Exhibit
4.6


 


EXECUTION
VERSION


 


Shareholders Agreement


 


 


As of 6 April 2008


 


(this “Agreement”),


 


 


Among


 


 


NESTLÉ S.A.


 


(the “Seller”)


 


 


and


 


 


NOVARTIS AG


 


(the “Buyer”)


 


 


Concerning


 


Certain matters with respect to ALCON, INC. (the “Company”)


 


and any common shares of the Company with a par value of CHF 0.20 per
share, whether 




or not issued (the “Common Shares”)


 

















 


SHAREHOLDERS AGREEMENT


 


Preamble:


 


WHEREAS, concurrently
with the execution and delivery of this Agreement, the Seller and the Buyer
have entered into the Purchase and Option Agreement dated as of 6 April 2008
(the “Purchase and Option Agreement”), concerning the sale by the Seller
and the purchase by the Buyer of certain Common Shares;


 


WHEREAS,
on the First Stage Closing Date, the Buyer and/or certain of its Affiliates
will acquire Beneficial Ownership of 74,061,237 Common Shares; and


 


WHEREAS,
from the First Stage Closing until the Second Stage Closing, the Seller will
continue to Beneficially Own a majority of the Common Shares.


 


NOW, THEREFORE,
in consideration of the foregoing premises and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, and the mutual
agreements and covenants hereinafter set forth, the Seller and the Buyer hereby
agree as follows:


 


1.                                      DEFINITIONS AND
INTERPRETATION


 


1.1                               Definitions.  For purposes of this Agreement, including the Preamble, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):


 


	
  “2007
  20-F”

  	
  The
  Company’s annual report on Form 20-F in respect of the fiscal year ended
  on December 31, 2007 and filed with the SEC on March 18, 2008.

  
	
   

  	
   

  
	
  “Additional
  Directors”

  	
  As defined
  in Section 2.1(a).

  
	
   

  	
   

  
	
  “AGM”

  	
  As defined
  in Section 2.1(a).

  
	
   

  	
   

  
	
  “Board”

  	
  The board of
  directors of the Company.

  
	
   

  	
   

  
	
  “Board
  Representation Termination Date”

  	
  As defined
  in Section 2.1(e)

  
	
   

  	
   

  
	
  “Business
  Day”

  	
  Any day that
  is not a Saturday, a Sunday or other day on which banks are required or
  authorized by law to be closed in the city of Basel, Zurich or Vevey,
  Switzerland.

  
	
   

  	
   

  
	
  “Buyer”

  	
  As defined
  on the title page.

  



 

















 


	
  “Buyer
  Acquired Business”

  	
  Any business
  acquired by the Buyer or any of its Affiliates, or with which the Buyer or
  any of its Affiliates effects a merger, consolidation or other business
  combination, or any partnership or joint venture in which the Buyer or any of
  its Affiliates has a majority voting or economic interest, in each case after
  the date of this Agreement.

  
	
   

  	
   

  
	
  “Buyer
  Designee”

  	
  Any
  individual that is (a) designated by the Buyer to serve as a Director in
  accordance with Section 2.1 and (b) eligible to serve as a Director
  in accordance with Legal Requirements.

  
	
   

  	
   

  
	
  “Buyer Non-Competition Termination Date”

  	
  If
  (a) the Purchase and Option Agreement is terminated prior to the First
  Stage Closing, the date of such termination, (b) the Purchase and Option
  Agreement is terminated after the First Stage Closing but prior to the Second
  Stage Closing, the second anniversary of the date of such termination and (c) the
  Second Stage Closing occurs, upon the Second Stage Closing.

  
	
   

  	
   

  
	
  “Buyer Non-Solicitation Termination Date”

  	
  If
  (a) the Purchase and Option Agreement is terminated prior to the First
  Stage Closing, the first anniversary of the date of such termination,
  (b) the Purchase and Option Agreement is terminated after the First
  Stage Closing but prior to the Second Stage