICIPANT RIGHTS AND OBLIGATIONS	11
9.	CLAWBACK	11
10.	TAX, SOCIAL SECURITY AND OTHER CHARGES	12
11.	TRANSFER OF AWARDS	12
12.	COMPANY DOCUMENTS	13
13.	BOARD’S POWERS	13
14.	ADMINISTRATION AND REGULATIONS	13
15.	AWARDS NOT PENSIONABLE ETC.	13
16.	NOTICES	13
17.	DATA PROTECTION	14
18.	AMENDMENT AND TERMINATION OF THE PLAN	14
19.	COMPLIANCE WITH LAW AND ARTICLES OF INCORPORATION	14
20.	APPLICABLE LAW	15
21.	DEFINITIONS AND INTERPRETATION	15
SCHEDULE A NOVARTIS COMPETITORS		20
SCHEDULE 1 LONG TERM PERFORMANCE PLAN		21
1.	APPLICATION OF THE SCHEDULE	21
2.	PERFORMANCE PERIOD	21
3.	PERFORMANCE CONDITIONS	21
4.	CESSATION OF EMPLOYMENT	22
5.	AMENDMENTS	23

 

 

SCHEDULE 2 PARTICIPANTS WHO ARE OR BECOME MEMBERS OF THE ECN		24
1.	APPLICATION OF THIS SCHEDULE	24
2.	DEFINITIONS	24
3.	PERFORMANCE CONDITIONS AND ECN LTPP AWARDS VESTING	24
4.	BLOCKING RESTRICTIONS	25
5.	CESSATION OF EMPLOYMENT – INTRODUCTION	25
6.	CESSATION OF EMPLOYMENT AS A RESULT OF RETIREMENT	26
7.	CORPORATE EVENTS	27
SCHEDULE 3 UNITED STATES		28
1.	APPLICATION OF THIS SCHEDULE	28
2.	GRANT OF AWARDS – SHARES SUBJECT TO THE PLAN	28
3.	DEFINITIONS	28
4.	STOCK APPRECIATION RIGHTS	28
5.	CONSEQUENCES OF VESTING – RESTRICTED STOCK UNITS	29
6.	CORPORATE EVENTS	30
7.	CODE SECTION 409A	30
8.	US EXECUTIVE FINANCIAL RECOUPMENT PROGRAM	31
SCHEDULE 4 SELECT PLAN 2024		31
1.	APPLICATION OF THE SCHEDULE	31
2.	PURPOSE	31
3.	PARTICIPANTS	31
4.	VESTING AND OTHER CONDITIONS	31
5.	DEFINITIONS	32
6.	CESSATION OF EMPLOYMENT	32
7.	US SELLING RESTRICTIONS	33
8.	APPENDICES TO THE SELECT PLAN	33
APPENDIX 1 NOVARTIS SELECT PLAN SWITZERLAND		34
1.	SELECT SWITZERLAND	34
2.	SELECT CHOICES SWITZERLAND	34
3.	CESSATION OF EMPLOYMENT	34
SCHEDULE 5 NOVARTIS LAUNCH LEADER PLAN		35
1.	APPLICATION OF THE SCHEDULE	35
2.	ELIGIBLE PARTICIPANTS	35
3.	AWARD SIZE	35
4.	VESTING AND OTHER CONDITIONS	35
5.	DIVIDENDS AND DIVIDEND EQUIVALENTS	36
6.	CESSATION OF EMPLOYMENT	36
7.	DEFINITIONS	37
8.	AMENDMENTS	37

 

 

NOVARTIS AG LONG TERM INCENTIVE PLAN

 

1.            PURPOSE OF THE PLAN

 

The purpose of the Plan is to enhance the alignment of the Participants in the Plan with the interests of the Company and its shareholders and to foster long term value creation.

 

The Rules govern the grant of Awards under the Plan and any sub-plan of the Plan, including the Long Term Performance Plan, the Business Unit Performance Plan, Select 2015 and other forms of long term incentive awards (including special, off cycle and ad hoc awards).

 

2.            GRANTING OF AWARDS

 

2.1           Selection of Participants

 

The Board may select any Eligible Employee to be granted an Award.

 

2.2           Timing of Awards

 

Subject to any Dealing Restrictions which prevent Awards being granted, the Board may grant Awards at any time during a Grant Period.

 

2.3           Decisions relating to Awards

 

In respect of any Award (whether Restricted Stock, Restricted Stock Units, SARs or other form of award) the Board will determine:

 

(a)

the type of Award to be granted;

(b)

where relevant, whether the Award is in respect of Shares or ADIs;

(c)

if the Award is a SAR, the base value from which the growth in value is to be measured;

(d)

if the Award does not comprise Restricted Stock, Restricted Stock Units or SARs, the form and terms and conditions of any such Award;

(e)

subject to Rule 2.4, the minimum, target and maximum number of Shares or ADIs to be subject or linked to the Award;

(f)

the Vesting Date or Vesting Dates;

(g)

whether the Award is subject to Performance Conditions and, if so, the terms of such Performance Conditions (including the applicable Performance Period);

(h)

whether the Award (or Shares or other rights comprising the Award) is subject to any holding or blocking period and if so the terms of any such period;

(i)

whether or not the Award will carry Dividend Equivalents and, if so, the form of such Dividend Equivalents;

(j)

whether the Participant is required to sell sufficient Shares to meet Taxation; and

(k)

which, if any, Schedules to the Plan will apply to the Award.

 

2.4            Determining the number of Shares or ADIs subject to an Award

 

In order to determine the minimum, target and maximum number of Shares or ADIs subject to or linked to an Award, the Board shall:

 

(a)

divide the relevant percentage of salary (as determined by the Board) expressed as a cash sum by the Market Value of a Share or ADI (as appropriate) as at the date immediately preceding the Grant Date and then, where necessary, round up to the nearest whole Share or ADI; or

 

(b)            apply such other method as the Board may determine from time to time.

 

 

2.5            Change of Performance Conditions

 

Notwithstanding Rule 18 (amendment and termination of the Plan), the Board may change a Performance Condition applicable to an outstanding Award if there are circumstances which cause the Board to consider that an altered performance condition would be a fairer measure of performance. Any such altered Performance Condition must be, in all material respects, no easier and no harder to satisfy than the original Performance Condition.

 

2.6            Award documentation

 

Each Award as such will be granted by resolution of the Board and subsequently legally offered by the respective Employer of the Eligible Employee.

 

Each Participant shall receive a notice of the grant of an Award (either electronically or in hard copy) in such form as the Board shall determine from time to time.

 

In relation to any Award the Participant is required to accept the grant of the Award to him by providing such acceptance via the service provider’s online interface (or in such form as the Board shall determine from time to time) as well as, if required, complete and update the CRS FACTA documentation via the service provider’s online interface at the latest within 6 months after he received the notice of the grant of the Award. The Board may determine that the Participant will be reminded of these prerequisites for participation in the Plan. If a Participant does not provide such acceptance and/or CRS FATCA documentation in time (and, if any, after reminders), any Awards granted shall lapse or, in the case of Restricted Stock, the Shares under that Award shall be forfeited without compensation, unless the Board determines otherwise.

 

Alternatively, the Board may determine that a Participant who receives an Award is deemed (as of the time of receipt) to have accepted the grant and agreed to the Rules (including applicable Schedules) and the terms set out in the notice of the grant of the Award. If this is the case, a Participant may reject his Award within 14 days of receiving the notice of grant of that Award (or such longer period as the Board permits or is otherwise required by law). If a Participant does so reject his Award, then immediately on such rejection that Award shall lapse or, in the case of Restricted Stock, the Shares under that Award shall be forfeited.

 

2.7            Schedules to the Plan

 

The Board may establish such schedules to the Rules as it considers necessary or appropriate. Such schedules may be included in the Plan in such a way that they create special rules applicable to certain Eligible Employees or categories of Eligible Employees and/or to constitute sub-plans to the Plan for Eligible Employees inside and outside Switzerland.

 

2.8            Policies etc.

 

Awards shall be subject to all applicable policies and procedures adopted by the Company from time to time, including without limitation the policies entitled “Policy for the treatment of awards in the event of a new hire, modified target, assignment or transfer within the Company” and “Policy for the grant of equity awards under the Novartis AG Long Term Incentive Plan in circumstances where an employee may leave the Company or has received an unsatisfactory performance or behaviour assessment”.

 

 

2.9            Delegations

 

The Board decided to delegate the following powers with regard the Plan, to the Employer, who decides after consultation with the Global Rewards &/or Global Legal teams at their discretion:

 

(a)

with reference to section 5 (Lapse of forfeiture of awards);

(b)

with reference to section 6.6 (Cessation of employment as a result of death or Disability) for the assessment of the performance condition if any; and

(c)

with reference to section 9 (Clawback).

 

The Board decided to delegate the implementation and execution of the Plan, including making non-material changes to the Rules themselves, to the Global Rewards &/or Global Legal teams.

 

3.             DIVIDENDS AND DIVIDEND EQUIVALENTS

 

3.1            Restricted Stock Units and SARs

 

A Participant holding an Award of Restricted Stock Units or SARs shall not be entitled to vote, to receive dividends or to have any other rights of a shareholder in respect of such an Award unless and until the Shares comprising the Award are transferred to or acquired by the Participant.

 

3.2            Restricted Stock

 

The Board in relation to an Award of Restricted Stock may determine that the Participant must agree to surrender or waive any right to vote, receive dividends or any other rights of a shareholder in respect of such Award.

 

3.3            Dividend Equivalents

 

If the Board determines that an Award carries Dividend Equivalents:

 

(a)

unless the Board decides otherwise, the number of Shares (or notional Shares if the Award is a SAR) subject to the Award will be increased by the number of Shares which could have been acquired by the reinvestment in the purchase of Shares (at the market value of a Share on each relevant dividend payment date) of dividends payable between the Grant Date and the Vesting Date on that number of Shares (or notional Shares) subject to the Award that Vests;

(b)

if the Board decides that Dividend Equivalents would not be on a notional reinvestment basis as described in Rule 3.3(a), as soon as practicable after the time an Award vests in full (and Shares are transferred or acquired or cash is paid to the Participant) the Company (or the Participant’s Employer) shall pay to the Participant (in cash or Shares) (subject to all applicable tax and social security deductions) an amount equal to the aggregate dividends which would have been paid on the Award (including in respect of notional Shares for Awards that are SARs) between the Grant Date and the Vesting Date; or

(c)

the Board may decide that the Dividend Equivalents may be calculated on any other basis.

 

For the avoidance of doubt, the amount of a dividend, for these purposes is the amount of the gross dividend before taxes.

 

 

For the purposes of this Rule 3, “market value” shall be determined by the Board on each relevant occasion.

 

Unless otherwise determined by the Board at any time or times, a Participant is not entitled to receive Dividend Equivalents with respect to the time period between the Vesting Date and the date that the relevant Shares are transferred to or acquired by him or payment in respect of the Award is made.

 

4.             VESTING OF AWARDS

 

4.1            General

 

Vesting of Awards under the Plan, transfer of Shares or ADIs or payment of cash is subject to any Rules or law that may require otherwise, including Rule 4.6 (dealing restrictions), Rule 4.8 (delivery of Shares or ADIs to a deposit account), Rule 5 (lapse or forfeiture of Awards) and Rule 9 (clawback).

 

The Board shall determine the number of Shares (or amount of cash in respect of a SAR) comprising an Award that shall Vest on any particular day or days. Furthermore, the Board shall confirm the Performance Condition as satisfied and the appropriate performance payout factor, if there is any applicable.

 

4.2            Normal Vesting

 

Subject to satisfying applicable Performance Conditions to which the Award is subject and the exceptions set out in the Rules, an Award shall Vest on the Vesting Date (or, if there is more than one Vesting Date, as to the relevant number of Shares or relevant cash entitlement in the case of SARs on each Vesting Date).

 

As soon as administratively possible, the Vested Award(s) will be visible to the Participant via the service provider’s online interface. For the avoidance of doubt, this may be some time after the actual Vesting Date.

 

4.3            Consequences of Vesting – Restricted Stock Units

 

As soon as administratively practicable and legally possible after the Vesting and subject to the Board’s confirmation of the satisfaction of the Performance Condition and the appropriate performance payout factor, if there is any applicable, the Company shall transfer the number of Shares (or pay or procure to be paid a cash sum if the Board has determined that the RSU is to be settled in cash) in respect of which the Award has Vested to the Participant.

 

4.4            Consequences of Vesting – Restricted Stock

 

As soon as administratively practicable after the Vesting, the restrictions applicable to the relevant Restricted Stock under the Plan shall cease to apply to the extent such Restricted Stock Vests.

 

4.5            Consequences of Vesting – SARs

 

As soon as administratively practicable and legally possible after the Vesting and subject to the Board’s confirmation of the satisfaction of the Performance Condition and the appropriate performance payout factor, if there is any applicable, the Company or the Participant’s Employer shall pay to the Participant a sum equal to growth in the market value (as determined by the Board) of the number of Vested notional Shares comprising each SAR.

 

 

4.6            Dealing Restrictions

 

If the Vesting of an Award is prevented on any date by a Dealing Restriction, the Award shall Vest on the first day it is not so prevented.

 

If the transfer of Shares or ADIs (or payment of cash) on or following Vesting is prevented by a Dealing Restriction, the period for such transfer or payment shall start from the first date on which it is no longer so prevented.

 

Shares received by a Participant on or following Vesting may be subject to Dealing Restrictions. Subject to any such restrictions, a Participant may sell (or may be required to do so) a sufficient number of such Shares to meet Taxation (as defined in Rule 10 (tax, social security and other charges)).

 

4.7            Fractional entitlements

 

Any fractional number of Shares which arises for any reason under the Plan shall be aggregated as at the Vesting Date and rounded up to the nearest whole Share (or, in the case of a SAR, notional Share), unless the Board determines otherwise.

 

4.8            Delivery of Shares or ADIs to a deposit account

 

Subject to Board determination otherwise, all Shares and ADIs transferred to Participants under the Plan shall be transferred to and registered in one single securities account (Securities Deposit Account) held in trust by such service provider as is nominated from time to time by the Company.

 

If a Participant Ceases Employment, the Participant must dispose of or, if possible, transfer from the Securities Deposit Account to a private securities account all of the Shares or ADIs managed by the service provider within the period of three months. If that is not done, the service provider will sell all of the Shares at market value without delay on behalf of the Participant or the Participant’s successor and transfer the proceeds less costs of sale to the Participant’s last known salary account and such transfer is in full and final satisfaction.

 

If a Participant Ceases Employment due to death, the period within which the Participant’s personal representative or successor in title must dispose of or transfer the Shares is twelve (12) months or such longer period as the Board may determine.

 

If the Company’s contract with the service provider for administration of the Plan ends in circumstances where the Plan continues, the Company will make arrangements for appropriate services to be provided by another service provider that the Company shall instruct at its sole discretion. In such circumstances, each Participant must give all notices and take all steps necessary to end the trust or custody agreement with the old service provider and appoint a new service provider.

 

The procedures specified above may be altered and other procedures established by the Board.

 

 

4.9            Lock-In period

 

Subject to Rule 4.10, the Board may determine or a Participant may elect at any time (in such form as the Board requires) that Shares or ADIs transferred or to be transferred to him under the Plan are or will be held in the Securities Deposit Account for a fixed period of time (the Lock-In Period) during which time such a Participant may not alienate such Shares or ADIs or create any security interest in or encumbrance on such Shares except as may be necessary for the proper administration of the Plan. During the Lock-In Period, the Participant is entitled without restriction to the dividend and voting rights associated with the Shares or ADIs the Participant acquired.

 

4.10          Cash, Share and ADI alternatives

 

The Board may decide to satisfy an Award (including any Dividend Equivalents) by:

 

(a)

paying or procuring to be paid to the Participant a sum equal to the market value (as determined by the Board) of the number of Shares that would otherwise have been transferred to the Participant following the Vesting of that Award;

(b)

delivering to the Participant ADIs with a value equal to the market value of the number of Shares that would otherwise have been transferred to the Participant following the Vesting of that Award; or

(c)

in the case of SARs delivering to the Participant Shares or ADIs with a value equal to the cash sum that would otherwise have been paid to the Participant following the vesting of that Award.

 

5.             LAPSE OR FORFEITURE OF AWARDS

 

Subject to Board determination otherwise, Awards lapse or in the case of Restricted Stock are forfeited on the earlier of:

 

(a)

failure to meet the Performance Condition or integrity conditions or compliance with company policies;

(b)

the occurrence of any event described in the Rules resulting in forfeiture or lapse of Awards, including under Rule 2 (granting of awards), Rule 6 (cessation of employment) and Rule 7 (corporate events); or

(c)

failure from the Participant to adhere to Rule 2.6 (Award documentation).

 

Furthermore, the Board may decide to deem that Awards lapse or in the case of Restricted Stock are forfeited if the Participant grossly negligently or intentionally violates his obligations resulting from his employment with his Employer, e.g. breach of confidentiality.

 

6.            CESSATION OF EMPLOYMENT

 

6.1 Introduction

 

This Rule 6 applies where a Participant Ceases Employment.

 

Notwithstanding any other part of this Rule 6, the Board may, in its discretion with no obligation to do so, allow (on such terms as the Board decides, including, without limitation, the Participant first executing and not revoking a general release of claims acceptable to the Company) a greater proportion of an Award to Vest and/or accelerate the time at which Vesting occurs and/or treat a Participant who has Ceased Employment as having done so within Rules 6.3, 6.4 or 6.6.

 

In the event that Awards are outstanding pursuant to Rules 6.3 or 6.4 and the Participant dies prior to the Vesting of those Awards, then Rule 6.6 shall apply.

 

 

6.2            General

 

Unless Rule 6.3, Rule 6.4 or Rule 6.6 applies, an Award that has not Vested will lapse or be forfeited on the day the Participant Ceases Employment.

 

6.3            Cessation of Employment as a result of Retirement

 

If a Participant Ceases Employment because of Retirement with the agreement of the Participant’s employer, his Award shall, subject to Rule 6.5 and, if so determined by the Board, the Participant first executing and not revoking a general release of claims acceptable to the Company, Vest on the Vesting Date to the extent the Performance Conditions have been met PROVIDED ALWAYS THAT if the Cessation of Employment in respect of which this Rule 6.3 applies occurs on or before the first anniversary of the Grant Date then the extent to which such Award Vests shall be reduced to take account of the proportion of the Performance Period as has elapsed when the Cessation of Employment occurs.

 

6.4            Cessation of Employment for other good reasons and following sale

 

If a Participant Ceases Employment because of:

 

(a)

termination of employment by the Participant’s Employer (whether or not by notice) other than for cause, including misconduct or poor performance;

(b)

his Employer ceasing to be a member of the Company; or

(c)

the business for which the Participant works is transferred to a person which or who is not a member of the Company,

 

his Award shall, subject to Rule 6.5 and, in relation to Rule 6.4(a) and if so determined by the Board, the Participant first executing and not revoking a general release of claims acceptable to the Company, Vest on the Vesting Date in respect of a proportion of the Award (corresponding to such proportion of the Performance Period as has elapsed when the Participant Ceases Employment (notwithstanding Rule 6.1)) to the extent the Performance Conditions have been met provided that the Board may determine in the case of leaving for reasons set out in Rule 6.4(b) or Rule 6.4(c) that some or all of the Awards held by relevant Participants shall be exchanged in accordance with Rule 7.2 (exchange of awards).

 

6.5            Lapse or forfeiture of Awards on joining a Competitor

 

Where either Rule 6.3 or 6.4 applies such that Awards are retained by the Participant following Cessation of Employment, the following shall also apply: In the event that the Participant, in the period commencing on such cessation and ending immediately following the relevant Vesting Date, becomes an employee or director (or otherwise provides services to) a Competitor, other than as a direct result of an event within Rule 6.4(b) or Rule 6.4(c), the Awards held by that Participant shall immediately lapse (or in the case of Restricted Stock, shall be immediately forfeited).

 

 

6.6            Cessation of Employment as a result of death or Disability

 

If a Participant Ceases Employment as a result of his death or Disability then Awards held by that Participant shall Vest immediately:

 

(a)

if, as at the date of Cessation of Employment, it is impractical to assess performance against the applicable Performance Conditions, at target; or

(b)

if, as at the date of Cessation of Employment, it is practicable to assess performance against the applicable Performance Conditions, to the extent the Board determines having regard to performance against the applicable Performance Conditions up to the date of Cessation of Employment.

 

In case of a Participant’s death, upon notice to the Company his personal representative or successor in title shall be entitled to, if any, the Vested Awards. Settlement of these Vested Awards to the Participant’s personal representative or successor in title excludes any other potential claims of the Participant’s estate with regards to the Plan.

 

6.7           Cessation of Employment – effect on blocking periods

 

If Rule 6.3 or 6.4 apply, all Awards held by the Participant will remain blocked until the end of the Mandatory Blocking Period and/or, where applicable, until the end of any Additional Blocking Period.

 

If a Participant Ceases Employment as a result of his death or Disability all Mandatory and Additional Blocking Periods shall cease to apply immediately.

 

7.             CORPORATE EVENTS

 

7.1            Change of Control

 

If a Change of Control occurs or is anticipated to occur, unvested Awards shall Vest at the effective time of such Change of Control (or such earlier date or time that the Board may determine) as follows:

 

(a)

if, as at the proposed date of Vesting, it is impractical to assess performance against the applicable Performance Conditions, at target; or

(b)

if, as at the proposed date of Vesting, it is practicable to assess performance against the applicable Performance Conditions, to the extent the Board determines having regard to performance against the applicable Performance Conditions up to the date of proposed date of Vesting,

 

PROVIDED ALWAYS THAT if, in respect of an Award, the Change of Control in respect of which this Rule 7.1 applies occurs on or before the first anniversary of the Grant Date then the extent to which such Award Vests shall be reduced to take account of the proportion of the Performance Period as has elapsed when the Change of Control occurs.

 

Notwithstanding the preceding paragraph of this Rule 7.1, the Board may in its discretion with no obligation to do so, allow a greater proportion of an Award to Vest.

 

Alternatively, the Board may determine that some or all Awards will be automatically exchanged under Rule 7.2 or may allow Participants to choose Vesting and/or exchange.

 

7.2            Exchange of Awards

 

If an Award is exchanged, then:

 

(a)

the exchanged award will be in respect of or by reference to shares in any company determined by the company offering the exchange;

 

 

(b)

the exchanged award shall have equivalent terms to those of the Award that was exchanged;

(c)

the Board may determine that any holding or blocking periods shall continue to apply to the exchanged Award;

(d)

the exchanged award will be subject to the Plan as it had effect in relation to the old Award immediately before the exchange;

(e)

with effect from the exchange, the Rules will apply as if references to Shares are references to shares over which the exchanged award has been granted; and

(f)

the Rules shall apply with such other adjustments as the Board may decide.

 

7.3            Demerger, variations of share capital and other corporate events

 

If the Board becomes aware that the Company is or is expected to be affected by any variation of share capital, rights issue, sub-division, consolidation or reduction of share capital, demerger, distribution (other than an ordinary dividend), liquidation or other event (other than a Change of Control) which, in the opinion of the Board, could affect the current or future value of Shares, the Board may:

 

(a)

adjust Awards in such manner as it considers appropriate;

(b)

allow Awards (for all or some Participants) to Vest in whole or in part, subject to any conditions that the Board may impose; or

(c)

require some or all Awards to be exchanged under Rule 7.2.

 

8.             PARTICIPANT RIGHTS AND OBLIGATIONS

 

The rights and obligations of a Participant under the terms of his or her office, employment or contract are not affected by becoming a Participant. These Rules do not form part of, and will not be incorporated into, any contract between a Participant and any member of the Company.

 

Participants do not have any right to continued employment with the Company as a result of participating in the Plan, nor are they entitled to any compensation or damages if any benefit under the Plan is reduced or cancelled as a result of applying the Rules.

 

Selection as a Participant refers only to the participation for the one grant year and does not guarantee a right of participation in the Plan in any subsequent year.

 

Nothing in this Plan confers any benefit, right or expectation on a person who is not an Eligible Employee or a Participant.

 

The Plan is discretionary and is not part of the any employment contract with the Employer or with the Company. Neither does the Plan create any contract between the Participant and Company, nor does the Plan give rise to a claim or legal entitlement to compensation for the Participant. The Plan may be changed or cancelled by the Board in its absolute discretion. Any future Awards may therefore be changed or cancelled at any time.

 

9.             CLAWBACK

 

Participants must adhere at all times to applicable laws, the Articles, the Company’s organisational regulations, the Code of Ethics and all applicable Company or Employer policies, procedures and guidelines (including without limitation the “Malus and clawback” practice). If a Participant fails to comply with any such laws, Articles, regulations, Code of Ethics, policies, procedures and/or guidelines in material respects then the Board may determine that:

 

 

(a)

all or any Award (whether vested or unvested) held by the Participant will lapse or be forfeited;

(b)

all or any of a Participant’s Shares or ADIs transferred to him under the Plan following the Vesting of Awards will be forfeited and must be transferred to the Company;

(c)

the Participant must pay the Company (or such other member of the Company as the Board may determine) gross proceeds from the sale of some or all of the Shares or ADIs transferred to him following the Vesting of Awards; and

(d)

pay to the Company (or such other member of the Company as the Board may determine) some or all of the gross sums paid to him under the Plan.

 

Furthermore, all Executive Officers, as defined in the Novartis AG Policy Governing the Recovery of Erroneously Awarded Compensation (“Policy”), which has been adopted by the Board of Directors of Novartis AG to comply with the requirements of United States Securities and Exchange Commission Rule 10D- 1 and Section 303A.14 of the New York Stock Exchange Listed Company Manual, will be subject to all of the terms and conditions of that Policy, as amended from time to time.

 

10.           TAX, SOCIAL SECURITY AND OTHER CHARGES

 

The Participant indemnifies each member of the Company against all taxes, social security contributions and other levies for which he is responsible that arise in connection with an Award (together “Taxation”).

 

If a member of the Company must settle Taxation on behalf of the Participant, where such duties are permitted and/or required by applicable laws, regulations or policies (e.g. tax equalization policies) to be deducted from the Participant’s net pay, the member of the Company shall withhold such amount from the current and/or subsequent payrolls and make such arrangements as is considered necessary for such a deduction.

 

If the available amounts of net pay are not sufficient, the Participant shall be obliged to forward a payment in the appropriate amount to the member of the Company or another designated legal entity to cover the amount of duties.

 

At the member of the Company’s discretion, a number of Shares in respect of which the Award has Vested to the Participant may be sold (Sell-to-Cover) or withheld (Withhold-to-Cover) in order to settle any Taxation. For this purpose, the Participant expressly authorizes the service provider, the Company and the Employer to sell or withhold Shares in an amount that is necessary to cover the Taxation.

 

The Company and/or the Employer may make such arrangements which it or they consider necessary to meet any liability to pay or account for Taxation (including selling sufficient Shares to meet such liability and accounting for the proceeds of sale to the Company or the Employer). The Participant will promptly do all things necessary to facilitate any such arrangements. Vesting and the transfer of Shares to him can be delayed until he does so.

 

11.           TRANSFER OF AWARDS

 

Unless specifically permitted under the Plan or with the prior written consent of the Board, Awards or any rights in respect of any Award may not be transferred, assigned or otherwise disposed of. If Awards (or any rights in respect of Awards) are transferred, assigned or otherwise disposed of or if the Participant becomes bankrupt, they shall lapse or be forfeited immediately.

 

 

12.           COMPANY DOCUMENTS

 

The Company may (but need not) send to any Participant any documents which the Company sends to its shareholders.

 

13.           BOARD’S POWERS

 

The exercise of any power or discretion, including refraining from exercise, of the Board concerning the Plan or any Award is absolute and unlimited and may be reasonably exercised at any time, subject always to the principle of good faith. When the Board exercises any of its powers or discretions in a way that will impact a Participant, the Board may (but need not) inform the relevant Participant in such manner as the Board shall determine.

 

Any decision of the Board in connection with the Plan, the interpretation of the Plan and any related documents and in connection with any dispute relating to the Plan will be final and binding.

 

14.           ADMINISTRATION AND REGULATIONS

 

The Plan shall be administered by the Board.

 

The Board may make and vary regulations and policies for the administration and operation of the Plan.

 

The Board has the right to delegate its powers related to this Plan.

 

15.           AWARDS NOT PENSIONABLE ETC.

 

For the avoidance of doubt, Awards under the Plan are not pensionable and do not count in relation to the calculation of benefit under programs such as life cover, income protection or continuation, medical or such other benefits as the Board may determine.

 

16.           NOTICES

 

Any notice or other communication under or in connection with the Plan or any Award may be given:

 

(a)

by the Company to an Eligible Employee or Participant either personally or sent to him at his place of work by electronic mail or other electronic means (including the internet or the intranet) or by post addressed to the address last known to the Company (including any address supplied by the relevant member of the Company) or sent through the Company's internal postal service; and

(b)

to the Company, either personally or by post to the Company secretary.

 

Items sent by post shall be pre-paid and shall be deemed to have been received 72 hours after posting. Items sent by electronic mail or other electronic means shall be deemed to have been received at the expiration of 24 hours from when they were sent.

 

 

The Board may decide the accept notices given by Participants if received after any time stipulated for receipt.

 

17.           DATA PROTECTION

 

As required by local laws and regulations, Participants are informed about the processing of their personal information in connection with an Award and the general administration of the Plan by the Company and any of their advisers or agents and to the transmission of any such information to other jurisdictions.

 

18.           AMENDMENT AND TERMINATION OF THE PLAN

 

The Board may at any time change the Plan (including amending or adding schedules to the Plan) in any way. Changes may affect Awards already granted provided always that, unless required by law, no such change may be made which is to the material disadvantage of a Participant without that Participant’s prior written consent. The Board shall give notice of any changes to any Participant. The Board may terminate the Plan at any time. Termination will not affect existing Awards.

 

19.           COMPLIANCE WITH LAW AND ARTICLES OF INCORPORATION

 

19.1          Compliance with Law etc.

 

The Plan is subject to all applicable laws and the Company’s Articles. If such law or the Articles require, the terms of any provision of the Plan and any Award (including any outstanding Award) shall be interpreted and/or amended and applied to the extent required to comply fully with such law or the Articles.

 

19.2          Swiss law with respect to the compensation of certain executives of listed companies

 

The Plan, in particular, is subject to any mandatory provisions of Swiss law pertaining to compensation of governing bodies derived from article 95 paragraph 3 of the Swiss Federal Constitution and the related implementing legislation (VegüV or later implementing Federal law). Any interpretation and/or amendment necessary in respect of any provision of the Plan or any Award as a result of applicable law and/or the Articles (whether currently in force or in the future) to the detriment of the Participant shall not give rise to any claims by or other rights whatsoever of the Participant. This applies in particular if the annual general meeting of the Company does not approve the compensation of the Participant which is subject to approval under the VegüV.

 

19.3          US Code Section 409A

 

If a Participant (other than a Participant whose benefits are provided under the United States Schedule) is subject to the United States Internal Revenue Code (“US Code”) (a “US Participant”), and if benefits under this Plan for such US Participant are not exempt from US Code Section 409A, it is intended that to the maximum extent permitted under all applicable law this Plan will be interpreted and administered to conform to the requirements of US Code Section 409A as they apply to such US Participant.

  

 

In furtherance of this intent, to the extent that any portion of the benefits provided under the Plan constitutes a “deferral of compensation” under United States Treasury Regulation Section 1.409A-1(b):

 

(a)

any election to voluntarily defer such portion shall be made in accordance with the requirements for an initial deferral under United States Treasury Regulation 1.409A-2(a);

(b)

the substantive provisions of Section 4(a) of Schedule United States shall apply to Awards of SARs with the “market value” in paragraphs 4(a)(i) and 4(a)(ii) of that same Schedule determined pursuant to Rule 22 of the Plan rather than paragraph 4(a)(iii) of Schedule United States;

(c)

Section 5.2 of Schedule United States shall apply to Restricted Stock Units, and

(d)

the provisions of Sections 6 and 7 of Schedule United States shall apply to all such Awards.

 

19.4            Voluntary Participation

 

By accepting any award or grant of securities under this Plan, Participants shall be deemed to represent and warrant to the Company that such Participant’s participation in the trade and acceptance of such securities is voluntary and that such Participant has not been induced to participate by expectation of engagement, appointment, employment or continued engagement, appointment or employment, as applicable.

 

20.           APPLICABLE LAW

 

The Plan is governed by and construed in accordance with the laws of Switzerland, under express exclusion of any provisions of conflict of laws.

 

The Board may resolve conclusively all questions of fact or interpretation concerning the Plan and has the authority to resolve any dispute of any kind that arises under or in connection with the Plan. In the event a dispute escalates to require resolution by a court, the dispute will exclusively be resolved by the Courts of Basel, Switzerland.

 

21.           DEFINITIONS AND INTERPRETATION

 

In this Plan and in the Schedules to the Plan, unless otherwise required by the Rules:

 

21.1          Definitions

 

ADIs means American depositary instruments being either American Depositary Shares or American Depositary Receipts of the Company as specified in the Grant Notice.

 

Articles means the articles of incorporation of the Company as amended from time to time.

 

Award means an award under the Plan (which may be an award of Restricted Stock Units, Restricted Stock, Stock Appreciation Rights or such other form of award referable to the Company’s equity as the Board may determine).

 

Board means the Company’s Board of Directors or, to the extent permitted by applicable law, the Board’s delegate or, following a Change of Control, those persons who comprised the Board immediately prior to such Change of Control.

 

Cessation of Employment occurs, for the purposes of the Plan, when a Participant ceases to hold an office or employment with any member of the Company PROVIDED THAT a Participant will not be treated as Ceasing Employment in circumstances in which that Participant is on a leave of absence where the Participant’s right to re-employment is guaranteed either by statute or contract and employment is not otherwise terminated during such leave of absence (in which case the Participant will Cease Employment at the time of such termination) and similar terms, such as “Ceases Employment” or “Ceasing to be Employed”, shall be construed accordingly.

 

 

Change of Control means any of the following:

 

(a)

any person or group of persons who are acting together purchases or otherwise becomes the beneficial owner or has the right to acquire such beneficial ownership (whether or not such right is exercisable immediately or subject to passage of time or other conditions) of voting securities representing more than 50% of the combined voting power of all outstanding securities of the Company;

(b)

the Company’s shareholders approve an agreement to merge or consolidate the Company with or into another corporation as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are or will be owned by the former shareholders of the Company; or

(c)

the Company’s shareholders approve the sale of all or substantially all of the Company’s business and/or assets to a person or entity which is not a member of the Company,

 

provided that an Internal Reorganisation shall not be a Change of Control.

 

Code of Ethics means the code of ethics adopted by the Company which describes the fundamental principles concerning ethical business conduct as amended from time to time.

 

Company means Novartis AG.

 

Competitor means any company or other organisation that is either or both:

 

(a)

part of the Company’s comparator peer group of peer companies in the global healthcare industry, as listed in Schedule A, as may be updated by the Board at any time without prior notice to plan participants, or

 

(b)

in competition with the Company or in relation to products and/or clinical areas.

 

The intent of identifying Competitors under this Plan is, and always has been, to be inclusive of all subsidiaries and affiliates of each such Competitor, and with respect to organisations that are in competition with the Company or in relation to products and/or clinical areas, is also inclusive of investors (including without limitation venture capital and private equity funds or management companies) that “significantly” invest in companies or other organisations that are engaged in activities that are in competition with the Company or in relation to products and/or clinical areas (“Investors”). For these purposes, a company or organisation shall be considered to be an Investor if the Board determines, in its sole and exclusive discretion, that such company or organisation makes significant investments in areas that are in competition with the Company or in relation to products and/or clinical areas. The determination of whether an Investor significantly invests in companies or other organisations that are engaged in activities that are in competition with the Company or in relation to products and/or clinical areas, and therefore is a “Competitor” for the purpose of this Plan, is within the complete, sole and unfettered discretion of the Board, which it can determine at any time without prior notice to plan participants.

 

 

Notwithstanding the foregoing, for the purposes of this Plan, a company or other organisation (including an Investor) shall not be deemed to be a “Competitor” if it is active in (or for Investors, does not invest in any products and/or clinical areas that are in competition with the Company or in relation to products and/or clinical areas) no jurisdiction (or, in connection with products or services, for delivery, sale, marketing, or development in no jurisdiction) in which the Company does business. For these purposes, “jurisdiction” means country.

 

If any part of the definition of “Competitor” is held to be void but would be valid if part of the wording were deleted or reformed, the definition of “Competitor” shall apply with such deletion or revision as may be necessary to make it valid and effective.

 

Dealing Day means a day on which the Swiss Exchange (SIX) or, in relation to ADIs, the national securities exchange in the US on which ADIs are listed, is open for business.

 

Dealing Restrictions means restrictions on the dealing in Shares or the grant of Awards imposed by any law, regulation or Code of Practice (including the Novartis Global Insider Trading Policy, as amended or replaced from time to time) or otherwise.

 

Disability means the Participant is permanently incapable of performing his duties and responsibilities due to illness or accident, in accordance with applicable law, or in the absence of such applicable law, as determined by the Board.

 

Dividend Equivalents means a right to cash or Shares as described in Rule 3.

 

Eligible Employee means any member of the Executive Committee and the Corporate Executive Company or any employee or group of employees of the Company as the Board shall determine.

 

Employer means the member of the Company by or in which the Participant is or, where the context so admits, was an office holder or employed.

 

Grant Date means the date an Award is made as specified in the Grant Notice.

 

Grant Notice means a grant notice provided to a Participant in accordance with the Rules.

 

Grant Period means the period of 42 calendar days commencing:

 

(a)

the day on which the Plan is adopted by the Board;

(b)

the Dealing Day immediately following the day on which the Company announces results for any period;

(c)

the day on which the Company’s annual general meeting is held; or

(d)

any day on which the Board resolves that exceptional circumstances exist which justify the making of an Award.

 

Internal Reorganisation means any event, offer, scheme, share purchase, merger or arrangement whereby:

 

(a)

a Change of Control occurs; and

(b)

immediately afterwards the share capital of the company then controlling (whether directly or indirectly) the Company is owned substantially by the same persons who were shareholders of the Company immediately prior to such event, scheme or arrangement in substantially the same proportions.

 

 

Lock-In Period has the meaning set out in Rule 4.9.

 

Market Value means in relation to a Share or ADI (as appropriate) on any given day:

 

(a)

if the Shares are admitted to trading on the Swiss Exchange (SIX) an amount equal to the closing price on that day (or if there is no such price on that day the last preceding day for which such price is available);

(b)

if the ADIs are listed on a national securities exchange in the US an amount equal to the closing price on that day (or if there is no such price on that day the last preceding day for which such price is available; or

(c)

if the Shares are not admitted to trading on the Swiss Exchange (SIX) or the ADIs are not listed on a national securities exchange in the US, then such value as is determined by the Board.

 

Participant means an Eligible Employee who is selected by the Board to participate in the Plan and is employed by the Company at the Grant Date.

 

Performance Condition means the condition (whether performance, time based or otherwise) set out in any Schedule or such other condition as the Board determines from time to time.

 

Performance Period means the period over which the Performance Conditions are measured, as determined by the Board.

 

Plan means the Novartis AG Long Term Incentive Plan.

 

Restricted Stock means an award of Shares subject to restrictions in accordance with the Plan.

 

Restricted Stock Units means a right to receive Shares or cash under the Plan (but subject to Rule 4.10 (cash and ADI alternative)).

 

Retirement means the Cessation of Employment:

 

(a)

subject, for the purposes of the Plan, to approval by the Employer, after having attained retirement age according to the law applicable to the Participant, if any;

(b)

on early retirement in accordance to applicable local law as approved by the Employer; or

(c)

by reason of retirement provided that such retirement is approved by the Board and the Employer.

 

Rules mean the rules of the Plan (including all Schedules).

 

Schedule means a schedule to the Rules.

 

Service means the period of continuous employment with the Company ending with the relevant Cessation of Employment for the purposes of the Plan PROVIDED ALWAYS THAT the Board may determine that prior periods of employment with the Company and/or periods of employment with entities outside the Company (but which are subsequently acquired by the Company) may be taken into account.

 

Share means a registered share of the Company with a par value of CHF -.50 or, in the case of SARs, notional Shares.

 

Stock Appreciation Rights or SARs means an award under the Plan, the future value of which is based on the increase in the value of Shares (from the base value set by the Board at the time an Award is made) which notionally comprises each SAR from the relevant Grant Date.

 

 

VegüV means the Swiss ordinance in executive compensation and is the German abbreviation for the ordinance against excessive compensation in listed companies (in full “Verordnung gegen übermässige Vergütungen bei börsenkotierten Aktiengesellschaften” or compensation of governing bodies in public companies such as members of the executive committee, the board of directors or the advisory boards).

 

Vesting means:

 

(a)

in the case of Restricted Stock Units, a Participant being entitled to receive Shares or cash;

(b)

in the case of Restricted Stock, restrictions under the Plan ceasing to apply; or

(c)

in the case of SARs, a Participant being entitled to receive a cash sum based on the growth in value of the notional Shares comprising the Award,

 

and “Vest” shall be construed accordingly.

 

Vesting Date means the date an Award vests as determined by the Board and specified in the Grant Notice.

 

21.2           Interpretation

 

Unless the context requires otherwise: words importing the singular include the plural and vice versa; the masculine includes the feminine and vice versa; the word “includes” is not a word of limitation; references to “Schedule” shall refer to the appropriate Schedule to the Plan; headings and boldings are for convenience only and do not affect the interpretation of these Rules.

 

 

SCHEDULE A 

NOVARTIS COMPETITORS

 

 

SCHEDULE 1

LONG TERM PERFORMANCE PLAN

 

1.            APPLICATION OF THE SCHEDULE

 

Where Awards are granted under the Long Term Performance Plan (the LTPP), then the Rules of the Novartis AG Long Term Incentive Plan (LTIP) shall apply subject to the terms set out in this Schedule.

 

2.            PERFORMANCE PERIOD

 

The Performance Period is the three-year period over which the Performance Conditions are measured ending on 31 December of the year preceding the year in which the Vesting Date of the relevant LTPP Award occurs or such other period as the Board shall determine as set out in the relevant Grant Notice.

 

3.            PERFORMANCE CONDITIONS

 

LTPP Awards are subject to Performance Conditions relating to Net Sales Growth, Core Operating Income Growth and Innovation. Each of the Performance Conditions is subject to an equal weighting percentage of an LTPP Award.

 

The maximum number of Vested LTPP Awards is 200% of the Awards determined in the Grant Notice before any Dividend Equivalents (with the caps applicable to each specific Performance Condition detailed below). To achieve this maximum, each Performance Condition should have a Performance Factor of 200% i.e. one Performance Conditions cannot compensate for the loss of another.

 

Net Sales Growth Performance Condition

 

For the purposes of this Schedule:

 

“Base Net Sales” means net sales of the Company for the Financial Year ended 31 December preceding the Grant Date as determined from time to time by the Board; and

 

“Net Sales Growth CAGR” means compound annual growth in net sales over the Performance Period as determined from time to time by the Board and expressed as the percentage change in comparison with the Base Net Sales, which is defined above.

 

The number of LTPP Awards that are subject to the Net Sales Growth Performance Condition Vesting on the Vesting Date is determined by multiplying the number of granted LTPP Awards that are subject to that Performance Condition with the Net Sales Growth Performance Factor. The Net Sales Growth Performance Factor is determined by the Board based on the following Vesting schedule for all positive values of Net Sales Growth CAGR:

 

Net Sales Growth CAGR		Net Sales Growth Performance Factor
Target Range 1		120 to 200 per cent
Target Range 2		80 to 120 per cent
Target Range 3		40 to 80 per cent
below Target Range 3		0 per cent

 

 

Target Range 1, Target Range 2 and Target Range 3 will be determined by the Board and notified to a Participant in the relevant Grant Notice.

 

Core Operating Income Growth Performance Condition

 

For the purposes of this Schedule:

 

“Base Core Operating Income” means the core operating income of the Company for the Financial Year ended 31 December preceding the Grant Date as determined from time to time by the Board; and

 

“COI Growth CAGR” means compound annual growth in core operating income over the Performance Period as determined from time to time by the Board and expressed as the percentage change in comparison with the Base Core Operating Income, which is defined above.

 

The number of LTPP Awards that are subject to the Core Operating Income Growth Performance Condition Vesting on the Vesting Date is determined by multiplying the number of granted LTPP Awards that are subject to that Performance Condition with the COI Growth Performance Factor. The COI Growth Performance Factor is determined by the Board based on the above Vesting schedule for the Net Sales Growth Performance Condition for all positive values of COI Growth CAGR (on the basis that the Vesting Schedule will have the following substituted column headings: the COI Growth CAGR and the COI Growth Performance Factor and that, as noted above, Target Range 1, Target Range 2 and Target Range 3 will be determined by the Board and notified to a Participant in the relevant Grant Notice).

 

Innovation Performance Condition

 

The Innovation Performance Factor reflects the achievement of the three-year forward-looking Innovation Targets set out for the respective grant of an Award and is determined by the Board as a percentage (the “Innovation Performance Factor”).

 

Innovation Targets focus on key innovation program milestones that will improve future business and/or highly contribute to Company’s scientific reputation and are approved by the Board under consultation with Company’s CEO and Research & Development Committee of the Board.

 

The number of LTPP Awards that are subject to the Innovation Performance Condition Vesting on the Vesting Date is determined by multiplying the number of granted LTPP Awards that are subject to that Performance Condition with the Innovation Performance Factor.

 

4.            CESSATION OF EMPLOYMENT

 

Rule 6 of the LTIP shall apply save as modified as follows:

 

6.6           Cessation of Employment as a result of death or Disability

 

Rule 6.6 shall apply as follows:

 

“If a Participant Ceases Employment as a result of his death then the number of LTPP Awards as determined in the Grant Notice and held by that Participant shall Vest immediately in respect of a proportion of the LTPP Award (corresponding to such proportion of the Performance Period as has elapsed when the Participant Ceases Employment as a result of death):

 

(a)

if, as at the date of Cessation of Employment, it is impractical to assess performance against the applicable Performance Conditions, at target; or

(b)

if, as at the date of Cessation of Employment, it is practicable to assess performance against the applicable Performance Conditions, to the extent the Board determines having regard to performance against the applicable Performance Conditions up to the date of Cessation of Employment.

 

 

In case of a Participant’s death, upon notice to the Company his personal representative or successor in title shall be entitled to, if any, the Vested LTPP Awards. Settlement of these Vested LTPP Awards to the Participant’s personal representative or successor in title excludes any other potential claims of the Participant’s estate with regards to the LTPP.”

 

5.            AMENDMENTS

 

The Board may at any time change this Schedule. Subject to Rule 2.5 of the LTIP, changes may affect Awards already granted provided always that, unless required by law, no such change may be made which is to the material disadvantage of a Participant without that Participant’s prior written consent.

 

 

SCHEDULE 2 

PARTICIPANTS WHO ARE OR BECOME MEMBERS OF THE ECN

 

1.             APPLICATION OF THIS SCHEDULE

 

Unless specifically provided otherwise, this Schedule shall apply to:

 

(a)

Awards granted to any Participant who at the relevant Grant Date is a member of the ECN; and

(b)

Awards granted to any Participant who, after the relevant Grant Date, becomes a member of the ECN.

 

Where this Schedule applies relevant Awards shall be subject to all the provisions of the Novartis AG Long Term Incentive Plan save as modified below.

 

2.            DEFINITIONS

 

For the purposes of this Schedule the following definitions shall apply:

 

“ECN” means the Executive Committee of Novartis AG (including permanent attendees to that committee).

 

“Retirement” means the Cessation of Employment after:

 

(a)

having attained age 58 or older, or

(b)

in respect of those Participants who satisfied the Rule of 60 at December 31, 2015, having attained age 55 or older and having completed at least 10 years of Service.

 

“Rule of 60” the sum of the Participant’s age plus Service being equal to 60 or more. For the purposes of this definition the Participant’s age and his Service shall be whole calendar years as at December 31, 2015.

 

3.            PERFORMANCE CONDITIONS AND ECN LTPP AWARDS VESTING

 

The paragraph 3 of “Schedule Long Term Performance Plan” shall apply as modified as follows:

 

In addition, for Executive Committee members, Relative TSR is included to the Performance Conditions previously mentioned.

 

Each of the Performance Conditions is subject to the following weighting percentage of an LTPP Award:

 

25% Net Sales Growth

25% Core Operating Income Growth

25% Innovation and

25% relative TSR

 

Relative Total Shareholder Return (TSR) Performance Condition

 

TSR is calculated using such standard published methodology as the Board may determine from time to time, including share price growth and dividends paid over the Performance Period.

 

 

TSR is measured against a comparator peer group of fourteen peer companies in the global healthcare industry, currently AbbVie, Amgen, AstraZeneca, Biogen, Bristol-Myers Squibb, Eli Lilly & Company, Gilead, GlaxoSmithKline, Johnson & Johnson, Merck & Co., Novo Nordisk, Pfizer, Roche and Sanofi. The Board, in its discretion, may alter the constituents of the comparator group in such circumstances as it considers appropriate, including where a constituent company is no longer listed on a stock exchange.

 

The number of LTPP Awards that are subject to the TSR Performance Condition Vesting on the Vesting Date is determined by multiplying the number of granted LTPP Awards that are subject to that Performance Condition with the TSR Performance Factor. The TSR Performance Factor is determined by the Board based on the following Vesting schedule for all positive values of TSR.

 

The performance factor is set out as follows PROVIDED ALWAYS that the below shall not apply to Awards under the LTPP which were granted prior to the date on which the Participant became a member of the ECN:

 

TSR rank compared to the comparator group		LTPP Performance Factor
1 to 2		170 to 200 per cent
3 to 5		130 to 160 per cent
6 to 8		80 to 120 per cent
9 to 15		0 per cent

 

In the event of a non-positive TSR value, the Board may reduce the number of LTPP Awards subject to the TSR Performance Condition, which would otherwise Vest.

 

For the avoidance of doubt, all of the other Performance Conditions set out in paragraph 3 of Schedule Long Term Performance Plan (i.e. the Net Sales Growth Performance Condition, the Core Operating Income Growth Performance Condition and the Innovation Performance Condition) shall continue to apply, as specified in Schedule Long Term Performance Plan.

 

4.            BLOCKING RESTRICTIONS

 

Awards granted to the Chief Executive Officer and Chief Financial Officer are subject to a mandatory blocking period of two years beyond the vesting date (after applicable taxes) (“Mandatory Blocking Period”).

 

Furthermore, the Board may offer Participants the opportunity to block Awards in the form of Restricted Stocks after the expiry of the Mandatory Blocking Period (“Additional Blocking Period”). The blocking choices and the terms of the blocking will be determined by the Board from time to time.

 

5.            CESSATION OF EMPLOYMENT – INTRODUCTION

 

The following in Rule 6.1 shall not apply:

 

“Notwithstanding any other part of this Rule 6, the Board may, in its discretion with no obligation to do so, allow (on such terms as the Board decides, including, without limitation, the Participant first executing and not revoking a general release of claims acceptable to the Company) a greater proportion of an Award to Vest and/or accelerate the time at which Vesting occurs and/or treat a Participant who has Ceased Employment as having done so within Rules 6.3, 6.4 or 6.6.”

 

 

6.             CESSATION OF EMPLOYMENT AS A RESULT OF RETIREMENT

 

6.1

Subject to proviso (b) below, Rule 6.3 shall be deleted in its entirety and replaced with the following:

 

“If a Participant Ceases Employment because of Retirement with the agreement of the Participant’s employer his Award shall, subject to Rule 6.5 and, if so determined by the Board, the Participant first executing and not revoking a general release of claims acceptable to the Company, Vest on the Vesting Date to the extent the Performance Conditions have been met PROVIDED ALWAYS THAT:

 

(a)

the extent to which such Award Vests shall be reduced to take account of the proportion of the Performance Period as has elapsed when the Cessation of Employment occurs; and

(b)

this provision of this Schedule shall not apply to any member of the ECN who, as at 1 January 2018, satisfied the definition of Retirement, as set out above in this Schedule (irrespective of whether or not such Retirement has been approved by his employer). If this proviso (b) applies then Rule 6.3 (as set out in the main body of the Plan) shall apply.”

 

6.2

Immediately following Rule 6.3 the following shall be added as Rule 6.3A:

 

“In determining whether to approve Retirement under Rule 6.3(a), the Board shall take into consideration the Participant’s satisfaction of certain conditions, including:

 

(a)

whether the Participant is leaving the Company in good standing and not for “cause” (for example because of dishonesty, misconduct, gross negligence, violation of the Code of Ethics or similar reason);

(b)

whether the Participant has returned to his Employer all company property in his possession at his termination;

(c)

whether the Participant has cooperated with his Employer in the orderly handover and transition of his duties and responsibilities prior to his date of termination;

(d)

whether the Participant has given his written commitment that for one year following his termination he will not work for a Competitor and he will refrain from soliciting other employees of the Company to terminate their employment; and

(e)

whether the Participant has affirmed his obligation not to disclose confidential information he received during his employment with the Company and to refrain from using any such information for any purpose not in Company’s business interests.”

 

6.3

At the end of Rule 6.6 the following proviso shall be added:

 

“PROVIDED ALWAYS THAT if, in respect of an Award, the death or Disability in respect of which this Rule 6.6 applies occurs on or before the first anniversary of the Grant Date then the extent to which such Award Vests shall be reduced to take account of the proportion of the Performance Period as has elapsed when Cessation of Employment by reason of death or Disability occurs.”

 

 

7.            CORPORATE EVENTS

 

The following in Rule 7.1 shall not apply:

 

“Notwithstanding the preceding paragraph of this Rule 7.1, the Board may in its discretion with no obligation to do so, allow a greater proportion of an Award to Vest.”

 

 

SCHEDULE 3 

UNITED STATES

 

1.             APPLICATION OF THIS SCHEDULE

 

When Awards under the Plan (including but not limited to Awards under the LTPP and Select Schedules to the Plan) are to be granted the Board may determine that this Schedule applies, in which case such Awards shall be subject to all the provisions of the Novartis AG Long Term Incentive Plan save as modified below.

 

ADIs subject to the Awards under the Plan are intended to be registered under the United States Securities Act of 1933.

 

2.             GRANT OF AWARDS – SHARES SUBJECT TO THE PLAN

 

Subject to Rule 7.3, the aggregate number of ADIs made subject to Awards under this Schedule may not exceed 13,510,000, plus any ADIs that were not issued under the Plan as of January 1, 2021; plus any ADIs subject to outstanding Awards under the Plan as of January 1, 2021 that on or after January 1, 2021 cease for any reason to be subject to such Awards.

 

Such ADIs shall be deemed to have been used in payment of Awards whether they are actually delivered or the market value equivalent of such ADIs is paid in cash. In the event any Award is surrendered or terminated, or expires or is forfeited, the number of ADIs no longer subject thereto shall thereupon be released and shall thereafter be available for new Awards under this Schedule.

 

ADIs comprising Awards under this Schedule or delivered by the Company in settlement of Awards under this Schedule may be derived from authorised and unissued Shares or from Shares or ADIs held in the treasury of the Company or held by another member of the Company or may be purchased on the open market or by private purchase.

 

3.             DEFINITIONS

 

For the purposes of this Schedule the following definitions shall apply:

 

“Company” in this Schedule means Novartis Corporation, a New York corporation.

 

“Retirement” the Cessation of Employment after having attained age 55 or older and having completed at least 10 years of Service.

 

4.             STOCK APPRECIATION RIGHTS

 

SARs granted under this Schedule shall be subject to such terms and conditions, not inconsistent with the Plan, as the Board may impose, including, but not limited to, the following:

 

(a)

SARs with Participant discretion to exercise

 

	(i)	Base Value. The Base Value for SARs per ADI subject to a SAR shall not be less than 100% of the market value of an ADI at the Grant Date.

(ii)

Payment on exercise. On the exercise of a SAR, the Company or the Employer shall pay to the Participant an amount equal to the number of ADIs subject to the SAR multiplied by the excess, if any, of the market value of one ADI on the exercise date over the Base Value.

 

 

(iii)

Market value. For the purposes of SARs subject to this Schedule, “market value” in paragraphs 4(a)(i) and 4(a)(ii) of this Schedule on a given date means:

 

(aa)

if the ADIs are listed on a national securities exchange in the United States, the closing sale price reported as having occurred on the primary exchange with which the Shares are listed and traded (currently the New York Stock Exchange) on such date or, if there is no such sale on that date, then the last preceding date on which such a sale was reported;

(bb)

if the ADIs are not listed on any national securities exchange but is quoted on the National Market System of the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), the trade price of the last sale reported on such date or, if there is no such sale on that date, then the last preceding date on which such a sale was reported; or

(cc)

if the ADIs are not listed on a national securities exchange nor quoted on NASDAQ, on a last sale basis the amount determined by the Board to be the fair market value based upon a good faith attempt to value the Shares accurately.

 

(iv)

Dividend Equivalents. If the Board designates Dividend Equivalents to apply to SARs pursuant to Rule 3.3(a), such accumulated Dividend Equivalents shall be paid to the Participant immediately upon Vesting.

 

(v)

No deferral of proceeds. Pursuant to the limitations of the United States Treasury Regulation Section 1.409A-1(b)(5)(i)(B)(3), a Participant may not defer the proceeds of the exercise of a SAR.

 

(b)

SARs without Participant Discretion to exercise

 

If a SAR is granted with a fixed exercise date and the Participant has no discretion to exercise the SAR, Participants may elect to defer the payment of the proceeds of the automatic exercise of the SAR, and any accumulated Dividend Equivalents, to the date later than the payment date specified in the Award provided that the Participant makes such deferred election either as an initial deferral under United States Treasury Regulation Section 1.409A-2(a) or pursuant to the subsequent deferral provisions of United States Treasury Regulation Section 1.409A-2(b). The Board shall determine whether such deferral is in the form of Shares (ADIs) or cash. If deferrals are in Shares (ADIs), unless otherwise directed by the Board such Shares (ADIs), and any accumulated Dividend Equivalents, shall be delivered upon such deferred payment date. If the deferrals are in cash, the cash proceeds of such automatic exercise of the SARs shall be transferred into the applicable non-qualified deferred compensation plan of the Company entity which employs the Participant.

  

5.            CONSEQUENCES OF VESTING – RESTRICTED STOCK UNITS

 

5.1

Participants may elect to defer the payment of Restricted Stock Units, and any accumulated Dividend Equivalents, to the date later than the payment date specified in the relevant Award provided that the Participant makes such a deferred election either as an initial deferral under United States Treasury Regulation Section 1.409A-2(a) or pursuant to the subsequent deferral provisions of United States Treasury Regulation Section 1.409A-2(b). The Board shall determine whether such deferral is in the form of Shares (ADIs) or cash. If deferrals are in Shares (ADIs), unless otherwise directed by the Board, such Shares (ADIs), and any accumulated Dividend Equivalents, shall be delivered from this Plan upon such deferred payment date. If deferrals are in cash, the cash proceeds of such Awards shall be transferred into the applicable non-qualified deferred compensation plan of the Participant’s employing Company in the United States.

 

 

5.2

Rule 4.3 shall be amended by inserting the underlined words below:

 

“As soon as practicable after the Vesting (but no later than the 15th day of the third calendar month after the Vesting) the Company shall transfer the number of Shares (or pay or procure to be paid a cash sum if the Board has determined that the RSU is to be settled in cash) in respect of which the Award has Vested to the Participant”.

 

6.

CORPORATE EVENTS

 

Should the Board determine that adjustments be made to Awards under Rule 7, any such adjustments or modifications must be made in a manner which is consistent with the provisions of section 409A of the United States Internal Revenue Code (“Code Section 409A”).

 

7.            CODE SECTION 409A

 

7.1

Notwithstanding anything under the Plan to the contrary, to the extent applicable, it is intended that the Plan as it applies to Participants shall comply with the provisions of Code Section 409A and the Plan and all applicable Awards be construed and applied in a manner consistent with this intent. In furtherance thereof, any amount constituting a “deferral of compensation” under Treasury Regulation Section 1.409A-1(b) that is payable to a Participant upon a separation from service of the Participant (within the meaning of Treasury Regulation Section 1.409A-1(h)) (other than due to the Participant’s death), occurring while the Participant shall be a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) of the Company (as limited by Code Sections 414(b), (c), (m) and (o)), shall not be paid until the earlier of:

 

(a)

the date that is six months following such separation from service; or

(b)

the date of the Participant’s death following such separation from service.

 

7.2

Notwithstanding any provision of the Plan to the contrary, to the extent that an Award constituting a “deferral of compensation” subject to Code Section 409A shall be deemed to be vested or restrictions lapse upon the occurrence of a Change of Control, and if such Change of Control does not constitute a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)), then even though such Award may be deemed to be vested or restrictions lapse, payment will only be made to the extent necessary to comply with the provisions of Code Section 409A, to the United States Participant on the earliest of:

 

(a)

the United States Participant’s separation from service, the date payment otherwise would have been made pursuant to the regular payment terms of the Award; or

(b)

the Participant’s death.

 

 

8.            US EXECUTIVE FINANCIAL RECOUPMENT PROGRAM

 

For grants made on or after January 1, 2021 for US-based roles covered by the Incentive Compensation Restriction and Executive Financial Recoupment Program, as set forth in Appendix E of the Corporate Integrity Agreement Between the Office of Inspector General of the Department of Health and Human Services and Novartis Corporation (“2020 Novartis Corporate CIA”) (the “Corporate Executive Financial Recoupment Program”), the Board temporarily delegates its authority and discretion to make Clawback determinations under section 9 of this Plan, with respect to incentives awarded under this Plan, to the Recoupment Committee established under the Corporate Executive Financial Recoupment Program, and to fulfill the obligations entrusted to the Recoupment Committee under such Program, for the term of the 2020 Novartis Corporate CIA.

 

Covered Executives must agree to accept the terms and conditions of the Corporate Executive Financial Recoupment Program as a condition of accepting awards under this Plan. The terms and conditions of the Executive Financial Recoupment Program shall apply to all awards made under this Plan to Covered Executives during the term of the 2020 Novartis Corporate CIA.

 

At the conclusion of the 2020 Novartis Corporate CIA, this temporary delegation of authority and discretion shall cease and will revert to the Board. The 2020 CIA may be accessed online at:

https://oig.hhs.gov/fraud/cia/agreements/Novartis_Corporation_06302020.pdf.

 

SCHEDULE 4

SELECT PLAN 2024

 

1.            APPLICATION OF THE SCHEDULE

 

Where Awards are granted under the Select Plan 2024 (“Select Plan”) either regularly or under special circumstances, then the Rules of the Novartis AG Long Term Incentive Plan (LTIP) shall apply subject to the terms set out in this Schedule.

 

The Select Plan applies for Select Awards made on or after 1 January 2024.

 

2.            PURPOSE

 

The purpose of the Select Plan is to provide selected Eligible Employees of the Company or any member of the Company with an opportunity to receive an Award in respect of Restricted Stock and/or Restricted Stock Units, thus providing an increased incentive for such persons to contribute to the future success and prosperity of the Company, enhancing the value of the Shares for the benefit of the shareholders of the Company and increasing the ability of the Company to attract and retain individuals of exceptional skill.

 

3.            PARTICIPANTS

 

(a)

Members of the ECN may not be granted Awards under the Select Plan.

(b)

Without prejudice to any subsisting Awards, the Board may, from time to time, exclude from participation under the Select Plan such category or categories of Eligible Employees as the Board may determine.

 

4.            VESTING AND OTHER CONDITIONS

 

(a)

Subject to the Board determining otherwise the overall staggered Vesting Period of the total Awards granted regularly under the Select Plan is 3 years.

(b)

With each completed year of the 3-year overall staggered Vesting Period, the Participant accrues an entitlement equalling 1/3 of the total Awards. The effective date used to determine the partially vested Award each year will be calculated backward from the Vesting Date specified in the Grant Notice. To the extent necessary, the partially vested Award for the first year is rounded commercially to the next whole number.

 

 

(c)

However, for special Awards granted under the Select Plan, like buyout grants, CEO grants and any other type of one-off grant, the Vesting Period of such Awards is a 3 year cliff (or alternatively as defined on the award agreement/notice itself), i.e. without a staggered vesting.

 

(d)

In the event that an Award comprises Select Restricted Stock, the Participant shall be entitled to receive all dividends declared in respect of such shares (if any) and, other than in the year in which the Award is made if that Award is made after the Company’s annual general meeting, to vote in any meeting of the Company’s shareholders by reference to such shares.

 

(e)

In the event that an Award comprises Select Restricted Stock Units, during the Vesting Period the Participant shall not, in relation to any shares referable to such SRSU, be entitled to any dividends or votes. SRSUs are not tradeable.

 

5.            DEFINITIONS

 

For the purposes of this Schedule and its Appendices the following definitions shall apply:

 

“ECN” means the Executive Committee of Novartis AG (including permanent attendees to that committee).

 

“Select Restricted Stock” or “SRS” shall mean a Share subject to restrictions in accordance with the Select Plan.

 

“Select Restricted Stock Unit” or “SRSU” shall mean a right to receive a Share (subject to the Board determining that SRSUs or any of them are to be settled in cash) in accordance with the Select Plan after the expiry of the Vesting Period.

 

“U.S. Person” has the same meaning as set out in Regulation S under the Securities Act of the United States of America provided that “U.S. Person” shall always include any person who is a resident of the United States.

 

“Vesting Date” means in relation to an Award the Vesting Date specified in the relevant Grant Notice.

 

“Vesting Period” shall mean the period between the Grant Date and Vesting Date of an Award.

 

6.            CESSATION OF EMPLOYMENT

 

Rule 6 of the LTIP shall apply save as modified as follows:

 

6.3            Cessation of Employment as a result of Retirement

 

Rule 6.3 shall apply as follows:

 

“If a Participant Ceases Employment because of Retirement with the agreement of the Participant’s employer his Award shall, provided, if so determined by the Board, the Participant

 

first executes and does not revoke a general release of claims acceptable to the Company, Vest on the date of such Cessation of Employment PROVIDED ALWAYS THAT if the Cessation of Employment in respect of which this Rule 6.3 applies occurs on or before the first anniversary of the Grant Date then the extent to which such Award Vests shall be reduced to take account of the proportion of the Vesting Period as has elapsed when the Cessation of Employment occurs.”

 

 

6.4            Cessation of Employment for other good reasons and following sale

 

“If a Participant Ceases Employment because of:

 

(a)

termination of employment by the Participant’s Employer (whether or not by notice) other than for misconduct or poor performance;

(b)

his Employer ceasing to be a member of the Company; or

(c)

the business for which the Participant works is transferred to a person which or who is not a member of the Company,

 

his Award shall, provided, in relation to Rule 6.4(a) and if so determined by the Board, the Participant first executes and does not revoke a general release of claims acceptable to the Company, Vest on the date of such Cessation of Employment in respect of a proportion of the Award (corresponding to such proportion of the Vesting Period as has elapsed when the Participant Ceases Employment provided that the Board may determine in the case of leaving for reasons set out in (b) or (c) above that some or all of the Awards held by relevant Participants shall be exchanged in accordance with Rule 7.2 of the LTIP (exchange of awards).”

 

6.5            Lapse or forfeiture of Awards on joining a Competitor

 

"Section 6.5 entitled Lapse or forfeiture of Awards on joining a Competitor shall not apply to awards made under this Schedule.”

 

6.6            Cessation of Employment as a result of death or Disability

 

“If a Participant Ceases Employment as a result of his death or Disability then Awards held by that Participant shall Vest immediately.”

 

7.            US SELLING RESTRICTIONS

 

The Shares subject to the Select Plan (including those received by Participants following Vesting of SRSUs) have not been and will not be registered under the U.S. Securities Act of 1933 and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. Persons except in certain transactions exempt from the registration requirements of the Securities Act. In connection with the acquisition of Shares, each Participant will represent and agree that she/he: is not a U.S. Person; is not purchasing or acquiring the Shares for the account or benefit of any U.S. Person; and has not offered or sold, and will not offer, sell or deliver, any of the Shares within the United States or to, or for the account or benefit of, any U.S. Person except pursuant to registration under the Securities Act or an available exemption from such registration.

 

8.            APPENDICES TO THE SELECT PLAN

 

The Board may establish such appendices to the Select Plan as it considers necessary or appropriate. Such appendices may be included in such a way that they create special rules applicable to certain Eligible Employees or categories of Eligible Employees and/or constitute sub-plans to the Select Plan.

 

 

APPENDIX 1 

NOVARTIS SELECT PLAN SWITZERLAND

  

 

SCHEDULE 5 

NOVARTIS LAUNCH LEADER PLAN

 

1.

APPLICATION OF THE SCHEDULE

 

Where Awards are granted under the Novartis Launch Leader Plan (the “NLLP”) then the rules of the Novartis AG Long Term Incentive Plan (LTIP) shall apply subject to the terms set out in this Schedule. Awards under the NLLP may be granted in addition to the Awards under other long-term incentive programs within this Plan or other Plans. Awards under the NLLP granted to US and Canadian Participants will be awarded under the respective Schedule of the Novartis Corporation 2011 Stock Incentive Plan for North American Employees, as amended.

 

2.

ELIGIBLE PARTICIPANTS

 

For Participants to be eligible to participate in the NLLP they must be both

 

1.

US and global launch leaders of products with anticipated peak sales in excess of 1 billion USD in the financial year (as determined in the sole discretion of the company), and

2.

Holder of Enterprise Value Roles (“EVR”) and Business Value Roles (“BVR”) ECN members are excluded from participation in the NLLP. Additionally, those Participants that are US or Canadian paid are not eligible under this schedule. US and Canadian Participants are eligible for awards under the respective Schedule of the Novartis Corporation 2011 Stock Incentive Plan for North American Employees, as amended.

 

3.

AWARD SIZE

 

Eligible participants may receive Awards up to the following size

 

(i)

Business Value Role (“BVR”): up to 5,000 Restricted Stock Units

(ii)

Holder of Enterprise Value Roles (“EVR”): up to 10,000 Restricted Stock Units

 

The Board may change the Award size at any time.

 

4.

VESTING AND OTHER CONDITIONS

 

a)

NLLP Awards are subject to the following Vesting conditions:

 

1.

The Participants need to receive at least a short term individual performance factor of 100% over the Vesting Period as defined in the Grant Notice; and

2.

the Participants may not move out of their EVR or BVR role they were in at the grant date before the end of the Vesting Period.

 

b)

If the Vesting condition no. 1 is not met at the time of Vesting, the NLLP Award will not qualify for Vesting and will lapse.

 

c)

If a Participant initiates a move to a role that does not qualify for eligibility for NLLP Awards within the Company (including all subsidiaries and affiliates of Novartis AG) at any time during the vesting period but prior to Vesting, condition no. 2 fails and the NLLP Award will lapse.

 

d)

The Novartis Compensation Committee or the CEO can approve exceptions to these Vesting conditions. The CEO may delegate approval for exceptions to the Chief People & Organization Officer.

 

 

e)

To the extent the Vesting conditions are met (as determined by the Board), the NLLP Award shall Vest on the Vesting Date subject to the rules of the Novartis AG Long Term Incentive Plan, including subject to the provisions relating to cessation of employment. The Board can also define additional Vesting conditions in the Grant Notice.

 

5.            DIVIDENDS AND DIVIDEND EQUIVALENTS

 

A Participant holding an NLLP Award of Restricted Stock Units shall not be entitled to vote, to receive dividends or to have any other rights of a shareholder in respect of such an Award unless and until the Shares comprising the Award are transferred to or acquired by the Participant.

 

6.            CESSATION OF EMPLOYMENT

 

Rule 6 of the LTIP shall apply save as modified as follows:

 

6.3            Cessation of Employment as a result of Retirement

 

Rule 6.3 shall apply as follows:

 

“If a Participant Ceases Employment because of Retirement with the agreement of the Participant’s employer his Award shall, provided, if so determined by the Board, the Participant first executes and does not revoke a general release of claims acceptable to the Company, Vest on the date of such Cessation of Employment PROVIDED ALWAYS THAT if the Cessation of Employment in respect of which this Rule 6.3 applies occurs on or before the first anniversary of the Grant Date then the extent to which such Award Vests shall be reduced to take account of the proportion of the Vesting Period as has elapsed when the Cessation of Employment occurs.”

 

6.4            Cessation of Employment for other good reasons and following sale

 

“If a Participant Ceases Employment because of:

 

(a)

termination of employment by the Participant’s Employer (whether or not by notice) other than for misconduct or poor performance;

(b)

his Employer ceasing to be a member of the Company; or

(c)

the business for which the Participant works is transferred to a person which or who is not a member of the Company,

 

his Award shall, provided, in relation to Rule 6.4(a) and if so determined by the Board, the Participant first executes and does not revoke a general release of claims acceptable to the Company, Vest on the date of such Cessation of Employment in respect of a proportion of the Award (corresponding to such proportion of the Vesting Period as has elapsed when the Participant Ceases Employment provided that the Board may determine in the case of leaving for reasons set out in (b) or (c) above that some or all of the Awards held by relevant Participants shall be exchanged in accordance with Rule 7.2 of the LTIP (exchange of awards).”

 

6.5            Lapse or forfeiture of Awards on joining a Competitor

 

"Where either Rule 6.3 or 6.4 applies such that NLLP Awards are retained by the Participant following Cessation of Employment, the following shall also apply: In the event that the Participant, in the period commencing on such cessation and ending immediately following the relevant Vesting Date, becomes an employee or director of (or otherwise provides services to) a Competitor, other than as a direct result of an event within Rule 6.4(b) or Rule 6.4(c), the NLLP Awards held by that Participant shall immediately lapse (or in the case of Restricted Stock, shall be immediately forfeited).”

 

 

6.6            Cessation of Employment as a result of death or Disability

 

“If a Participant Ceases Employment as a result of his death or Disability then Awards held by that Participant shall Vest immediately.”

 

7.             DEFINITIONS

 

For the purpose of this Schedule, the following additional definitions shall apply:

 

“Equivalent Performance Measurement” If the performance assessment is not available for any reason including any performance management system changes, only the available assessments will be considered or an Equivalent Performance Measurement will be sought. For new Awards, the Equivalent Performance Measurement will be defined in the Grant Notice.

 

“EVR” Enterprise Value Roles are roles with enterprise-wide responsibilities and impact.

 

“BVR” Business Value Roles are roles with function-wide or business-wide responsibilities and impact.

 

“Launch Leaders” have responsibility and control over product launches with anticipated sales budgets of > 1 billion USD per financial year (as determined in the sole discretion of the company).

 

“Rating” means the performance assessment on the Novartis matrix used for the annual performance evaluation, which is required subsequently over the performance period.

 

“Restricted Stock Unit” or “SRSU” shall mean a right to receive a Share (subject to the Board determining that SRSUs or any of them are to be settled in cash) in accordance with the Select Plan after the expiry of the Vesting Period.

 

“Vesting Date” means in relation to an Award the Vesting Date specified in the relevant Grant Notice.

 

“Vesting Period” shall mean the period between the Grant Date and Vesting Date of an Award.

 

8.             AMENDMENTS

 

The Board may change this Schedule at any time. Changes may affect NLLP Awards already granted provided always that, unless required by law, no such change may be made which is to the material disadvantage of a Participant without the Participant’s prior written consent.

 

 

 

Exhibit 4.6

 

Novartis AG

 

Deferred Share Bonus Plan

 

Adopted by the Board of Directors on January 22, 2014 and amended thereafter with latest adjustments made on December 13, 2023 with effect in relation to awards made on or after that date.

 

 

Contents

 

NOVARTIS AG DEFERRED SHARE BONUS PLAN	2
1.   PURPOSE OF THE PLAN	2
2.   DETERMINATION OF DEFERRED SHARE BONUS AWARDS	2
3.   DIVIDENDS AND DIVIDEND EQUIVALENTS	3
4.   VESTING OF DEFERRED SHARE BONUS AWARDS	4
5.   LAPSE OR FORFEITURE OF DEFERRED SHARE BONUS AWARDS	6
6.   CESSATION OF EMPLOYMENT	6
7.   CORPORATE EVENTS	8
8.   PARTICIPANT RIGHTS AND OBLIGATIONS	9
9.   CLAWBACK	9
10.  TAX, SOCIAL SECURITY AND OTHER CHARGES	9
11.  TRANSFER OF DEFERRED SHARE BONUS AWARDS	10
12.  COMPANY DOCUMENTS	10
13.  BOARD’S POWERS	10
14.  ADMINISTRATION AND REGULATIONS	10
15.  AWARDS NOT PENSIONABLE ETC.	11
16.  NOTICES	11
17.  DATA PROTECTION	11
18.  SCHEDULES TO THE PLAN	11
19.  AMENDMENT AND TERMINATION OF THE PLAN	11
20.  COMPLIANCE WITH LAW AND ARTICLES OF INCORPORATION	12
21.  APPLICABLE LAW	12
22.  DEFINITIONS AND INTERPRETATION	13
SCHEDULE 1 PARTICIPANTS WHO ARE OR BECOME MEMBERS OF THE ECN	17
1.   APPLICATION OF THIS SCHEDULE	17
2.   DEFINITIONS	17
3.   LAPSE OR FORFEITURE OF DEFERRED SHARE BONUS AWARDS	17
4.   CESSATION OF EMPLOYMENT – INTRODUCTION	17
5.   LEAVING IN SPECIAL CIRCUMSTANCES	17

 

 

SCHEDULE 2 UNITED STATES	19
1.   APPLICATION OF THIS SCHEDULE	19
2.   GRANT OF DEFERRED SHARE BONUS AWARDS – SHARES SUBJECT TO THE PLAN	19
3.   DEFINTIONS	19
4.   STOCK APPRECIATION RIGHTS	19
5.   CONSEQUENCES OF VESTING – RESTRICTED STOCK UNITS	21
6.   CORPORATE EVENTS	21
7.   CODE SECTION 409A	21
8.   US EXECUTIVE FINANCIAL RECOUPMENT PROGRAM	22
SCHEDULE 3 RETENTION SHARE BONUS AWARDS	23
1.   APPLICATION OF THIS SCHEDULE	23
2.   DEFINITIONS	23
3.   DETERMINATION OF RETENTION SHARE BONUS AWARD	23
4.   DETERMINING THE NUMBER OF SHARES OR ADIS SUBJECT TO A RETENTION SHARE BONUS AWARD	23
5.   TIMING OF RETENTION SHARE BONUS AWARDS	24
6.   VESTING OF RETENTION SHARE BONUS AWARDS	25
7.   LEAVING IN SPECIAL CIRCUMSTANCES - RETENTION SHARE BONUS AWARDS	25
8.   CHANGE OF CONTROL PRIOR TO THE VESTING DATE - RETENTION SHARE BONUS  AWARDS	26

 

  

NOVARTIS AG DEFERRED SHARE BONUS PLAN

 

1.             PURPOSE OF THE PLAN

 

The purpose of the Plan is to retain Eligible Employees.

 

2.             DETERMINATION OF DEFERRED SHARE BONUS AWARDS

 

2.1           General

 

The Board may determine that a proportion of the gross amount payable in respect of an Annual Incentive Award will be provided to the Participant in the form of a Compulsory Deferred Share Bonus Award.

 

2.2           Voluntary Deferred Share Bonus Awards

 

A Participant may, subject to completing such documentation as the Board may specify from time to time within the time limits specified by the Board, decide to receive up to all of any payment (in increments as determined by the Board) in connection with an Annual Incentive Award (other than that part of the Award that is subject to a Compulsory Deferred Share bonus Award) in the form of a Voluntary Deferred Share Bonus Award.

 

2.3           Decisions relating to Deferred Share Bonus Awards

 

In respect of any Deferred Share Bonus Award, the Board shall determine:

 

(a)

whether the Deferred Share Bonus Award is in respect of Restricted Stock, Restricted Stock Units or SARs;

 

(b)

where relevant, whether the Deferred Share Bonus Award is in respect of Shares or ADIs;

 

(c)

whether or not the Deferred Share Bonus Award will carry Dividend Equivalents and, if so, the form of such Dividend Equivalents;

 

(d)

the latest date by which the Participant must complete a form of acceptance of a Deferred Share Bonus Award;

 

(e)

if the Deferred Share Bonus Award is a SAR, the base value from which the growth in value is to be measured;

 

(f)

if the Deferred Share Bonus Award does not comprise Restricted Stock, Restricted Stock Units or SARs, the form, terms and conditions of any such Deferred Share Bonus Award;

 

(h)

the number of Shares, ADIs or notional shares in the case of SARs to be subject or linked to the Deferred Share Bonus Award (see Rule 2.4 below);

 

(i)

the Vesting Date or Vesting Dates and any conditions to which the Award is subject;

 

(j)

whether the Participant is required to sell sufficient Shares to meet Taxation;

 

(k)

which, if any, Schedules to the Plan will apply to the Award.

 

 

2.4           Determining the number of Shares or ADIs subject to a Deferred Share Bonus Award

 

In order to determine the number of Shares or ADIs subject or linked to a Deferred Share Bonus Award, the Board shall:

 

(a)

divide the relevant cash sum by the Market Value of a Share or ADI (as appropriate) as at the date immediately preceding the Grant Date and then, where necessary, round up to the nearest whole Share or ADI; or

 

(b)

apply such other method as the Board may determine from time to time.

 

2.5           Timing of Deferred Share Bonus Awards

 

Subject to any Dealing Restrictions which prevent Deferred Share Bonus Awards being granted, the Board shall grant such Compulsory Deferred Share Bonus Awards and Voluntary Share Bonus Awards as soon as practicable within the first Grant Period following the expiry of the Performance Period applicable to an Annual Incentive Award.

 

3.             DIVIDENDS AND DIVIDEND EQUIVALENTS

 

3.1           Restricted Stock Units and SARs

 

A Participant holding a Deferred Share Bonus Award of Restricted Stock Units or SARs shall not be entitled to vote, to receive dividends or to have any other rights of a shareholder in respect of such an Award unless and until the Shares comprising the Award are transferred to or acquired by the Participant.

 

3.2           Restricted Stock

 

The Board in relation to a Deferred Share Bonus Award of Restricted Stock may determine that the Participant must agree to surrender or waive any right to vote, receive dividends or any other rights of a shareholder in respect of such Award.

 

3.3           Dividend Equivalents

 

If the Board determines that a Deferred Share Bonus Award carries Dividend Equivalents:

 

(a)

unless the Board decides otherwise, the number of Shares (or notional Shares if the Deferred Share Bonus Award is a SAR) subject to the Deferred Share Bonus Award will be increased by the number of Shares which could have been acquired by the reinvestment in the purchase of Shares (at the market value of a Share on each relevant dividend payment date) of dividends payable between the Grant Date and the Vesting Date on that number of Shares (or notional Shares) subject to the Deferred Share Bonus Award that Vests; or

 

(b)

if the Board decides that Dividend Equivalents would not be on a notional reinvestment basis as described in Rule 3.3(a), as soon as practicable after the time a Deferred Share Bonus Award vests in full (and Shares are transferred or acquired or cash is paid to the Participant) the Company shall pay to the Participant (in cash or Shares) (subject to all applicable tax and social security deductions) an amount equal to the aggregate dividends which would have been paid on the Deferred Share Bonus Award (including in respect of notional Shares for Deferred Share Bonus Awards that are SARs) between the Grant Date and the Vesting Date; or

 

(c)

the Board may decide that the Dividend Equivalents may be calculated on any other basis.

 

 

For the avoidance of doubt, the amount of a dividend, for these purposes is the amount of the gross dividend before taxes.

 

For the purposes of this Rule 3, “market value” shall be determined by the Board on each relevant occasion.

 

A Participant is not entitled to receive Dividend Equivalents with respect to the time period between the Vesting Date and the date that the relevant Shares are transferred to or acquired by him or payment in respect of the Deferred Share Bonus Award is made.

 

4.            VESTING OF DEFERRED SHARE BONUS AWARDS

 

4.1           General

 

Vesting of Deferred Share Bonus Awards under the Plan, transfer of Shares or ADIs or payment of cash is subject to any Rules or law that may require otherwise, including Rule 4.5 (dealing restrictions), Rule 4.7 (delivery of Shares or ADIs to a deposit account), Rule 5 (lapse or forfeiture of Awards) and Rule 9 (clawback).

 

4.2           Normal Vesting

 

Subject to the exceptions set out in these Rules, Deferred Share Bonus Awards shall Vest on the Vesting Date.

 

4.3           Consequences of Vesting – Restricted Stock Units

 

As soon as practicable after the Vesting Date the Company shall transfer the number of Shares (or pay a cash sum if the Board has determined that the RSU is to be settled in cash) in respect of which the Deferred Share Bonus Award has Vested to the Participant.

 

4.4           Consequences of Vesting – Restricted Stock

 

On the Vesting Date the restrictions applicable to the relevant Restricted Stock under the Plan shall cease to apply to the extent such Restricted Stock Vests.

 

4.5           Dealing Restrictions

 

If the Vesting of a Deferred Share Bonus Award is prevented on any date by a Dealing Restriction, the Deferred Share Bonus Award shall Vest on the first day it is not so prevented.

 

If the transfer of Shares or ADIs (or payment of cash) on or following the Vesting Date is prevented by a Dealing Restriction, the period for such transfer or payment shall start from the first date on which it is no longer so prevented.

 

Shares received by a Participant on or following the Vesting Date may be subject to Dealing Restrictions. Subject to any such restrictions, a Participant may sell (or may be required to do so) a sufficient number of such Shares to meet Taxation (as defined in Rule 10 (tax, social security and other charges)).

 

 

4.6           Fractional entitlements

 

Any fractional number of Shares which arises for any reason under the Plan shall be aggregated as at the Vesting Date and rounded up to the nearest whole Share (or, in the case of a SAR, notional Share), unless the Board determines otherwise.

 

4.7           Delivery of Shares or ADIs to a deposit account

 

Subject to Board determination otherwise, all Shares and ADRs transferred to Participants under the Plan shall be transferred to and registered in one single securities account (Securities Deposit Account) held in trust by such service provider as is nominated from time to time by the Company.

 

If a Participant Ceases Employment, the Participant must dispose of or if possible transfer from the Securities Deposit Account to a private securities account all of the Shares or ADIs managed by the service provider within the period three months. If that is not done, the service provider will sell all of the Shares at market value without delay on behalf of the Participant or the Participant’s successor and transfer the proceeds less costs of sale to the Participant’s last known salary account and such transfer is in full and final satisfaction.

 

If a Participant Ceases Employment of the Company due to death, the period within which the Participant’s personal representative or successor in title must dispose of or transfer the Shares is 12 months or such longer period as the Board may determine.

 

If the Company’s contract with the service provider for administration of the Plan ends in circumstances where the Plan continues, the Company will make arrangements for appropriate services to be provided by another service provider that the Company shall instruct at its sole discretion. In such circumstances, each Participant must give all notices and take all steps necessary to end the trust or custody agreement with the old service provider and appoint a new service provider.

 

The procedures specified above may be altered and other procedures established by the Board.

 

4.8           Lock-In Period

 

Subject to Rule 4.9, the Board may determine or a Participant may elect at any time (in such form as the Board requires) that Shares or ADIs transferred or to be transferred to him under the Plan are or will be held in the Securities Deposit Account for a fixed period of time (the “Lock-In Period”) during which time such a Participant may not alienate such Shares or ADIs or create any security interest in or encumbrance on such Shares except as may be necessary for the proper administration of the Plan.

 

During the Lock-In Period, the participant is entitled without restriction to the dividend and voting rights associated with the Shares or ADIs the Participant acquired.

 

4.9           Cash, Share and ADI alternatives

 

The Board may decide to satisfy a Deferred Share Bonus Award (including any Dividend Equivalents) by:

 

(a)

paying the Participant a sum equal to the market value (as determined by the Board) of the number of Shares that would otherwise have been transferred to the Participant following the Vesting of that Deferred Share Bonus Award; or

 

(b)

delivering to the Participant ADIs with a value equal to the market value of the number of Shares that would otherwise have been transferred to the Participant following the Vesting of that Deferred Share Bonus Award.

 

 

5.            LAPSE OR FORFEITURE OF DEFERRED SHARE BONUS AWARDS

 

Subject to Board determination otherwise, Deferred Share Bonus Awards lapse or in the case of Restricted Stock are forfeit on the earlier of the occurrence of any event described in the Rules resulting in forfeiture or lapse of a Deferred Bonus Share Award, including under Rule 6 (Cessation of Employment) and Rule 7 (Corporate events).

 

In relation to any Award the Participant is required to accept the grant of the Award to him by providing such acceptance via the service provider’s online interface (or in such form as the Board shall determine from time to time) as well as, if required, complete and update the CRS FACTA documentation via the service provider’s online interface at the latest within 6 months after he received the notice of the grant of the Award. The Board may determine that the Participant will be reminded of these prerequisites for participation in the Plan. If a Participant does not provide such acceptance and/or CRS FATCA documentation in time (and, if any, after reminders), any Awards granted shall lapse or, in the case of Restricted Stock, the Shares under that Award shall be forfeited without compensation, unless the Board determines otherwise.

 

Alternatively, the Board may determine that a Participant who receives an Award is deemed (as of the time of receipt) to have accepted the grant and agreed to the Rules (including applicable Schedules) and the terms set out in the notice of the grant of the Award. If this is the case, a Participant may reject his Award within 14 days of receiving the notice of grant of that Award (or such longer period as the Board permits or is otherwise required by law). If a Participant does so reject his Award, then immediately on such rejection that Award shall lapse or, in the case of Restricted Stock, the Shares under that Award shall be forfeited.

 

The Board may decide to deem that Awards lapse or in the case of Restricted Stock are forfeited if the Participant grossly negligently or intentionally violates his obligations resulting from his employment with his Employer, e.g. breach of confidentiality or any compliance issue with company policies.

 

6.            CESSATION OF EMPLOYMENT

 

6.1           Introduction

 

This Rule 6 applies where a Participant Ceases Employment.

 

Notwithstanding any other part of this Rule 6, the Board may, in its discretion with no obligation to do so, allow (on such terms as the Board decides) a greater proportion of a Deferred Share Bonus Award to Vest and/or to accelerate the time at which Vesting occurs.

 

In the event that Compulsory Deferred Share Bonus Awards are outstanding pursuant to Rule

 

6.3

and the Participant dies prior to the Vesting of those Awards, then Rule 6.4 shall apply.

 

6.2

General

 

Unless Rules 6.3, 6.4 or 6.6 apply, a Deferred Share Bonus Award (or any proportion of a Deferred Share Bonus Award) that has not Vested will lapse or be forfeit on the day the Participant Ceases Employment

 

 

6.3           Leaving in special circumstances – Compulsory Deferred Share Bonus Awards

 

If a Participant Ceases Employment because of:

 

(a)

Retirement with the agreement of the Participant’s Employer;

 

(b)

termination of employment by the Participant’s Employer (whether or not by notice) other than for misconduct or poor performance

 

(c)

his employer ceasing to be a member of the Company;

 

(d)

the business for which the Participant works is transferred to a person which or who is not a member of the Company; or

 

(e)

any other reason if the Board so decides,

 

his Compulsory Deferred Share Bonus Award shall Vest on the Vesting Date provided that the Board may determine in the case of leaving for reasons set out in Rule 6.3(d) or Rule 6.3(e) that some or all of the Awards held by relevant Participants shall be exchanged in accordance with Rule 7.2 (exchange of awards).

 

6.4

Cessation of Employment as a result of death or disability – Compulsory Deferred Share Bonus Awards

 

If a Participant Ceases Employment as a result of his death or disability then Compulsory Deferred Share Bonus Awards held by that Participant shall Vest immediately on such cessation.

 

In case of a Participant’s death or disability, upon notice to the Company himself or his personal representative or successor in title shall be entitled to, if any, the payment of the annual incentive. Settlement of this incentive to the Participant or his personal representative or successor in title excludes any other potential claims of the Participant’s estate with regards to the Plan.

 

6.5

Lapse or forfeiture of Compulsory Deferred Share Bonus Awards on joining a Competitor

 

Where Rule 6.3 applies such that Compulsory Deferred Bonus Awards are retained by the Participant following Cessation of Employment, in the event that the Participant, in the period commencing on such cessation and ending immediately following the relevant Vesting Date becomes an employee or director of (or otherwise provides services to) a Competitor then Compulsory Deferred Share Bonus Awards held by that Participant shall immediately lapse (or on the case of Restricted Stock shall be immediately forfeited).

 

6.6           Cessation of Employment – Voluntary Deferred Share Bonus Awards

 

If a Participant Ceases Employment for any reason his Voluntary Deferred Share Bonus Awards shall Vest immediately on such cessation.

 

6.7           Assignments and Transfers

 

If a Participant is sent on an international assignment or is transferred to another entity within the Company, this will not be considered as Ceasing Employment under the Plan. The treatment of assignments and transfers is subject to the rules of the “Internal Transfer Policy for Share plans”.

 

  

7.            CORPORATE EVENTS

 

7.1           Change of Control prior to the Vesting Date

 

(a)

Compulsory Deferred Share Bonus Awards

 

If a Change of Control occurs or is anticipated to occur prior to the Vesting Date of a Compulsory Deferred Share Bonus Award then each such Award shall Vest on the Change of Control or at such earlier point as the Board shall determine.

 

Alternatively, the Board may determine that some or all Deferred Share Bonus Awards will be automatically exchanged under Rule 7.2 or may allow Participants to choose Vesting and/or exchange.

 

(b)

Voluntary Deferred Share Bonus Awards

 

If a Change of Control occurs or is anticipated to occur prior to the Vesting Date of a Voluntary Deferred Share Bonus Award then each such Award shall Vest on the Change of Control or at such earlier point as the Board shall determine.

 

7.2           Exchange of Deferred Share Bonus Awards

 

If a Deferred Share Bonus Award is exchanged, then:

 

(a)

the exchanged award will be in respect of or by reference to shares in any company determined by the company offering the exchange;

 

(b)

the exchanged award shall have equivalent terms to those of the Deferred Share Bonus Award that was exchanged;

 

(c)

the exchanged award will be subject to the Plan as it had effect in relation to the old Deferred Share Bonus Award immediately before the exchange;

 

(d)

with effect from the exchange, the Rules will apply as if references to Shares are references to shares over which the exchanged award has been granted;

 

(e)

the Rules shall apply with such other adjustments as the Board may decide.

 

7.3           Demerger, variations of share capital and other corporate events

 

If the Board becomes aware that the Company is or is expected to be affected by any variation of share capital, rights issue, sub-division, consolidation or reduction of share capital, demerger, distribution (other than an ordinary dividend), liquidation or other event (other than a Change of Control) which, in the opinion of the Board, could affect the current or future value of Shares, the Board may:

 

(a)

adjust Deferred Share Bonus Awards in such manner as it considers appropriate;

 

(b)

allow Deferred Share Bonus Awards (for all or some Participants) to Vest in whole or in part, subject to any conditions that the Board may impose;

 

(c)

require some or all Deferred Share Bonus Awards to be exchanged under Rule 7.2.

 

 

8.            PARTICIPANT RIGHTS AND OBLIGATIONS

 

The rights and obligations of a Participant under the terms of his or her office, employment or contract are not affected by becoming a Participant. These Rules do not form part of, and will not be incorporated into, any contract between a Participant and any member of the Company.

 

Participants do not have any right to continued employment with the Company as a result of participating in the Plan, nor are they entitled to any compensation or damages if any benefit under the Plan is reduced or cancelled as a result of applying the Rules.

 

Nothing in this Plan confers any benefit, right or expectation on a person who is not an Eligible Employee or a Participant.

 

9.            CLAWBACK

 

Participants must adhere at all times to applicable laws, the Articles, the Company’s organizational regulations, the Code of Ethics, and all applicable Company, Company or Employer policies, procedures and guidelines. If, in the reasonable opinion of the Board, a Participant fails to comply with any such laws, Articles, regulations, Code of Ethics, policies, procedures and/or guidelines in all material respects then the Board may determine that:

 

(a)

all or any of a Deferred Share Bonus Award (whether Vested or unvested) held by the Participant will lapse or be forfeit;

 

(b)

all or any amount of cash received (on a gross basis) under any Deferred Share Bonus Award be paid to the Company (or such other member of the Company as the Board may determine);

 

(c)

all or any of a Participant’s Shares or ADIs transferred to him under the Plan following the Vesting of Deferred Share Bonus Awards will be forfeit and must be transferred to the Company; and

 

(d)

the Participant must pay the Company (or such other member of the Company as the Board may determine) gross proceeds from the sale of some or all of the Shares or ADIs transferred to him following the Vesting of Deferred Share Bonus Awards.

 

Furthermore, all Executive Officers, as defined in the Novartis AG Policy Governing the Recovery of Erroneously Awarded Compensation (“Policy”), which has been adopted by the Board of Directors of Novartis AG to comply with the requirements of United States Securities and Exchange Commission Rule 10D- 1 and Section 303A.14 of the New York Stock Exchange Listed Company Manual, will be subject to all of the terms and conditions of that Policy, as amended from time to time.

 

10.          TAX, SOCIAL SECURITY AND OTHER CHARGES

 

The Participant indemnifies each member of the Company against all taxes, social security contributions and other levies for which he is responsible that arise in connection with any Deferred Share Bonus Award (together “Taxation”).

 

The Company and any employer may make such arrangements it considers necessary to meet any liability to pay or account for Taxation (including selling sufficient Shares to meet such liability and accounting for the proceeds of sale to the Company or the Participant’s employer or making deductions from any cash sum payable to the Participant). The Participant will promptly do all things necessary to facilitate any such arrangements and payment of cash. Vesting and the transfer of Shares to him can be delayed until he does so.

 

 

11.          TRANSFER OF DEFERRED SHARE BONUS AWARDS

 

Unless specifically permitted under the Plan or with the prior written consent of the Board, Deferred Share Bonus Awards or any rights in respect of any such Awards may not be transferred, assigned or otherwise disposed of. If Deferred Share Bonus Awards (or any rights in respect of Deferred Share Bonus Awards) are transferred, assigned or otherwise disposed of or if the Participant becomes bankrupt, they shall lapse or be forfeit immediately.

 

12.           COMPANY DOCUMENTS

 

The Company may (but need not) send to any Participant any documents which the Company sends to its shareholders.

 

13.          BOARD’S POWERS

 

The exercise of any power or discretion, including refraining from exercise, of the Board concerning the Plan or any Award is absolute and unlimited and may be reasonably exercised at any time, subject always to the principle of good faith. When the Board exercises any of its powers or discretions in a way that will impact a Participant, the Board may (but need not) inform the relevant Participant in such manner as the Board shall determine.

 

Any decision of the Board in connection with the Plan, the interpretation of the Plan and any related documents and in connection with any dispute relating to the Plan will be final and binding.

 

The Board decided to delegate the following powers with regard to the Plan to the Employer who decides after consultation with the Global Rewards &/or Global Legal teams at their discretion:

 

(a)

with reference to section 5 (Lapse of forfeiture of awards)

 

(b)

with reference to section 6.4 (Cessation of employment as a result of Death or disability)

 

(c)

with reference to section 9 (Clawback)

 

The Board decided to delegate the implementation and execution of the Plan, including making non-material changes to the Rules themselves, to the Global Rewards &/or Global Legal teams.

 

14.          ADMINISTRATION AND REGULATIONS

 

14.1

The Plan shall be administered by the Board.

 

14.2

The Board may make and vary regulations and policies for the administration and operation of the Plan.

 

14.3

The Board has the right to delegate its powers related to this Plan.

 

 

15.           AWARDS NOT PENSIONABLE ETC.

 

For the avoidance of doubt, any growth in value from the Grant Date of Deferred Share Bonus Awards under the Plan (or the Shares or ADIs comprising such Awards) is not pensionable and does not count in relation to the calculation of benefit under programmes such as life cover, income protection or continuation, medical or such other benefits as the Board may determine.

 

16.           NOTICES

 

Any notice or other communication under or in connection with the Plan may be given:

 

(a)

by the Company to an Eligible Employee or Participant either personally or sent to him at his place of work by electronic mail or other electronic means (including the internet or the intranet) or by post addressed to the address last known to the Company (including any address supplied by the relevant member of the Company) or sent through the Company's internal postal service; and

 

(b)

to the Company, either personally or by post to the Company secretary.

 

Items sent by post shall be pre-paid and shall be deemed to have been received 72 hours after posting. Items sent by electronic mail or other electronic means shall be deemed to have been received at the expiration of 24 hours from when they were sent.

 

The Board may decide the accept notices given by Participants if received after any time stipulated for receipt.

 

17.           DATA PROTECTION

 

Each Participant agrees to the receipt, holding and processing of information in connection with a Deferred Share Bonus Award and the general administration of the Plan by the Company and any of their advisers or agents and to the transmission of any such information outside of the European Economic Area (including, without limitation, to Switzerland and to the United States of America). Each Participant acknowledges that the EU Commission considers that the United States of America (and various other jurisdictions) do not have adequate data protection laws.

 

18.           SCHEDULES TO THE PLAN

 

The Board may establish such schedules to the Rules as it considers necessary or appropriate. Such schedules may be included in the Plan so as to apply special rules to categories of Eligible Employees and/or to constitute sub-plans to the Plan for Eligible Employees outside Switzerland.

 

19.           AMENDMENT AND TERMINATION OF THE PLAN

 

The Board may at any time change the Plan (including amending or adding schedules to the Plan) in any way. Changes may affect Deferred Share Bonus Awards already granted provided always that, unless the change is required by law, no such change may be made which is to the material disadvantage of a Participant without that Participant’s prior written consent.

 

The Board shall give notice of any changes to any Participant.

 

  

The Board may terminate the Plan at any time. Termination will not affect existing Deferred Share Bonus Awards.

 

20.           COMPLIANCE WITH LAW AND ARTICLES OF INCORPORATION

 

20.1         Compliance with Law etc

 

The Plan is subject to all applicable laws and the Company’s Articles. If such law or the Articles require, the terms of any provision of the Plan and any Award (including any outstanding Award) shall be interpreted and/or amended and applied to the extent required to comply fully with such law or the Articles.

 

20.2           Minder Initiative

 

The Plan, in particular, is subject to any mandatory provisions of Swiss law pertaining to compensation of governing bodies derived from article 95 paragraph 3 of the Swiss Federal Constitution (the “Minder Initiative”). Any interpretation and/or amendment necessary in respect of any provision of the Plan or any Award as a result of applicable law and/or the Articles to the detriment of the Participant shall not give rise to any claims by or other rights whatsoever of the Participant. This applies in particular if the annual general meeting of the Company does not approve the compensation of the Participant which is subject to approval under the Minder Initiative.

 

20.3           US Code Section 409A

 

If a Participant (other than a Participant whose benefits are provided under the United States Schedule) is subject to the United States Internal Revenue Code (“US Code”) (a “US Participant”), and if benefits under this Plan for such US Participant are not exempt from US Code Section 409A, it is intended that to the maximum extent permitted under all applicable law this Plan will be interpreted and administered to conform to the requirements of US Code Section 409A as they apply to such US Participant.

 

20.4           Voluntary Participation

 

By accepting any award or grant of securities under this Plan, Participants shall be deemed to represent and warrant to the Company that such Participant’s participation in the trade and acceptance of such securities is voluntary and that such Participant has not been induced to participate by expectation of engagement, appointment, employment or continued engagement, appointment or employment, as applicable.

 

21.           APPLICABLE LAW

 

The Plan is governed by and construed in accordance with the laws of Switzerland, under express exclusion of any provisions of conflict of laws.

 

The Board may resolve conclusively all questions of fact or interpretation concerning the Plan and has the authority to resolve any dispute of any kind that arises under or in connection with the Plan. In the event a dispute escalates to require resolution by a court, the dispute will exclusively be resolved by the Courts of Basel, Switzerland.

 

  

22.           DEFINITIONS AND INTERPRETATION

 

In this Plan, unless otherwise required by the Rules:

 

22.1          Definitions

 

ADIs means American depositary instruments being either American Depositary Shares or American Depositary Receipts of the Company as specified in the Grant Notice.

 

Annual Incentive Award means an award or rights to participate under the Annual Incentive Plan or any other annual bonus arrangement as the Board shall determine.

 

Annual Incentive Plan means the rules of a cash-based incentive plan established by the Board on January 22, 2014 which operates in conjunction with the Plan.

 

Articles means the articles of incorporation of the Company as amended from time to time.

 

Award means a Deferred Share Bonus Award.

 

Board means the Company’s Board of Directors or, to the extent permitted by applicable law, the Board’s delegate or, following a Change of Control, those persons who comprised the Board immediately prior to such Change of Control.

 

Cessation of Employment occurs, for the purposes of the Plan, when a Participant ceases to hold an office or employment with the Company PROVIDED THAT a Participant will not be treated as Ceasing Employment in circumstances in which that Participant is on a leave of absence where the Participant’s right to re-employment is guaranteed either by statute or contract and employment is not otherwise terminated during such leave of absence (in which case the participant will Cease Employment at the time of such termination) and similar terms, such as “Ceases Employment” or “Ceasing to be Employed”, shall be construed accordingly.

 

Change of Control means any of the following:

 

(a)

any person or group of persons who are acting together purchases or otherwise becomes the beneficial owner or has the right to acquire such beneficial ownership (whether or not such right is exercisable immediately or subject to passage of time or other conditions) of voting securities representing more than 50% of the combined voting power of all outstanding securities of the Company;

 

(b)

the Company’s shareholders approve an agreement to merge or consolidate the Company with or into another corporation as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are or will be owned by the former shareholders of the Company;

 

(c)

the shareholders of the Company approve the sale of all or substantially all of the Company’s business and/or assets to a person or entity which is not a member of the Company,

 

provided that an Internal Reorganisation shall not be a Change of Control.

 

Competitor has the same meaning as under the Novartis AG Long Term Incentive Plan.

 

  

Compulsory Deferred Share Bonus Award means a Deferred Share Bonus Award which the Participant must accept in respect of his Annual Incentive Award (or part thereof).

 

Company means Novartis AG.

 

Dealing Day means a day on which the Swiss Exchange (SIX) or, in relation to ADIs, the national securities exchange in the US on which ADIs are listed, is open for business.

 

Dealing Restrictions means restrictions on the dealing in Shares or the grant of Awards imposed by any law, regulation or Code of Practice (including the Novartis Global Insider Trading Policy, as amended or replaced from time to time) or otherwise.

 

Deferred Share Bonus Award means an award under the Plan (and includes both Compulsory and Voluntary Deferred Share Bonus Awards).

 

Determination Date means the date after the Performance Period has ended on which the Board determines whether (and to what extent) a cash amount is payable to a Participant under the Annual Incentive Plan having regard to the relevant Performance Targets.

 

Dividend Equivalents means a right to cash or Shares as described in Rule 3.

 

Eligible Employee means any member of the Executive Committee and the Corporate Executive of the Company or any employee or group of employees of the Company as the Board shall determine.

 

Employer means the member of the Company by or in which the Participant is or, where the context so admits, was an office holder or employed.

 

Grant Date means the date a Deferred Share Bonus Award (as the context requires) is made.

 

Grant Notice means a grant notice provided to a Participant in accordance with the Rules.

 

Grant Period means the period of 42 days commencing:

 

(a)

the Dealing Day immediately following the day on which the Company announces results for any period;

 

(b)

the day on which the Company’s annual general meeting is held;

 

(c)

any day on which the Board resolves that exceptional circumstances exist which justify the making of an Award.

 

Internal Reorganisation means any event, offer, scheme, share purchase, merger or arrangement whereby:

 

(a)

a Change of Control occurs; and

 

(b)

immediately afterwards the share capital of the company then controlling (whether directly or indirectly) the Company is owned substantially by the same persons who were shareholders of the Company immediately prior to such event, scheme or arrangement in substantially the same proportions.

 

Lock-In Period has the meaning set out in Rule 4.8.

 

 

Market Value means in relation to a Share or ADI (as appropriate) on any given day:

 

(a)

if the Shares are admitted to trading on the Swiss Exchange (SIX) an amount equal to the closing price on that day (or if there is no such price on that day the last preceding day for which such price is available);

 

(b)

if the ADIs are listed on a national securities exchange in the US an amount equal to the closing price on that day (or if there is no such price on that day the last preceding day for which such price is available);

 

(c)

if the Shares are not admitted to trading on the Swiss Exchange (SIX) or the ADIs are not listed on a national securities exchange in the US, then such value as is determined by the Board.

 

Participant means an Eligible Employee who is selected by the Board to participate in the Plan and is employed by the Company at the Grant Date.

 

Plan means the Novartis AG Deferred Share Bonus Plan.

 

Restricted Stock means an award of Shares subject to restrictions in accordance with the Plan.

 

Restricted Stock Units means a right to receive Shares or cash under the Plan (but subject to Rule 4.9 (cash and ADI alternative)).

 

Retirement means the Cessation of Employment after having attained retirement age according to applicable local law, if any, in the Participant’s country of employment, or early retirement according to local laws as approved by the employing entity; or at discretion of the Board of Directors the Cessation of Employment as a result of a mutual agreement (as approved by the employing entity) with immediate receipt of a retirement benefit.

 

Rules mean the rules of the Plan (including all Schedules).

 

Schedule means a schedule to the Rules.

 

Service means the period of continuous employment with the Company ending with the relevant Cessation of Employment for the purposes of the Plan PROVIDED ALWAYS THAT the Board may determine that prior periods of employment with the Company and/or periods of employment with entities outside the Company (but which are subsequently acquired by the Company) may be taken into account.

 

Share means a registered share of the Company with a par value of CHF -.50 or in the case of SARs, notional Shares.

 

Stock Appreciation Rights or SARs means an award under the Plan, the future value of which is based on the increase in the value of Shares (from the base value set by the Board at the time an Award is made) which notionally comprises each SAR from the relevant Grant Date.

 

Vesting means:

 

(a)

in the case of Restricted Stock Units, a Participant being entitled to receive Shares or cash;

 

(b)

in the case of Restricted Stock, restrictions under the Plan ceasing to apply;

 

 

(c)

in the case of SARs, a Participant being entitled to receive a cash sum based on the growth in value of the notional Shares comprising the Deferred Share Bonus Award,

 

and “Vest” shall be construed accordingly.

 

Vesting Date means the date an Award vests as determined by the Board and specified in the Grant Notice or otherwise as required under the Rules.

 

Vesting Period means the period between the date on which an Award is granted and the Vesting Date.

 

Voluntary Deferred Share Bonus Award means a Deferred Share Bonus Award which is made as a result of the Participant voluntarily electing to receive his Annual Incentive Award (or part thereof) in the form of an award under this Plan.

 

22.2          Interpretation

 

Unless the context requires otherwise: words importing the singular include the plural and vice versa; the word “includes” is not a word of limitation; the masculine includes the feminine and vice versa, headings and boldings are for convenience only and do not affect the interpretation of these Rules.

 

 

SCHEDULE 1

PARTICIPANTS WHO ARE OR BECOME MEMBERS OF THE ECN

 

1.             APPLICATION OF THIS SCHEDULE

 

This Schedule shall apply to:

 

(a)

Deferred Share Bonus Awards granted to any Participant who at the relevant Grant Date is a member of the ECN; and

 

(b)

Deferred Share Bonus Awards granted to any Participant who, after the relevant Grant Date, becomes a member of the ECN.

 

Where this Schedule applies relevant Deferred Share Bonus Awards shall be subject to all the provisions of the Novartis AG Deferred Share Bonus Plan save as modified below.

 

2.             DEFINITIONS

 

For the purposes of this Schedule the following definition shall apply:

 

“ECN” means the Executive Committee of Novartis AG (including permanent attendees to that committee).

 

“Retirement” means the Cessation of Employment after:

 

(a)

having attained age 58 or older, or

 

(b)

in respect of those Participants who satisfied the Rule of 60 at December 31, 2015, having attained 55 or older and having completed as at least 10 years of Service.

 

“Rule of 60” the sum of the Participant’s age plus Service being equal to 60 or more. For the purposes of this definition the Participant’s age and his Service shall be whole calendar years as at December 31, 2015.

 

3.             LAPSE OR FORFEITURE OF DEFERRED SHARE BONUS AWARDS

 

The words “Subject to Board determination otherwise,” at the start of Rule 5 shall not apply.

 

4.

CESSATION OF EMPLOYMENT – INTRODUCTION

 

The second paragraph of Rule 6.1 shall not apply.

 

5.

LEAVING IN SPECIAL CIRCUMSTANCES

 

5.1

Rule 6.3(f) shall not apply.

 

 

5.2

Immediately following Rule 6.3 the following shall be added as Rule 6.3A:

 

“In determining whether to approve Retirement under Rule 6.3(a), the Board shall take into consideration the Participant’s satisfaction of certain conditions, including:

 

(a)

whether the Participant is leaving the Company in good standing and not for cause (for example because of dishonesty, misconduct, gross negligence, violation of this employer’s code of ethics or similar reason);

 

(b)

whether the Participant has returned to his Employer all company property in his possession at his termination;

 

(c)

whether the Participant has cooperated with his Employer in the orderly handover and transition of his duties and responsibilities prior to his date of termination;

 

(d)

whether the Participant has given his written commitment that for one year following his termination he will not work for a Competitor and he will refrain from soliciting other employees of the Company to terminate their employment; and

 

(e)

whether the Participant has affirmed his obligation not to disclose confidential information he received during his employment with the Company and to refrain from using any such information for any purpose not in Company’s business interests.”

 

  

SCHEDULE 2

UNITED STATES

 

1.             APPLICATION OF THIS SCHEDULE

 

When Deferred Share Bonus Awards under the Plan are to be granted the Board may determine that this Schedule applies, in which case such Awards shall be subject to all the provisions of the Novartis AG Deferred Share Bonus Plan save as modified below.

 

ADIs subject to the Deferred Share Bonus Awards under the Plan are intended to be registered under the United States Securities Act of 1933.

 

2.            GRANT OF DEFERRED SHARE BONUS AWARDS – SHARES SUBJECT TO THE PLAN

 

(a)

Subject to Rule 7.3, the aggregate number of ADIs made subject to Deferred Share Bonus Awards under this Schedule may not exceed 2,780,000, plus any ADIs that were not issued under the Plan as of January 1, 2021; plus any ADIs subject to outstanding Awards under the Plan as of January 1, 2021 that on or after January 1, 2021 cease for any reason to be subject to such Awards.

 

(b)

Such ADIs shall be deemed to have been used in payment of Deferred Share Bonus Awards whether they are actually delivered or the market value equivalent of such ADIs is paid in cash. In the event any Deferred Share Bonus Award is surrendered or terminated, or expires or is forfeited, the number of ADIs no longer subject thereto shall thereupon be released and shall thereafter be available for new Deferred Share Bonus Awards under this Schedule.

 

(c)

ADIs comprising Deferred Share Bonus Awards under this Schedule or delivered by the Company in settlement of Deferred Share Bonus Awards under this Schedule may be derived from authorised and unissued Shares or from Shares or ADIs held in the treasury of the Company or may be purchased on the open market or by private purchase.

 

3.            DEFINITIONS

 

For the purposes of this Schedule the following definition shall apply:

 

“Retirement” means the Cessation of Employment after having attained age 55 or older and having completed at least 10 years of Service.

 

4.            STOCK APPRECIATION RIGHTS

 

SARs granted under this Schedule shall be subject to such terms and conditions, not inconsistent with the Plan, as the Board may impose, including, but not limited to, the following:

 

(a)

SARs with Participant discretion to exercise

 

(i)

Base Value. The Base Value for SARs per ADI subject to a SAR shall not be less than 100% of the market value of an ADI at the Grant Date.

 

(ii)

Payment on exercise. On the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of ADIs subject to the SAR multiplied by the excess, if any, of the market value of one ADI on the exercise date over the Base Value.

 

  

(iii)

Market value. For the purposes of SARs subject to this Schedule, “market value” in paragraphs 4(a)(i) and 4(a)(ii) of this Schedule on a given date means:

 

(aa)

if the ADIs are listed on a national securities exchange in the United States, the closing sale price reported as having occurred on the primary exchange with which the Shares are listed and traded (currently the New York Stock Exchange) on such date or, if there is no such sale on that date, then the last preceding date on which such a sale was reported;

 

(bb)

if the ADIs are not listed on any national securities exchange but is quoted on the National Market System of the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), the trade price of the last sale reported on such date or, if there is no such sale on that date, then the last preceding date on which such a sale was reported; or

 

(cc)

if the ADIs are not listed on a national securities exchange nor quoted on NASDAQ, on a last sale basis the amount determined by the Board to be the fair market value based upon a good faith attempt to value the Shares accurately.

 

(iv)

Dividend Equivalents. If the Board designates Dividend Equivalents to apply to SARs pursuant to Rule 4.3(a), such accumulated Dividend Equivalents shall be paid to the Participant immediately upon Vesting.

 

(v)

No deferral of proceeds. Pursuant to the limitations of the United States Treasury Regulation Section 1.409A-1(b)(5)(i)(B)(3), a Participant may not defer the proceeds of the exercise of a SAR.

 

(b)

SARs without Participant Discretion to exercise

 

If a SAR is granted with a fixed exercise date and the Participant has no discretion to exercise the SAR, Participants may elect to defer the payment of the proceeds of the automatic exercise of the SAR, and any accumulated Dividend Equivalents, to the date later than the payment date specified in the Deferred Share Bonus Award provided that the Participant makes such deferred election either as an initial deferral under United States Treasury Regulation Section 1.409A-2(a) or pursuant to the subsequent deferral provisions of United States Treasury Regulation Section 1.409A-2(b). The Board shall determine whether such deferral is in the form of Shares (ADIs) or cash. If deferrals are in Shares (ADIs), unless otherwise directed by the Board such Shares (ADIs), and any accumulated Dividend Equivalents, shall be delivered upon such deferred payment date. If the deferrals are in cash, the cash proceeds of such automatic exercise of the SARs shall be transferred into the applicable non-qualified deferred compensation plan of the Company entity which employs the Participant.

 

 

5.            CONSEQUENCES OF VESTING – RESTRICTED STOCK UNITS

 

5.1

Participants may elect to defer the payment of Restricted Stock Units, and any accumulated Dividend Equivalents, to the date later than the payment date specified in the relevant Deferred Share Bonus Award provided that the Participant makes such a deferred election either as an initial deferral under United States Treasury Regulation Section 1.409A-2(a) or pursuant to the subsequent deferral provisions of United States Treasury Regulation Section 1.409A-2(b). The Board shall determine whether such deferral is in the form of Shares (ADIs) or cash. If deferrals are in Shares (ADIs), unless otherwise directed by the Board, such Shares (ADIs), and any accumulated Dividend Equivalents, shall be delivered from this Plan upon such deferred payment date. If deferrals are in cash, the cash proceeds of such Awards shall be transferred into the applicable non-qualified deferred compensation plan of the Participant’s employing Company in the United States.

 

5.2

Rule 4.3 shall be amended by inserting the underlined words below:

 

“As soon as practicable after the Vesting (but no later than the 15 ^th day of the third calendar month after the Vesting) the Company shall transfer the number of Shares (or pay a cash sum if the Board has determined that the RSU is to be settled in cash) in respect of which the Deferred Share Bonus Award has Vested to the Participant”.

 

6.            CORPORATE EVENTS

 

Should the Board determine that adjustments be made to Deferred Share Bonus Awards under Rule 7, any such adjustments or modifications must be made in a manner which is consistent with the provisions of section 409A of the United States Internal Revenue Code (“Code Section 409A”).

 

7.            CODE SECTION 409A

 

7.1

Notwithstanding anything under the Plan to the contrary, to the extent applicable, it is intended that the Plan as it applies to Participants shall comply with the provisions of Code Section 409A and the Plan and all applicable Deferred Share Bonus Awards be construed and applied in a manner consistent with this intent. In furtherance thereof, any amount constituting a “deferral of compensation” under Treasury Regulation Section 1.409A-1(b) that is payable to a Participant upon a separation from service of the Participant (within the meaning of Treasury Regulation Section 1.409A-1(h)) (other than due to the Participant’s death), occurring while the Participant shall be a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) of the Company (as limited by Code Sections 414(b), (c), (m) and (o)), shall not be paid until the earlier of:

 

(a)

the date that is six months following such separation from service; or

 

(b)

the date of the Participant’s death following such separation from service.

 

  

7.2

Notwithstanding any provision of the Plan to the contrary, to the extent that a Deferred Share Bonus Award constituting a “deferral of compensation” subject to Code Section 409A shall be deemed to be vested or restrictions lapse upon the occurrence of a Change of Control, and if such Change of Control does not constitute a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)), then even though such Award may be deemed to be vested or restrictions lapse, payment will only be made to the extent necessary to comply with the provisions of Code Section 409A, to the United States participant on the earliest of:

 

(a)

the United States participant’s separation from service, the date payment otherwise would have been made pursuant to the regular payment terms of the Award; or

 

(b)

the Participant’s death.

 

8.            US EXECUTIVE FINANCIAL RECOUPMENT PROGRAM

 

For awards granted on or after January 1, 2021 for US-based roles covered by the Incentive Compensation Restriction and Executive Financial Recoupment Program, as set forth in Appendix E of the Corporate Integrity Agreement Between the Office of Inspector General of the Department of Health and Human Services and Novartis Corporation (“2020 Novartis Corporate CIA”) (the “Corporate Executive Financial Recoupment Program”), the Board temporarily delegates its authority and discretion to make Clawback determinations under section 9 of this Plan, with respect to incentives awarded under this Plan, to the Recoupment Committee established under the Corporate Executive Financial Recoupment Program, and to fulfil the obligations entrusted to the respective Recoupment Committee under such Program, for the term of the 2020 Novartis Corporate CIA.

 

Covered Executives must agree to accept the terms and conditions of the Executive Financial Recoupment Program as a condition of accepting awards under this Plan. The terms and conditions of the Executive Financial Recoupment Program shall apply to all awards made under this Plan to Covered Executives during the term of the 2020 Novartis Corporate CIA.

 

At the conclusion of the 2020 Novartis Corporate CIA, this temporary delegation of authority and discretion shall cease and will revert to the Board. The 2020 Novartis Corporate CIA may be access online at https://oig.hhs.gov/fraud/cia/agreements/Novartis_Corporation_06302020.pdf.

 

  

SCHEDULE 3

RETENTION SHARE BONUS AWARDS

 

1.

APPLICATION OF THIS SCHEDULE

 

The Rules of the Novartis AG Deferred Share Bonus Plan shall apply to an award granted in the form of a Retention Share Bonus Award granted or to be granted under this Schedule as if it were a Compulsory Deferred Share Bonus Award, except as set out in this Schedule.

 

Where there is any conflict between the Rules and this Schedule, the terms of this Schedule shall prevail.

 

2.

DEFINITIONS

 

For the purpose of this Schedule the following definition shall apply:

 

“Initial Conditions”	means the condition or conditions determined by the Board and applicable to the calculation of the Initial Value.
“Initial Period”	means the period over which the Initial Conditions are measured, as determined by the Board.
“Initial Value”	means the notional cash values applicable to the Participant and attributable to a Retention Share Bonus Award as at the expiry of the applicable Initial Period.
“Retention Share Bonus Award”	means an Award granted under this Schedule to the Plan.

 

3.

DETERMINATION OF RETENTION SHARE BONUS AWARD

 

For the purposes of this Schedule, Rule 2.1 shall not apply and shall be replaced by the following:

 

“(a)

The Board may determine that an Award will be provided to the participant in the form of a Retention Share Bonus Award.

 

(b)

Where the Board determines that a Participant shall be granted a Retention Share Bonus Award, it shall also determine:

 

(i)

the minimum, target and maximum Initial Value; and

 

(ii)

the Initial Conditions applicable to such Initial Value (unless the Board has delegated setting such conditions, in which case they shall determine the overall structure, approach and principles to be applied).”

 

4.

DETERMINING THE NUMBER OF SHARES OR ADIS SUBJECT TO A RETENTION SHARE BONUS AWARD

 

For the purposes of this Schedule, Rule 2.4 shall not apply and shall be replaced by the following:

 

“(a)

Following the expiry of the Initial Period, the Board shall grant a Retention Share Bonus Award. The number of Shares or ADIs subject

 

 

or linked to such Award (“X”) shall be determined by the Board as follows:

 

X = A

B

 

Where:

 

A

subject to adjustments below, is the Initial Value as adjusted by the Board to take into account the satisfaction or otherwise of the Initial Conditions following the expiry of the Initial Period; and

 

B

is Market Value of a Share or ADI (as appropriate) as at such date as the Board may determine as soon as practicable following the expiring of the Initial Period rounded up, where necessary, to the nearest whole Share or ADI,

 

provided that the Board may apply such other method of calculation as it may determine from time to time.

 

(b)

If during the Initial Period the Participant’s role and/or responsibilities have been altered, then:

 

(i)

A (as determined in Rule 2.4(a) above) may, at the discretion of the Board and in such manner as the Board may determine from time to time, be adjusted to reflect such alteration in role and/or responsibilities;

 

(ii)

the Board may, at its discretion, determine that any or all of A (where relevant, as adjusted in accordance with Rule 2.4(b)(i)) is paid in cash, subject to the appropriate deductions, to the Participant as soon as practicable following determination of the cash sum payable. In this event, A in Rule 2.4(a) shall be that part of A not settled in accordance with this Rule 2.4(b)(ii);

 

(c)

In the event that Rule 2.4(b)(ii) applies and any part of the Initial Value is settled in accordance with that Rule, then that Participant shall have no right to receive any further benefit or payment or to receive Shares or ADIs in respect of that of the Initial Value.”

 

5.

TIMING OF RETENTION SHARE BONUS AWARDS

 

For the purposes of this Schedule, Rule 2.5 shall not apply and shall be replaced by the following:

 

“Subject to any Dealing Restrictions which prevent Retention Share Bonus Awards being granted, the Board shall grant such Retention Share Bonus Awards as soon as practicable within the first Grant Period following the expiry of the Initial Period.”

 

 

6.

VESTING OF RETENTION SHARE BONUS AWARDS

 

Immediately following Rule 4.1, the following shall be added as Rule 4.1A:

 

“To the extent that the Initial Conditions are not met, there shall be no entitlement to receive a Retention Share Bonus Award.”

 

7.

LEAVING IN SPECIAL CIRCUMSTANCES - RETENTION SHARE BONUS AWARDS

 

For the purposes of this Schedule, Rule 6.3 and Rule 6.4 shall apply where a Participant Ceases Employment following the expiry of the Initial Period but prior to the Vesting Date applicable to a Retention Share Bonus Award.

 

Immediately following Rule 6.3, the following shall be added as Rule 6.3A:

 

“(a)

If a Participant Ceases Employment during the Initial Period otherwise than because of a reason set out in Rule 6.3(a) to (e) or Rule 6.4 then the Participant shall have no right to receive any cash payment or a Retention Share Bonus Award.

 

(b)

If a Participant Ceases Employment during the Initial Period because of a reason set out in Rule 6.3(a) to (e) or Rule 6.4 then the Board shall, by reference to the Initial Value applicable to that Participant, determine the cash sum payable to the Participant as follows:

 

(i)

if the Participant, prior to Cessation of Employment, is not required to undertake employment duties for a defined period (“Garden Leave”) then in respect of that part of his Initial Value which relates to the applicable period of Garden Leave:

 

(aa)

that element of his Initial Value which is referable to individual conditions shall be settled at target; and

 

(bb)

that element of his Initial Value which is referable to business conditions shall be settled:

 

(A)

if, as at the date of Cessation of Employment, it is impractical to assess the relevant business conditions, at target; or

 

(B)

if, as at the date of Cessation of Employment, it is practical to assess the relevant business conditions, to the extent the Board determines having regard to the relevant business conditions up to the date of such cessation;

 

(ii)

to the extent that (i) above does not apply then:

 

(aa)

if, as at the date of Cessation of Employment, it is impractical to assess the relevant conditions, at target; or

 

(bb)

if, as at the date of Cessation of Employment, it is practical to assess the conditions, to the extent the Board determines having regard to progress towards satisfying such conditions up to the date of such cessation,

 

PROVIDED ALWAYS THAT settlement of the Initial Value shall be reduced to take account of the proportion of the Initial Period during which the Participant was an Eligible Employee.

 

  

(c)

In the event that Rule 6.3A(b) applies and any part of the Initial Value is settled in accordance with that Rule, then that Participant shall have no right to receive any benefit or payment or to receive Shares or ADIs in respect of that Award.”

 

8.

CHANGE OF CONTROL PRIOR TO THE VESTING DATE - RETENTION SHARE BONUS AWARDS

 

For the purposes of this Schedule, Rule 7.1(a) shall apply where a Change of Control occurs following the expiry of the Initial Period but prior to the Vesting Date applicable to a Retention Share Bonus Award.

 

Immediately following Rule 7.1(a), the following shall be added as Rule 7.1A:

 

“(a)

If a Change of Control occurs or is anticipated to occur during the Initial Period then the Initial Value shall vest on the Change of Control or at such earlier point as the Board shall determine and the Board shall determine the cash sum in respect of such Initial Value that is payable as follows:

 

(i) if, as at the date of the Change of Control, it is impractical to assess the Initial Conditions, at target; or

 

(ii) if, as at the date of the Change of Control, it is practicable to assess the applicable Initial Conditions, to the extent the Board determines having regard to progress towards satisfying such conditions up to the date of the Change of Control,

 

PROVIDED ALWAYS THAT payment shall be reduced to take account of the proportion of the Initial Period as has elapsed when the Change of Control occurs and during which the Participant was an Eligible Employee.

 

(b)

In the event that Rule 7.1A(a) applies and a Participant’s Initial Value is settled in accordance with that Rule, then that Participant shall have no further right to receive any benefit or payment or to receive Shares or ADIs in respect of that Award.”

 

 

 

 

Exhibit 4.7

 

 

Working Copy Effective January 1, 2024

 

NOVARTIS CORPORATION
2011 STOCK INCENTIVE PLAN
FOR NORTH AMERICAN EMPLOYEES,

AS AMENDED AND RESTATED

 

(THE “PLAN”)

 

(Effective January 1, 2011)

 

1.             Purpose

 

Novartis Corporation originally established the Novartis Corporation 2001 Stock Incentive Plan for North American Employees (the “Original Plan”), effective as of January 1, 2001, which has subsequently been amended from time to time, including the Novartis Corporation 2011 Stock Incentive Plan for North American Employees (the “Plan”). This document reflects and incorporates amendments to the Plan, which are effective as of January 1, 2024, and apply to any Eligible Person employed by a member of the Novartis Group on or after that date.

 

The purpose of the Plan is to provide a means through which the Company and its Subsidiaries may attract able persons to enter and remain in the employ or in a consulting relationship with the Company and its Subsidiaries and to provide a means whereby they can acquire and maintain Stock ownership, or be paid incentive compensation measured by reference to the value of Stock, thereby strengthening their commitment to the welfare of the Company and its Subsidiaries and promoting an identity of interest between shareholders of Novartis AG and these employees, directors and consultants. So that the appropriate incentive can be provided, the Plan provides for granting Incentive Stock Options, Nonqualified Stock Options (including Tradable Options), Stock Appreciation Rights, Restricted Stock Awards or any combination of the foregoing.

 

The Plan is effective as of January 1, 2011, and applies to any Eligible Person employed by a member of the Novartis Group on or after that date.

 

2.            Definitions

 

The following definitions shall be applicable throughout the Plan.

 

(a)          “ADS” means a Novartis AG American Depositary Share, each of which represents one ordinary share of Novartis AG, nominal value CHF 0.50 per share.

 

(b)          “Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock or Restricted Stock Unit Award under the Plan.

 

 

(c)          “Award Agreement” means the electronic or paper award notice or agreement, if any, between the Company (or one of its Subsidiaries) and a Participant who was granted an Award which defines rights and obligations of the parties with respect to such Award in addition to those set forth in the Plan.

 

(d)          “Board” means the Board of Directors of the Company.

 

(e)          “Cause” means the Company, a Subsidiary or any other member of the Novartis Group (as the case may be) with which the Participant has an employment, consulting or other contractual relationship having cause to terminate the Participant’s employment or service with the Novartis Group in accordance with the provisions of any existing employment, consulting or any other agreement between the Participant and the Company, such Subsidiary or such other member of the Novartis Group (as the case may be) or, in the absence of such an employment, consulting or other agreement which defines or describes such cause, upon (i) the determination by the Company, such Subsidiary or such other member of the Novartis Group (as the case may be), in the applicable entity’s sole discretion, with which the Participant has a relationship that the Participant has engaged, during the performance of his/her duties to the Company, Subsidiary or such other member of the Novartis Group, in significant acts or omissions including, but not limited to, dishonesty, willful misconduct, gross negligence or a material violation of the Company’s Code of Ethics, relating to the business of the Company, such Subsidiary or such other member of the Novartis Group.

 

(f)          “Cessation of Employment” occurs, for the purposes of the Plan, when a Participant ceases to hold an office or employment with any member of the Novartis Group provided that a Participant will not be treated as Ceasing Employment in circumstances in which that Participant is on a leave of absence where the Participant’s right to re-employment is guaranteed either by statute or contract and employment is not otherwise terminated during such leave of absence (in which case the participant will Cease Employment at the time of such termination) and similar terms, such as “Ceases Employment” or “Ceasing to be Employed”, shall be construed accordingly.

 

(g)          “Change in Control” shall be deemed to occur if:

 

(i)          any person or group of persons who are acting together purchases or otherwise becomes the beneficial owner or has the right to acquire such beneficial ownership (whether or not such right is exercisable immediately or subject to passage of time or other conditions) of voting securities representing more than 50% of the combined voting power of all outstanding securities of Novartis AG;

 

(ii)         Novartis AG shareholders approve an agreement to merge or consolidate Novartis AG with or into another corporation as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are or will be owned by the former shareholders of Novartis AG;

 

(iii)        Novartis AG shareholders approve the sale of all or substantially all of the Novartis AG business and/or assets to a person or entity which is not a member of the Group; provided that an Internal Reorganization shall not be a Change in Control.

 

 

(h)          “Code” means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section.

 

(i)           “Committee” means the Policy (Stock) Committee of the Board or such other committee appointed by the Board to administer the Plan.

 

(j)           “Company” means Novartis Corporation, a New York corporation.

 

(k)          “Date of Grant” means the date on which the granting of an Award is authorized or such other date as may be specified in such authorization.

 

(l)           “Disability” and “Disabled” shall have the meaning set forth in Section 22(e) (3) of the Code.

 

(m)         “ECN” means the Executive Committee of Novartis AG (including permanent attendees to that committee).

 

(n)          “Eligible Person” means (i) a person regularly employed in the United States or Canada by the Company, a Subsidiary or any other member of the Novartis Group (including any such person who is working in the United States on secondment or other nonpermanent basis) who makes a significant contribution to the financial results of any of the foregoing entities; (ii) a director of the Company or a Subsidiary (including non-employee directors) or (iii) a consultant to the Company or a Subsidiary. An Eligible Person (regardless of whether such Eligible Person is eligible to apply for Retirement status under the Plan) who either (x) has been notified in writing that his/her employment or service with the Novartis Group will terminate due to any reason or (y) has notified his/her employing or contracting Novartis Group Company in writing of his/her intent to resign shall not be eligible to receive Awards under the Plan after his/her date of written notification.

 

(o)          “Exchange Act” means the Securities Exchange Act of 1934.

 

(p)          “Fair Market Value” on a given date means (i) if the Stock is listed on a national securities exchange in the United States, the closing sale price reported as having occurred on the primary exchange with which the Stock is listed and traded (currently the New York Stock Exchange) on such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the Stock is not listed on any national securities exchange but is quoted in the National Market System of the National Association of Securities Dealers Automated Quotation System the trade price of the last sale reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) if the Stock is not listed on a national securities exchange nor quoted in the National Market System of the National Association of Securities Dealers Automated Quotation System on a last sale basis, the amount determined by the Committee to be the fair market value based upon a good faith attempt to value the Stock accurately.

 

 

(q)          “Holder” means a Participant who has been granted an Award.

 

(r)          “Incentive Stock Option” means an Option granted by the Committee to a Participant under the Plan which is designated by the Committee as an “incentive stock option” within the meaning of Section 422 of the Code. Notwithstanding anything in the Plan to the contrary, no Incentive Stock Option shall be granted under the Plan after December 31, 2020.

 

(s)          “Internal Reorganization” means any event, offer, scheme, share purchase, merger or arrangement whereby:

 

(i)          a Change in Control occurs; and

 

(ii)         immediately afterwards the share capital of the Company then controlling (whether directly or indirectly) Novartis AG is owned substantially by the same persons who were shareholders of Novartis AG immediately prior to such event, scheme or arrangement in substantially the same proportions.

 

(t)          “Nonqualified Stock Option” means an Option granted under the Plan which is not designated as an Incentive Stock Option.

 

(u)          “Novartis AG” means Novartis AG, the parent of the Company, the stock of which is traded on the SIX Swiss Exchange and the ADSs of which are listed on the New York Stock Exchange.

 

(v)          “Novartis Group” means Novartis AG and each corporation, partnership, limited liability company or other business organization (each a “Business Entity”) more than 50% of the voting power of which is owned by Novartis AG either directly or indirectly through one or more intermediate Business Entities more than 50% of the voting power of each of which is owned either directly by Novartis AG or by another such intermediate Business Entity.

 

(w)          “Option” means an Award granted under Section 8 of the Plan.

 

(x)          “Option Period” means the period described in Section 8(c).

 

(y)          “Option Price” means the exercise price set for an Option described in Section 8(a).

 

(z)          “Participant” means an Eligible Person who has been selected by the Committee in its sole discretion to participate in the Plan and to receive an Award pursuant to Section 6.

 

(aa)        “Plan” means the Company’s 2011 Stock Incentive Plan, as amended from time to time, and as amended and restated in this document.

 

 

(bb)       “Restricted Period” means, with respect to any share of Restricted Stock or any Restricted Stock Unit, the period of time determined by the Committee during which such Award is subject to the restrictions set forth in Section 10 of the Plan.

 

(cc)        “Restricted Stock” means shares of Stock issued or transferred to or on behalf of a Participant subject to forfeiture and the other restrictions set forth in Section 10 of the Plan.

 

(dd)        “Restricted Stock Award” means an Award of Restricted Stock or Restricted Stock Units granted under Section 10 of the Plan.

 

(ee)        “Restricted Stock Unit” means the potential right to acquire one share of Stock.

 

(ff)         “Retirement” means, except as set forth in an Award Agreement, a Participant’s Cessation of Employment for any reason other than Cause or such other factors as the Committee may consider in its discretion after such Participant has attained age 55 or older and completed 10 or more Years of Service, or any other date approved by the Committee. Notwithstanding anything in this Plan to the contrary, for purposes of any Restricted Stock Award granted on or after February 4, 2004, and any Option granted on or after January 1, 2009, (x) no Cessation of Employment will constitute a “Retirement” without the consent of the Committee (determined in accordance with procedures described in Addendum B); and (y) for any Participant whose Cessation of Employment occurs on or after January 1, 2015, no such Cessation of Employment will constitute a “Retirement” unless the Participant executes (and does not revoke) a general release of claims acceptable to the Company.

 

(gg)       “Securities Act” means the Securities Act of 1933, as amended.

 

(hh)       “Stock” means ADSs or such other authorized shares of stock of Novartis AG as from time to time may be authorized for use under the Plan.

 

(ii)          “Stock Appreciation Right” or “SAR” means an Award granted under Section 9 of the Plan.

 

(jj)          “Strike Price” means the price set for an SAR described in Section 9(a).

 

(kk)        “Subsidiary” means any corporation or other legal entity that is organized in the United States (including under the laws of any State) or Canada and more than 50% of whose stock having general voting power (or, in the case of a legal entity other than a corporation, more than 50% of the voting interests in which) is owned, directly or indirectly, by Novartis AG.

 

(ll)          “Tradable Options” is defined in Section 8(h).

 

 

(mm)       “Years of Service” means the total period of employment with Novartis AG and its Subsidiaries, including prior periods of service without regard to any intervening break in service; provided, however, that no Years of Service shall be granted under this Plan for service with an entity that is not part of the Novartis Group, or for an entity prior to it becoming part of the Novartis Group unless the Committee approves the granting of such service. A Participant’s prior service as an independent contractor or service with a staffing agency will not be included in the calculation of Years of Service under this Plan. Notwithstanding anything to the contrary contained above a Participant’s prior service with Chiron Corporation, Alcon, Inc. and Fougera Pharmaceuticals, Inc. (“Fougera”) (applicable with respect to Fougera to “Continuing Employees” as defined in the merger agreement relating to the acquisition of Fougera) shall be included as Years of Service for calculation of eligibility for Retirement under paragraph 2(ff).

 

3.             Effective Date, Duration and Shareholder Approval

 

The Plan is effective as of January 1, 2024. The Plan shall have no expiration date and administration of the Plan shall continue in effect until all matters relating to the payment of Awards previously granted have been settled.

 

4.             Administration

 

The Plan shall be administered by the Committee composed of at least three persons. The majority of the members of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee.

 

Subject to the provisions of the Plan, the Committee, in its sole discretion, shall have exclusive power to:

 

(i)          Select the Eligible Persons to participate in the Plan;

 

(ii)         Determine the nature and extent of the Awards to be made to each Participant;

 

(iii)        Determine the time or times when Awards will be made to Eligible Persons;

 

(iv)        Determine the duration of each Restricted Period;

 

(v)         Determine the conditions to which the payment of Awards may be subject;

 

(vi)        Prescribe the form of Award Agreement, if any, or other form or forms evidencing Awards; and

 

(vii)       Cause records to be established in which there shall be entered, from time to time as Awards are made to Eligible Persons, the date of each Award, the number of Incentive Stock Options, Nonqualified Stock Options, SARs, Restricted Stock Units and shares of Restricted Stock awarded by the Committee to each Eligible Person, and the expiration date and the duration of any applicable Restricted Period.

 

 

(viii)      Modify existing Awards as it determines to be appropriate and consistent with the Plan and applicable law.

 

The Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. The Committee’s interpretation of the Plan or any documents evidencing Awards granted pursuant thereto and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties unless otherwise determined by the Board.

 

5.             Grant of Awards; Shares Subject to the Plan

 

The Committee may, from time to time, grant Awards of Options, Stock Appreciation Rights, Restricted Stock Units or Restricted Stock, under the Plan to one or more Eligible Persons; provided, however, that:

 

(a)          Subject to Section 12, the aggregate number of shares of Stock made subject to all Awards may not exceed 161,000,000; plus any shares of Stock that were not issued under the Original Plan as of the Effective Date; plus any shares of Stock subject to outstanding awards under the Original Plan as of the Effective Date that on or after the Effective Date cease for any reason to be subject to such awards;

 

(b)          Such shares shall be deemed to have been used in payment of Awards whether they are actually delivered or the Fair Market Value equivalent of such shares is paid in cash. In the event any Option, SAR not attached to an Option or Restricted Stock Award, shall be surrendered, terminate, expire, or be forfeited, the number of shares of Stock no longer subject thereto shall thereupon be released and shall thereafter be available for new Awards under the Plan; and

 

(c)          Stock delivered by the Company in settlement of Awards under the Plan may be authorized and unissued Stock or Stock held in the treasury of Novartis AG or held by another member of the Novartis Group or may be purchased on the open market or by private purchase.

 

6.             Eligibility

 

Participation shall be limited to Eligible Persons selected by the Committee.

 

7.             Chairman’s Discretionary Authority

 

Notwithstanding any vesting dates or exercise periods set by the Committee, the Chairman of the Board of the Company may, in his/her sole discretion, for any individual Participant, accelerate the exercisability of any form of stock grant made available under this Plan, delay or defer the expiration of any such grant (but not beyond its original Grant Period) or, in the case of any Nonqualified Stock Option, set a different Option Period which may be longer or shorter than ten years, which actions shall not affect the terms and conditions of any such Option other than with respect to exercisability, expiration and/or the Option Period applicable thereto. Notwithstanding anything to the contrary expressed above, any actions to accelerate, change, delay or defer any stock grant which affects the entire type of grant to Participants receiving such a grant in any given year can only be made by the consent of the Stock Committee and the Compensation Committee of the Board of Directors of the parent, Novartis AG.

 

 

8.             Stock Options

 

The Committee is authorized to grant one or more Incentive Stock Options or Nonqualified Stock Options to any Participant; provided, however, that no Incentive Stock Options shall be granted to any Participant who is not an employee of the Company or a Subsidiary. Each Option so granted shall be subject to the following conditions or to such other conditions as may be reflected in any applicable Award Agreement.

 

(a)          Option Price. The exercise price (“Option Price”) per share of Stock for each Option shall be set by the Committee at the time of grant but, with respect to Incentive Stock Options shall not be less than the Fair Market Value of a share of Stock at the Date of Grant.

 

(b)          Manner of Exercise and Form of Payment. Options which have become exercisable may be exercised by delivery of a notice of exercise to the Committee or its designee, in a form prescribed by the Committee or its designee, accompanied by payment of the Option Price. The Option Price shall be payable by bank draft or certified personal check and/or shares of Stock valued at the Fair Market Value at the time the Option is exercised (provided that such Stock has been held by the Participant for at least six months) or, in the discretion of the Committee, either (i) in other property having a fair market value on the date of exercise equal to the Option Price, or (ii) by delivering to the Committee a copy of irrevocable instructions to a stockbroker to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the Option Price.

 

(c)          Vesting, Option Period and Expiration. Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee, which vesting shall take place no sooner than three years after the date of grant, unless a shorter period is designated as provided in subparagraph (d) below. Options shall be exercisable as soon as administratively practicable following their vesting. Options shall expire after such period (the “Option Period’) as may be determined by the Committee, which Option Period (i) in the case of Incentive Stock Options shall be ten years and (ii) in the case of Nonqualified Stock Options shall be ten years unless the Committee shall specify a longer period than ten years in individual circumstances, as determined by the Committee, on the basis of national tax law other than U.S. law concerning the valuation of the Option at grant and on the resulting tax liability of the Participant, which different period shall not affect the terms and conditions of any such Option other than with respect to the Option Period. If an Option is exercisable in installments, such installments or portions thereof which become exercisable shall remain exercisable until the Option expires. Unless otherwise stated in the applicable Option Award Agreement or unless otherwise extended in the exercise of its discretion by the Committee, the Option shall expire earlier than the end of the Option Period in the following circumstances:

 

(i)          If prior to the end of the Option Period, the Holder shall undergo a Cessation of Employment, the vested Option shall expire on the earlier of the last day of the Option Period or the date that is ninety days after the date of separation. In such event, the Option shall remain exercisable by the Holder until its expiration, only to the extent the Option was exercisable at the time of such Cessation of Employment.

 

 

(ii)         For Options granted prior to February 4, 2003, if the Holder dies or the Holder’s employment with the Novartis Group is terminated by reason of Retirement prior to the end of the Option Period and while still in the employ or service of the Company, a Subsidiary or another member of the Novartis Group, or within thirty days of Normal Termination, such Holder becomes Disabled, the Option shall become 100% vested and nonforfeitable and shall expire on the earlier of the last day of the Option Period or the date that is (i) one year with respect to an Incentive Stock Option and (ii) three years with respect to a Nonqualified Stock Option after the date of death, Disability or Retirement of the Holder. In the event of death, the Option shall remain exercisable by the person or persons to whom the Holder’s rights under the Option pass by will or the applicable laws of descent and distribution until its expiration, only to the extent the Option was exercisable by the Holder at the time of death.

 

(iii)        Notwithstanding anything in the Plan to the contrary, for Options granted on or after February 4, 2003, if a Holder’s employment with all members of the Novartis Group is terminated by reason of death, Disability or Retirement (approved by the Stock Committee as provided in Section 2(ff) for Options granted on or after January 1, 2009) prior to the end of the Option Period, the Option shall become 100% vested and nonforfeitable and shall expire on the last day of the Option Period.

 

(iv)        Notwithstanding anything in the Plan to the contrary, for Options granted on or after February 1, 2006, if a Holder’s employment with all members of the Novartis Group is terminated by reason of (1) Cessation of Employment by the Participant with written approval of the Stock Committee or (2) by the member of the Novartis Group with which the Participant has an employment, consulting or other contractual relationship, without Cause, and within thirty days of such Cessation of Employment such Holder becomes Disabled, the Option shall become 100% vested and nonforfeitable and shall expire on the last day of the Option Period.

 

(v)         Notwithstanding anything in the Plan to the contrary, for Options granted on or after January 1, 2015, if a Participant Ceases Employment Clause 1 in ADDENDUM B regarding Cessation of Employment shall apply to such Options.

 

 

(d)          Other Terms and Conditions. An Option granted under the Plan may be evidenced by an Award Agreement, which may contain such provisions as may be determined by the Committee and, except as may be specifically stated otherwise in such Award Agreement, such Option shall be subject to the following terms and conditions:

 

(i)          Each Option issued pursuant to this Section 8 or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof, subject to any limitations that may be imposed on the partial exercise in the discretion of the Committee to reflect the need for administrative convenience.

 

(ii)         Each ADS purchased through the exercise of an Option issued pursuant to this Section 8 shall be paid for in full at the time of the exercise. Each Option shall cease to be exercisable, as to any share of Stock, when the Holder purchases the share or exercises a related SAR or when the Option expires.

 

(iii)        Subject to Sections 8(h) and 11(l), Options issued pursuant to this Section 8 shall not be transferable by the Holder except by will or the laws of descent and distribution and shall be exercisable during the Holder’s lifetime only by him.

 

(iv)        Each Option issued pursuant to this Section 8 shall vest and become exercisable by the Holder in accordance with the vesting schedule established by the Committee and set forth in the Award Agreement, consistent with the requirements of subparagraph(c) above.

 

(v)         Any Award Agreement may contain a provision that, upon demand by the Committee for such a representation, the Holder shall deliver to the Committee at the time of any exercise of an Option issued pursuant to this Section 8 a representation in the form prescribed by the Committee that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an Option issued pursuant to this Section 8 shall be a condition precedent to the right of the Holder or such other person to purchase any shares. In the event certificates for Stock are delivered under the Plan with respect to which such investment representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws.

 

(vi)        Any Incentive Stock Option Award Agreement shall contain a provision requiring the Holder to notify the Company in writing immediately after the Holder makes a disqualifying disposition of any Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including any sale) of such Stock before the later of (a) two years after the Date of Grant of the Incentive Stock Option or (b) one year after the date the Holder acquired the Stock by exercising the Incentive Stock Option.

 

 

(e)          Incentive Stock Option Grants to 10% Shareholders. Notwithstanding anything to the contrary in this Section 8, if an Incentive Stock Option is granted to a Holder who owns stock representing more than ten percent of the voting power of all classes of stock of Novartis AG or of a Subsidiary, the Option Period shall not exceed five years from the Date of Grant of such Option and the Option Price shall be at least 110 percent of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option.

 

(f)           $100,000 Per Year Limitation for Incentive Stock Options. To the extent the aggregate Fair Market Value (determined as of the Date of Grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options.

 

(g)          Voluntary Surrender. The Committee may permit the voluntary surrender of all or any portion of any Nonqualified Stock Option issued pursuant to this Section 8 and its corresponding SAR, if any, granted under the Plan to be conditioned upon the granting to the Holder of a new Option for the same or a different number of shares as the Option surrendered or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at an Option Price, during an Option Period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the Option Price, Option Period, or any other terms and conditions of the Nonqualified Stock Option surrendered.

 

(h)          Tradable Options. The Committee may grant Nonqualified Stock Options that the Holder may sell on or after the date such Options become vested to a Market Maker in accordance with procedures established from time to time by the Committee and by the Market Maker. For purposes of this Section 8(h), the term “Market Maker” shall mean UBS AG, or any other entity identified from time to time by the Committee. Upon the sale by a Holder of such Options to the Market Maker, and notwithstanding any other provision of this Plan to the contrary, such Options shall not expire until the last day of the Option Period.

 

9.            Stock Appreciation Rights

 

Any Option granted under the Plan may include SARs, either at the Date of Grant or, except in the case of an Incentive Stock Option, by subsequent amendment. The Committee also may award SARs to Eligible Persons independent of any Option. An SAR shall confer on the Holder thereof the right to receive in shares of Stock, cash or a combination thereof the value equal to the excess of the Fair Market Value of one share of Stock on the date of exercise over the Strike Price of the SAR, with respect to every share of Stock for which the SAR is granted. An SAR shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose, including, but not limited to, the following:

 

(a)          Strike Price. The Strike Price per share of Stock for which an SAR is granted shall be set by the Committee at the time of grant, but (i) with respect to an SAR granted in connection with an Option the Strike Price shall be equal to the Option Price of such Option and (ii) with respect to an SAR granted independently of an Option, the Strike Price shall not be less than 100% of the Fair Market Value of a share of Stock at the Date of Grant.

 

 

(b)          Vesting. SARs granted in connection with an Option shall become exercisable, be transferable and shall expire according to the same vesting schedule, transferability rules and expiration provisions as the corresponding Option. An SAR granted independently of an Option shall become exercisable, be transferable and shall expire in accordance with a vesting schedule, transferability rules and expiration provisions as established by the Committee and reflected in an Award Agreement.

 

(c)          Automatic Exercise. If on the last day of the Option Period (or in the case of an SAR granted independently of an Option, the period established by the Committee after which the SAR shall expire), the Fair Market Value of the Stock exceeds the Strike Price, the Holder has not exercised the SAR or the corresponding Option (if any), and neither the SAR nor the corresponding Option (if any), has expired, such SAR shall be deemed to have been exercised by the Holder on such last day and the Company shall make the appropriate payment there for.

 

(d)          Payment. Upon the exercise of an SAR, the Company shall pay to the Holder an amount equal to the number of shares subject to the SAR multiplied by the excess, if any, of the Fair Market Value of one share of Stock on the exercise date over the Strike Price. The Company shall pay such excess in cash, in shares of Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Fractional shares shall be settled in cash.

 

(e)          Method of Exercise. A Holder may exercise an SAR after such time as the SAR vests by filing an irrevocable notice with the Committee or its designee, in a form prescribed by the Committee or its designee, specifying the number of SARs to be exercised, and the date on which such SARs were awarded.

 

(f)           Expiration. Each SAR shall cease to be exercisable, as to any share of Stock, when the Holder exercises the SAR or exercises a related Option, with respect to such share of Stock. An SAR shall expire ten years after its Date of Grant, unless the Committee shall specify a shorter period.

 

10.          Restricted Stock and Restricted Stock Unit Awards

 

(a)          Award of Restricted Stock and Restricted Stock Units.

 

(i)          The Committee shall have the discretion and authority (1) to grant Restricted Stock and Restricted Stock Units, (2) to issue or transfer Restricted Stock and Restricted Stock Units to Eligible Persons, and (3) to establish terms, conditions and restrictions applicable to such Restricted Stock and Restricted Stock Units, including the Restricted Period, which may differ with respect to each grantee, the time or times at which Restricted Stock or Restricted Stock Units shall be granted or become vested, the number of shares or units to be covered by each grant and the consideration, if any, required to be paid by a Participant for an award of Restricted Stock or Restricted Stock Units.

 

 

(ii)         The Holder of a Restricted Stock Award shall execute and deliver to the Company (or acknowledge by electronic means) any Award Agreement issued with respect to the Restricted Stock and Restricted Stock Units setting forth the restrictions applicable to such Restricted Stock and Restricted Stock Units. If the Committee determines that the Restricted Stock shall be held in escrow rather than delivered to the Holder or held in a brokerage account by the Company (or in such other form as the Committee determines to be appropriate) pending the release of the applicable restrictions, the Holder additionally shall execute and deliver to the Company (1) an escrow agreement satisfactory to the Committee, and (2) the appropriate blank stock powers with respect to the Restricted Stock covered by such agreements. If a Holder shall fail to execute or acknowledge by electronic means any required Restricted Stock Award Agreement and, if applicable, an escrow agreement and stock powers, the Award shall be null and void. Subject to the restrictions set forth in Section 10(b), the Holder shall generally have the rights and privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock, but, beginning with grants issued on or after January 1, 2011, shall not have a right to receive dividends or dividend equivalents or a right to vote on shareholder matters in connection with such Restricted Stock unless or until such restrictions have lapsed Upon the Award of Restricted Stock, the Committee may cause a Stock certificate registered in the name of the Holder to be issued and, if it so determines, deposited together with the Stock powers with an escrow agent designated by the Committee. If an escrow arrangement is used, the Committee shall cause the escrow agent to issue to the Holder a receipt evidencing any Stock certificate held by it registered in the name of the Holder. The Committee may also elect to hold such Restricted Stock in such form as it determines to be appropriate.

 

(b)          Restrictions.

 

(i)          Restricted Stock and Restricted Stock Units awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in any applicable Award Agreement: (1) if an escrow arrangement is used, the Holder shall not be entitled to delivery of any Stock certificate; (2) the shares of Restricted Stock shall be subject to the restrictions on transferability set forth in the Award Agreement; and (3) the shares or units shall be subject to forfeiture to the extent provided in subparagraph (d) below and in the Award Agreement and, to the extent such shares of Restricted Stock are forfeited, any Stock certificates that have been issued shall be returned to the Company, and all rights of the Holder to such shares and as a shareholder shall terminate without further obligation on the part of the Company.

 

(ii)         The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock or Restricted Stock Units whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock Award, such action is appropriate.

 

 

(c)          Restricted Period. The Restricted Period of Restricted Stock and Restricted Stock Units shall commence on the Date of Grant and shall expire from time to time as to that part of the Restricted Stock and Restricted Stock Units indicated in a schedule established by the Committee and set forth in any Award Agreement. For annual Awards made on or after January 1, 2024, unless otherwise provided by the Committee, such annual Awards will vest in substantially equal thirds (each a tranche), with one-third of the annual Award vesting on each annual anniversary of the Date of Grant. Nothing in the foregoing sentence will preclude the Committee from applying individual terms and conditions to Awards other than annual Awards.

 

(d)          Forfeiture Provisions.

 

(i)          For Awards granted up to and including December 31, 2014, if a Holder Ceases Employment by reason of death, Disability or Retirement (as approved by the Committee as provided in Section 2(ff)), all restrictions on the Award shall expire. Except to the extent determined by the Committee and reflected in the underlying Award Agreement, in the event a Holder Ceases Employment (either by the Holder or by the Company) during a Restricted Period for any reason other than death, Disability or Retirement, that portion of the Award with respect to which restrictions have not expired shall be completely forfeited.

 

(ii)         Notwithstanding anything in the Plan to the contrary, for Awards granted on or after January 1, 2015, if a Participant Ceases Employment Clause 1 in ADDENDUM B regarding Cessation of Employment shall apply to such Awards.

 

(e)          Delivery of Stock. Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock and Restricted Stock Units covered by a Restricted Stock Award, the restrictions set forth in Section 10 (b) and any Award Agreement shall be of no further force or effect with respect to shares of Restricted Stock and Restricted Stock Units which have not then been forfeited. If an escrow arrangement is used for shares of Restricted Stock, upon such expiration, the Company shall deliver to the Holder, or his/her beneficiary, without charge, the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or Stock dividends credited to the Holder’s account with respect to such Restricted Stock and the interest thereon, if any. With respect to Restricted Stock Units, unless a Holder has made a proper and timely deferral election under Section 17 below, the Company shall credit (net of any tax withholding) shares of Stock reflecting the number of Restricted Stock Units which have not then been forfeited and to which the Restricted Period has expired to a brokerage account in the name of the Holder or his/her beneficiary (or hold such shares in such other form as the Committee determines to be appropriate) until the Holder or his/her beneficiary provides direction regarding the delivery of such shares of Stock. The Company will coordinate with the equity plan third party administrator to deliver such shares of Stock as soon as administratively practicable following vest date.

 

 

(f)           Stock Restrictions. To the extent a certificate is issued representing Restricted Stock awarded under the Plan, each such certificate shall bear the following legend until the end of the Restricted Period with respect to such Stock:

 

(i)          “Transfer of this certificate and the shares represented hereby is restricted pursuant to the terms of a Restricted Stock Agreement, dated as of , between Novartis Corporation and a copy of such Agreement is on file at the offices of the Company at 608 Fifth Avenue New York, New York 10020.”

 

(ii)         Stop transfer orders shall be entered with Novartis AG’s transfer agent and registrar against the transfer of legended securities.

 

(g)          Deferral of Restricted Stock Unit Awards. Effective for Restricted Stock Units awarded on or after January 1, 2014, Participants may elect to defer the cash proceeds of vested Restricted Stock Units at the end of the Restricted Period; provided that the Participant makes such a deferred election either as an initial deferral under Treasury Regulation Section 1.409A-2(a) or pursuant to the subsequent deferral provisions of Treasury Regulation Section 1.409A-2(b). The cash proceeds of any deferred Restricted Stock Unit award shall be transferred into the applicable non-qualified deferred compensation plan of the Participant’s employing Novartis Group Company and shall be payable to the Participant in accordance with the terms of the applicable nonqualified deferred compensation plan.

 

11.          General

 

(a)          Additional Provisions of an Award. Awards under the Plan also may be subject to such other provisions (whether or not applicable to the benefit awarded to any other Participant) as the Committee determines appropriate including, without limitation, provisions to assist the Participant in financing the purchase of Stock upon the exercise of Options, provisions for the forfeiture of or restrictions on resale or other disposition of shares of Stock acquired under any Award, provisions giving the Company the right to repurchase shares of Stock acquired under any Award in the event the Participant elects to dispose of such shares, and provisions to comply with Federal and state securities laws and Federal and state tax withholding requirements. Any such provisions shall be reflected in the applicable Award agreement. The Committee shall not be required to provide uniform terms for Awards to all Participants and, in determining the provisions to be included in Awards made to any Participant, may take into account such considerations as it considers reasonable or appropriate (which, without limitation, may include tax considerations related to such Participant’s residence or nationality).

 

 

(b)          Clawback Provision.

 

(i)          The granting and vesting of any form of grant under this Plan is subject to the Participant’s adherence to and compliance with all applicable laws, all policies adopted by Novartis AG or any member of the Novartis Group to comply with such laws, including but not limited to the Novartis AG Policy Governing the Recovery of Erroneously Awarded Compensation, as well as all internal rules of Novartis, including but not limited to the Code of Ethics, the Global Conflict of Interest guideline, Doing Business Ethically policy, Insider Trading policy, Anti-Harassment policy (for US employees), the Duty to comply with Law and Cooperate policy (for US employees), Confidentiality policy or any provision of the other policies and guidelines of Novartis Group Companies applicable to a Participant’s work (all such policies and internal rules collectively “Guidelines”). These Guidelines, which may be amended from time to time through publication on the Novartis intranet or otherwise, form an integrated part of this incentive plan.

 

(ii)         Accordingly, in case the Committee, in its sole discretion, determines that the Participant has violated applicable laws or Guidelines in a substantial or material way (including, but not limited to fraud, bribes, scientific misconduct, illegal marketing practices such as off-label promotion, or offering kickbacks, etc.) (collectively “Misconduct”), or if a Participant incurs a Cessation of Employment for Cause or Misconduct, the Committee may determine in its sole discretion that any or all of the grants to the Participant shall not vest and will be rescinded in and for any period in which such Cause or Misconduct occurred or was discovered, and, to the extent that such incentive grants have already vested and have been exercised, traded or converted by the Participant or moved to his or her individual account, the Participant shall agree promptly to repay any or all of the incentive already received for any period in which such Cause or Misconduct occurred or was discovered. In the event of the Participant’s failure to disgorge such amounts illegitimately received by him or her under the above provision, the Participant agrees that the Company may sue him or her for recovery of such proceeds on the basis of breach of contract, and that the Company is entitled to equitable relief to prevent the Participant’s disposition or diversion of such assets, and that the Participant will be liable to the Company for its reasonable attorneys fees and costs in recovering such amounts. In the event a Participant is determined by the Committee to have engaged in Misconduct or incurs a Cessation of Employment for Cause or Misconduct, the Committee may determine in its sole discretion that any or all vested but unexercised Stock Options (including Tradable Options) shall immediately be forfeited regardless of when the Cause or Misconduct occurred or was discovered. This provision is effective as to all outstanding grants under this Plan, no matter when made.

 

(iii)        In addition to the foregoing, for grants made under this Plan on or after January 1, 2021, for US-based roles covered by the Incentive Compensation Restriction and Executive Financial Recoupment Program (as set forth in Appendix E of the 2020 Novartis Corporate CIA, hereinafter “Corporate Executive Financial Recoupment Program”) of the Corporate Integrity Agreement Between the Office of Inspector General of the Department of Health and Human Services and Novartis Corporation (“2020 Novartis Corporate CIA”) (such roles hereinafter referenced as “Covered Executives”), the Committee temporarily delegates its authority and discretion to make Clawback determinations under this section 11 (b) of this Plan, with respect to grants awarded under this Plan, to the Corporate Recoupment Committee established under the Corporate Executive Financial Recoupment Program and to fulfil the obligations entrusted to the Corporate Recoupment Committee under such Program, for the term of the 2020 Novartis Corporate CIA.

 

 

Covered Executives must agree to accept the terms and conditions of the Corporate Executive Financial Recoupment Program as a condition of accepting awards under this Plan. The terms and conditions of the Corporate Executive Financial Recoupment Program shall apply to all awards made under this Plan to Covered Executives during the term of the 2020 Novartis Corporate CIA.

 

At the conclusion of the 2020 Novartis Corporate CIA , this temporary delegation of authority and discretion shall cease and will revert to the Committee.

 

The 2020 Novartis Corporate CIA may be accessed online at:

https://oig.hhs.gov/fraud/cia/agreements/Novartis_Corporation_06302020.pdf.

 

(c)          Privileges of Stock Ownership. Except as otherwise specifically provided in the Plan, no person shall be entitled to the privileges of stock ownership in respect of shares of Stock which are subject to Awards hereunder until such shares have been issued to that person.

 

(d)          Government and Other Regulations. The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption there from and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Stock to be offered or sold under the Plan. If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend any Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption.

 

(e)          Tax Withholding. Notwithstanding any other provision of the Plan, the Company or a Subsidiary, as appropriate, shall have the right to deduct from all Awards cash and/or Stock, valued at Fair Market Value on the date of payment, in an amount necessary to satisfy all Federal, state or local taxes as required by law to be withheld with respect to such Awards and, in the case of Awards paid in Stock, the Holder or other person receiving such Stock may be required to pay to the Company or a Subsidiary prior to delivery of such Stock, the amount of any such taxes which the Company or a Subsidiary is required to withhold, if any, with respect to such Stock. Subject in particular cases to the disapproval of the Committee, the Company or a Subsidiary may accept shares of Stock of equivalent Fair Market Value in payment of such withholding tax obligations if the Holder of the Award elects to make payment in such manner. Effective for any Awards paid in Stock that vest on or after January 1, 2014 (regardless of when such Awards were granted), including but not limited to Awards granted under the Long Term Performance Plan and the Leveraged Stock Savings Plan, Stock withholding shall be mandatory, and neither the Company nor any Subsidiary may accept cash or shares of Stock of equivalent Fair Market Value from the Holder or other person receiving such Stock in payment of such withholding tax obligations.

 

 

(f)           Minder Initiative. The Plan, in particular, is subject to any mandatory provisions of Swiss law pertaining to compensation of governing bodies derived from article 95 paragraph 3 of the Swiss Federal Constitution (the “Minder Initiative”). Any interpretation and/or amendment necessary in respect of any provision of the Plan or any Award as a result of applicable law and/or the Articles to the detriment of the Participant shall not give rise to any claims by or other rights whatsoever of the Participant. This applies in particular if the annual general meeting of Novartis AG does not approve the compensation of the Participant which is subject to approval under the Minder Initiative.

 

(g)          Claim to Awards and Employment or Service Rights. No employee or other person shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. Neither the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to be retained in the employ or service of the Company, a Subsidiary or any member of the Novartis Group. By accepting any Award or grant of securities under the Plan, Participants shall be deemed to represent and warrant to the Company that such Participant’s participation in the trade and acceptance of such securities is voluntary and that such Participant has not been induced to participate by expectation of engagement, appointment, employment or continued engagement, appointment or employment, as applicable.

 

(h)          Designation and Change of Beneficiary. Each Participant may file with the Committee a designation in a form prescribed by the Committee of one or more persons as the beneficiary who shall be entitled to receive the rights or amounts payable with respect to an Award due under the Plan upon his/her death. A Participant may, from time to time, revoke or change his/her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by the Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate.

 

(i)           Payments to Persons Other Than Participants. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his/her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his/her estate (unless a prior claim there for has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his/her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company there for.

 

 

(j)           No Liability of Committee Members. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his/her behalf in his/her capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

 

(k)          Governing Law. The Plan shall be governed by and construed in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof.

 

(l)           Funding. No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Holders shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law.

 

(m)         Nontransferability. A person’s rights and interest under the Plan, including amounts payable, may not be sold, assigned, donated, or transferred or otherwise disposed of, mortgaged, pledged or encumbered (including, but not limited to, pursuant to a “domestic relations order” (as that term is defined in Code Section 414(p)(1)(B))) except, in the event of a Holder’s death, to a designated beneficiary to the extent permitted by the Plan, or in the absence of such designation, by will or the laws of descent and distribution; provided, however, the Committee may, in its sole discretion, allow in an Award Agreement for transfer of Awards other than Incentive Stock Options to other persons or entities as long as such transferability does not adversely impact the ability of Novartis AG to register the Stock underlying Awards pursuant to the Securities Act.

 

 

(n)          Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan by any person or persons other than himself.

 

(o)          Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.

 

(p)          Expenses. The expenses of administering the Plan shall be borne by the Company.

 

(q)          Pronouns. Masculine pronouns and other words of masculine gender shall refer to both men and women.

 

(r)          Titles and Headings. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.

 

(s)          Grant Acceptance and Data Validation Provisions. Within 6 months of the Date of Grant of an equity award under this Plan, a Participant must logon to the equity platform provider website and accept the award agreement that reflects the specific provisions of the given grant. Failure to accept an equity award within 6 months of the Date of Grant will result in the Participant’s equity award cancellation without compensation or recourse.

 

12.          Changes in Capital Structure

 

Awards granted under the Plan and any Award Agreements shall be subject to equitable adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Stock or other consideration subject to such Awards (i) in the event of changes in the outstanding ADS or in the capital structure of Novartis AG by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the Date of Grant of any such Award, (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan, or (iii) upon the occurrence of any other event which otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. In addition, in the event of any such corporate or other event, the aggregate number of shares of Stock available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

 

 

For Awards made up to and including December 31, 2014, Notwithstanding the above, in the event of any of the following: (i) Novartis AG is merged or consolidated with another corporation or entity and, in connection therewith, consideration is received by shareholders of Novartis AG in a form other than stock or other equity interests of the surviving entity; (ii) all or substantially all of the assets of Novartis AG are acquired by another person; (iii) the reorganization or liquidation of Novartis AG; or the execution by Novartis AG of a written agreement to undergo an event described in clauses (i), (ii) or (iii) above, then the Committee may, in its sole discretion, cancel any outstanding Awards and pay to the Holders thereof, in cash, the value of such Awards based upon the price per share of Stock received or to be received by other shareholders of Novartis AG in the event. The terms of this Section 12 may be varied by the Committee in any particular Award agreement.

 

For Awards made on or after January 1, 2015, Section 13 of the Plan applies.

 

13.          Change in Control and other Corporate Events

 

For Awards made up to and including December 31, 2014, except to the extent stated otherwise in any individual Award Agreement, or except as otherwise provided in the exercise of discretion by the Compensation Committee of Novartis AG, upon the occurrence of a Change in Control (i) all outstanding Options and freestanding SARs shall become immediately exercisable in full and (ii) all restrictions with respect to outstanding shares of Restricted Stock and Restricted Stock Units shall lapse.

 

For Awards made on or after January 1, 2015, Clause 2 in ADDENDUM B regarding Change in Control and other Corporate Events applies.

 

14.          Nonexclusivity of the Plan

 

Neither the adoption of this Plan by the Board nor, if applicable, the submission of this Plan to the shareholders of the Company or Novartis AG for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.

 

15.          Amendment and Termination

 

The Board or the Committee may, at any time, or from time to time, amend, terminates or suspend and, if suspended, reinstate, the Plan in whole or in part in its sole discretion; provided that any such amendment shall be contingent on obtaining the approval of the shareholders of the Company or Novartis AG if the Committee determines that such approval is necessary to comply with any requirement of law or rule of any stock exchange on which the equity securities of Novartis AG are traded. The Board or the Committee may not cancel, reduce or otherwise alter outstanding vested Awards in a manner adverse to a Participant unless it obtains the express written consent of the affected individual Participant.

 

16.          Canadian Participants

 

Addendum A hereto shall apply at all times to Participants who are Canadian residents.

 

 

17.          Code Section 409A

 

Anything under the Plan to the contrary notwithstanding, to the extent applicable, it is intended that the Plan shall comply with the provisions of Code Section 409A and the Plan and all applicable Awards be construed and applied in a manner consistent with this intent. In furtherance thereof, any amount constituting a “deferral of compensation” under Treasury Regulation Section 1.409A-1(b) that is payable to a Participant upon a separation from service of the Participant (within the meaning of Treasury Regulation Section 1.409A-1(h)) (other than due to the Participant’s death), occurring while the Participant shall be a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) of the Novartis Group (as limited by Code Sections 414(b), (c), (m) and (o)), shall not be paid until the earlier of (x) the date that is six months following such separation from service or (y) the date of the Participant’s death following such separation from service. Notwithstanding any provision of the Plan to the contrary, to the extent that an Award constituting a “deferral of compensation” subject to Code Section 409A shall be deemed to be vested or restrictions lapse upon the occurrence of a Change in Control, and such Change in Control does not constitute a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)), then even though such Award may be deemed to be vested or restrictions lapse, payment will be made to the extent necessary to comply with the provisions of Code Section 409A, to the Participant on the earliest of (i) the Participant’s separation from service, the date payment otherwise would have been made pursuant to the regular payment terms of the Award, or (iii) or the Participant’s death.

 

18.          Exclusive Provisions

 

This Plan and any Award Agreement entered into with Participants contemplated by this Plan and consistent with this Plan’s terms, contains the entire provisions with respect to the subject matter hereof, and supersedes all prior negotiations, instruments and oral understandings.

 

19.          Diagnostic Transaction

 

Contingent upon the closing of the sale of Novartis AG’s direct or indirect ownership in the blood transfusion diagnostics business of Novartis Vaccines & Diagnostics, Inc. to an affiliate of Grifols, S.A. pursuant to the terms of a Stock and Asset Purchase Agreement (“SAPA”) (the “Diagnostics Transaction”), the Awards of Participants under the Plan who become Transferred Employees (as such term is defined in the SAPA, and as such term may be modified in any global employee services agreement or any other transactional document relating to the Diagnostics Transaction), shall become fully vested, and Options (including Tradable Options) for such Transferred Employees shall become exercisable (and Tradable Options shall become sellable to the Market Maker), on the Closing Date (as defined in the SAPA) of the Diagnostics Transaction.

 

 

20.          Restructuring

 

For Awards granted on or before December 31, 2014, if, on or after January 1, 2014 a Participant under the Plan incurs a Cessation of Employment as a direct result of an event that the Participant’s employing Novartis Group Company certifies to the Committee is an approved, group restructuring plan (which must be certified by the requesting Novartis Group Company to the U.S. Stock Committee as having been approved by the member of the Novartis Corporation Board of Directors who is also the Chief Financial Officer of Novartis International AG (the “Group CFO”), or if the Group CFO is not a member of the Board, by the member of the Board so selected by the Board entitling such Participant to enhanced severance benefits under the Severance Pay Plan for Employees of Novartis Group Companies in the United States (a “Restructuring”), such Participant shall become vested in a pro rata portion of his/her Award, and a pro rata portion of Options (including Tradeable Options) shall become exercisable (and Tradable Options shall become sellable to the Market Maker). Such pro ration shall be determined by dividing (i) the number of completed months from the date the Award was granted through the date of Cessation of Employment, by (ii) the total number of months during the vesting period. Such pro rata vesting of Awards and the ability to exercise such previously unvested Options (and the ability to sell such previously unvested Tradable Options to the Market Maker) is contingent on the execution (and non-revocation) by the Participant of a general release of claims acceptable to the Company. A Participant who incurs a Cessation of Employment due to a Restructuring and who applies for and is granted Retirement status under the Plan shall have his/her Awards treated under the Retirement provisions of the Plan rather than this Section 20. A Participant (regardless of whether such Participant is eligible to apply for Retirement status under the Plan) who has been notified in writing that his/her employment with the Novartis Group will terminate due to a Restructuring shall not be eligible to receive Awards under the Plan after the date of notification.

 

21.          Vaccines Transaction

 

Contingent upon the closing of the sale of Novartis AG’s direct or indirect ownership in certain portions of the vaccines business of Novartis Vaccines and Diagnostics, Inc. to an affiliate of GlaxoSmithKline plc pursuant to the terms of a Sale and Purchase Agreement (“SAPA”) (the “GSK Vaccines Transaction”), the Awards of Participants under the Plan who become Transferred Employees (as such term is defined in the SAPA), shall on the Closing Date (as defined in the SAPA) of the GSK Vaccines Transaction become vested on a pro rata basis, and Options (including Tradable Options) for such Transferred Employees shall become exercisable (and Tradable Options shall become sellable to the Market Maker) on a pro rata basis. Such pro ration (not to exceed 1) shall be determined by dividing (i) the number of completed and partial years (rounded to the next highest full year) from the date the Award was granted through the later of (x) January 31, 2015 or (y) the Closing Date, by (ii) the total number of years during the vesting period. For the avoidance of doubt, and pursuant to the exercise of discretion by the Compensation Committee of Novartis AG, the Change in Control vesting provisions of Section 13 of the Plan shall not apply to the GSK Vaccines Transaction. Also for the avoidance of doubt, the post-employment exercise period under Section 8 for Options (including Tradable Options) shall be measured from the Closing Date. A Participant who does not become a Transferred Employee and who is eligible for, applies for and is granted Retirement status under the Plan shall have his/her Awards treated under the Retirement provisions of the Plan rather than this Section 21. A Participant who becomes a Transferred Employee will not be eligible to have his/her Awards treated under the Retirement provisions of the Plan rather than this Section 21.

 

 

22.          OTC Transaction

 

Contingent upon the closing of the contribution of Novartis AG’s direct or indirect ownership in Novartis Consumer Health, Inc. to a new joint venture between an affiliate of Novartis AG and an affiliate of GlaxoSmithKline plc pursuant to the terms of a Contribution Agreement (“CA”) (the “OTC Transaction”), the Awards of Participants under the Plan who become Transferred Employees (as such term is defined in the CA), shall on the Closing Date (as defined in the CA) of the OTC Transaction become vested on a pro rata basis, and Options (including Tradable Options) for such Transferred Employees shall become exercisable (and Tradable Options shall become sellable to the Market Maker) on a pro rata basis. Such pro ration (not to exceed 1) shall be determined by dividing (i) the number of completed and partial years (rounded to the next highest full year) from the date the Award was granted through the later of (x) January 31, 2015 or (y) the Closing Date, by (ii) the total number of years during the vesting period. For the avoidance of doubt, and pursuant to the exercise of discretion by the Compensation Committee of Novartis AG, the Change in Control vesting provisions of Section 13 of the Plan shall not apply to the OTC Transaction. Also for the avoidance of doubt, the post-employment exercise period under Section 8 for Options (including Tradable Options) shall be measured from the Closing Date. A Participant who does not become a Transferred Employee and who is eligible for, applies for and is granted Retirement status under the Plan shall have his/her Awards treated under the Retirement provisions of the Plan rather than this Section 22. A Participant who becomes a Transferred Employee will not be eligible to have his/her Awards treated under the Retirement provisions of the Plan rather than this Section 22.

 

23.          Animal Health Transaction

 

Contingent upon the closing of the sale of Novartis AG’s direct or indirect ownership in Novartis Animal Health US, Inc. to an affiliate of Eli Lilly and Company pursuant to the terms of a Sale and Purchase Agreement (“SAPA”) (the “Animal Health Transaction”), the Awards of Participants under the Plan who become Transferred Employees (as such term is defined in the SAPA), shall on the Closing Date (as defined in the SAPA) of the Animal Health Transaction become vested on a pro rata basis, and Options (including Tradable Options) for such Transferred Employees shall become exercisable (and Tradable Options shall become sellable to the Market Maker) on a pro rata basis. Such pro ration (not to exceed 1) shall be determined by dividing (i) the number of completed and partial years (rounded to the next highest full year) from the date the Award was granted through the later of (x) January 31, 2015 or (y) the Closing Date, by (ii) the total number of years during the vesting period. For the avoidance of doubt, and pursuant to the exercise of discretion by the Compensation Committee of Novartis AG, the Change in Control vesting provisions of Section 13 of the Plan shall not apply to the Animal Health Transaction. Also for the avoidance of doubt, the post-employment exercise period under Section 8 for Options (including Tradable Options) shall be measured from the Closing Date. A Participant who does not become a Transferred Employee and who is eligible for, applies for and is granted Retirement status under the Plan shall have his/her Awards treated under the Retirement provisions of the Plan rather than this Section 23. A Participant who becomes a Transferred Employee will not be eligible to have his/her Awards treated under the Retirement provisions of the Plan rather than this Section 23.

 

 

ADDENDUM A
ADDENDUM FOR CANADIAN PARTICIPANTS

 

 

ADDENDUM B

 

Clauses applicable to Awards made on or after January 1, 2015

 

1.          Cessation of Employment

 

(a)          General: Unless Clause 1.(b), Clause 1.(c), Clause 1.(d), or Clause 1.(f) applies, an Award that has not vested will lapse or be forfeited on the day the Participant Ceases Employment.

 

(b)          Cessation of Employment as a result of Retirement: For Awards granted on or before December 31, 2015, if a Participant Ceases Employment because of Retirement his/her Award shall vest on the day the Participant Ceases Employment. For Awards granted on or after January 1, 2016 and prior to January 1, 2024, if a Participant Ceases Employment because of Retirement his/her Award (i) shall vest on the day the Participant Ceases Employment if the Award has been outstanding for 12 months or more on the day the Participant Ceases Employment, and (ii) shall vest on a pro rata basis if the Award has been outstanding for fewer than 12 months on the day the Participant Ceases Employment. The pro ration described in clause (ii) of the preceding sentence shall be determined by dividing (x) the number of completed months from the date the Award was granted through the date of Cessation of Employment, by (y) the total number of months during the vesting period.

 

For annual Awards granted on or after January 1, 2024, if a Participant Ceases Employment because of Retirement, his/her Award (i) shall vest on the day the Participant Ceases Employment if the Award has been outstanding for 12 months or more on the day the Participant Ceases Employment, and (ii) shall vest on a pro rata basis with respect to each tranche if the Award has been outstanding for fewer than 12 months on the day the Participant Ceases Employment. The pro ration described in clause (ii) of the preceding sentence shall be determined by dividing (x) the number of completed months from the date the Award was granted through the date of Cessation of Employment, by (y) the total number of months during the vesting period with respect to each tranche. By way of example, if a Participant who received an annual Award in January 2024 Ceases Employment because of Retirement in July 2024 after completing 5 months in the vesting period for the January 2024 annual Award, the Participant will be vested in 5/12 of the tranche vesting in January 2025, 5/24 of the tranche vesting in January 2026, and 5/36 of the tranche vesting in January 2027.

 

For any Awards other than annual Awards granted on or after January 1, 2024 with a cliff vesting schedule, if a Participant Ceases Employment because of Retirement his/her Award (i) shall vest on the day the Participant Ceases Employment if the Award has been outstanding for 12 months or more on the day the Participant Ceases Employment, and (ii) shall vest on a pro rata basis if the Award has been outstanding for fewer than 12 months on the day the Participant Ceases Employment. The pro ration described in clause (ii) of the preceding sentence shall be determined by dividing (x) the number of completed months from the date the Award was granted through the date of Cessation of Employment, by (y) the total number of months during the vesting period.

 

 

In determining whether to approve Retirement under this Clause 1.(b), the Committee shall take into consideration the Participant’s satisfaction of certain conditions, including:

 

(i)          whether the Participant is leaving the Novartis Group in good standing and not for Cause or because of dishonesty, misconduct, gross negligence, violation of this employer’s code of ethics or similar reason;

 

(ii)         whether the Participant has returned to his/her employer all company property in his/her possession at his/her Cessation of Employment;

 

(iii)        whether the Participant has cooperated with his/her employer in the orderly handover and transition of his/her duties and responsibilities prior to his/her date of Cessation of Employment;

 

(iv)        to the extent permitted by applicable law, whether the Participant has given his/her written commitment that for one year following his/her Cessation of Employment he/she will not work for a Competitor and for one year following his/her Cessation of Employment (two years for ECN and Level 10/9 Participants) he/she will refrain from soliciting other employees of the Novartis Group to terminate their employment; and

 

(v)         whether the Participant has affirmed his/her obligation not to disclose confidential information he/she received during his/her employment with the Novartis Group and to refrain from using any such information for any purpose not in Novartis Group’s business interests; and

 

(vi)        whether the Participant has satisfied such other requirements established by the Committee as apply to Participants generally, including but not limited to submission of and compliance with the terms and conditions of the Initial Request for Retirement Status Treatment of Stock Incentive Plan Grants (Form A) and Certification at Termination Request for Accelerated Vesting of Stock Incentive Plan Grants (Form B), or any successors thereto, and the requirement that for any Participant whose Cessation of Employment occurs on or after January 1, 2015, no such Cessation of Employment will constitute a “Retirement” unless the Participant executes (and does not revoke) a general release of claims acceptable to the Company.

 

(c)          Cessation of Employment by the employer other than for Cause:

 

(i)          For Awards granted prior to January 1, 2024, if a Participant Ceases Employment because his/her employment is terminated by the Participant’s employer (whether or not by notice) other than for Cause, his/her Award shall vest on the day the Participant Ceases Employment in respect of a proportion of the Award (corresponding to such proportion of the vesting or Restriction Period as has elapsed when the Participant Ceases Employment), which pro ration shall be determined by dividing (i) the number of completed months from the date the Award was granted through the date of Cessation of Employment, by (ii) the total number of months during the vesting period. Such pro rata vesting of Awards and the ability to exercise such previously unvested Options (and the ability to sell such previously unvested Tradable Options to the Market Maker) is contingent on the execution (and non-revocation) by the Participant of a general release of claims acceptable to the Company.

 

 

(ii)         For annual Awards granted on or after January 1, 2024, if a Participant Ceases Employment because his/her employment is terminated by the Participant’s employer (whether or not by notice) other than for Cause, his/her Award shall vest on the day the Participant Ceases Employment in respect of a proportion of the Award (corresponding to such proportion of the vesting or Restriction Period for each tranche as has elapsed when the Participant Ceases Employment), which pro ration shall be determined by dividing (i) the number of completed months from the date the Award was granted through the date of Cessation of Employment, by (ii) the total number of months during the vesting period for each tranche. Such pro rata vesting of Awards is contingent on the execution (and non-revocation) by the Participant of a general release of claims acceptable to the Company. By way of example, if a Participant who received an annual Award in January 2024 Ceases Employment because his/her employment is terminated by the Participant’s employer (whether or not by notice) other than for Cause in July 2025, the Participant will have already vested in the tranche of his/her January 2024 annual Award that vested in January 2025, the Participant will vest in 17/24 of the tranche that will vest in January 2026, and 17/36 of the tranche that will vest in January 2027.

 

(iii)        For any Awards other than annual Awards granted on or after January 1, 2024 with a cliff vesting schedule, if a Participant Ceases Employment because his/her employment is terminated by the Participant’s employer (whether or not by notice) other than for Cause, his/her Award shall vest on the day the Participant Ceases Employment in respect of a proportion of the Award (corresponding to such proportion of the vesting or Restriction Period as has elapsed when the Participant Ceases Employment), which pro ration shall be determined by dividing (i) the number of completed months from the date the Award was granted through the date of Cessation of Employment, by (ii) the total number of months during the vesting period. Such pro rata vesting of Awards is contingent on the execution (and non-revocation) by the Participant of a general release of claims acceptable to the Company.

 

(iv)        A Participant who has been notified in writing that he/she will be Ceasing Employment under this Clause 1(c) shall not be eligible to receive Awards under the Plan after the date of notification.

 

(d)          Cessation of Employment following a sale: If a Participant Ceases Employment because of:

 

(i)          his/her employer ceasing to be a member of the Novartis Group; or

 

 

(ii)         the business for which the Participant works is transferred to a person which or who is not a member of the Novartis Group,

 

his or her Award shall vest on the day the Participant Ceases Employment in respect of a proportion of the Award (corresponding to such proportion of the vesting or Restriction Period as has elapsed when the Participant Ceases Employment), which pro ration shall be determined by dividing (i) the number of completed months from the date the Award was granted through the date of Cessation of Employment, by (ii) the total number of months during the vesting period; provided that the Board may determine that some or all of the Awards held by relevant Participants shall be exchanged in accordance with Clause 2.(b) (exchange of awards).

 

(e)          Cessation of Employment as a result of death or disability: If a Participant Ceases Employment as a result of his/her death or Disability, then Awards held by that Participant shall vest on the day the Participant Ceases Employment. Effective January 1, 2016, if a Participant Ceases Employment on account of his/her death or Disability on or after the date on which the Fair Market Value of the Stock is determined for purposes of granting Awards and prior to the Date of Grant with respect to such Awards, no Award shall be granted to the Participant, but the Stock Committee shall recommend to the member of the Novartis Group that employed the Participant that a fully vested cash payment be issued to the Participant (or his/her estate) equal to the value of the Award that would have been granted on the Date of Grant if the Participant had still been an employee of the Novartis Group on the Date of Grant.

 

(f)           Assignments and Transfers: If a Participant is sent on an international assignment or is transferred to another entity within the Novartis Group this will not be considered as Ceasing Employment under the Plan. The treatment of assignments and transfers is subject to the rules of the “Internal Transfer Policy for Shareplans”.

 

2.          Change in Control and other Corporate Events

 

(a)          Change in Control: If a Change in Control occurs or is anticipated to occur, unvested Awards shall vest at the effective time of such Change in Control (or such earlier date or time that the Board may determine) PROVIDED ALWAYS THAT if, in respect of an Award, the Change in Control in respect of which this Clause 2.(a) applies on or before the first anniversary of the Date of Grant then the Award shall vest in respect of a proportion of the Award (corresponding to such proportion of the vesting period as has elapsed when the Change in Control or earlier date the Board determines), which pro ration shall be determined by dividing (i) the number of completed months from the date the Award was granted through the date of the Change in Control (or earlier date determined by the Board), by (ii) the total number of months during the vesting period.

 

Notwithstanding the preceding paragraph of this Clause 2.(a), the Board may in its discretion with no obligation to do so, allow a greater proportion of an Award to vest; provided that this paragraph does not apply to ECN members.

 

 

Alternatively, the Board may determine that some or all Awards will be automatically exchanged under Clause 2.(b).

 

(b)          Exchange of Awards: If an Award is exchanged, then:

 

(i)          the exchanged award will be in respect of or by reference to shares in any company determined by the company offering the exchange;

 

(ii)         the exchanged award shall have equivalent terms to those of the Award that was exchanged;

 

(iii)        the exchanged award will be subject to the Plan as it had effect in relation to the old Award immediately before the exchange;

 

(iv)        with effect from the exchange, the Plan will apply as if references to ADSs are references to shares over which the exchanged award has been granted;

 

(v)         the Plan shall apply with such other adjustments as the Board may decide.

 

(c)          Demerger, variations of share capital and other corporate events: If the Board becomes aware that Novartis AG is or is expected to be affected by any variation of share capital, rights issue, sub-division, consolidation or reduction of share capital, demerger, distribution (other than an ordinary dividend), liquidation or other event (other than a Change in Control) which, in the opinion of the Board, could affect the current or future value of Novartis AG shares, the Board may:

 

(i)          adjust Awards in such manner as it considers appropriate;

 

(ii)         allow Awards (for all or some Participants) to vest in whole or in part, subject to any conditions that the Board may impose;

 

require some or all Awards to be exchanged under Clause 2.(b).

 

 

ADDENDUM C
NOVARTIS LAUNCH LEADER PLAN FOR UNITED STATES AND CANADIAN PARTICIPANTS

 

(EFFECTIVE FOR AWARDS GRANTED ON OR AFTER JANUARY 1, 2021)

 

1.

Application of this addendum

 

Where Awards are granted under the Novartis Launch Leader Plan (the “NLLP”) to Participants who are United States or Canadian employees, then except as provided in this Addendum C, the rules of the Novartis AG Long Term Incentive Plan (LTIP), including but not limited to Schedule 7 to the LTIP, shall apply to such Awards. Awards under the NLLP may be granted in addition to the Awards under other long-term incentive programs within the LTIP or other plans.

 

2.

Cessation of Employment

 

Notwithstanding Section 6 of Schedule 7 to the LTIP, the provisions of Addendum B of the Plan, including but not limited to provisions relating to Retirement, shall apply to NLLP Awards covered by this Addendum C.

 

 

 

 

 

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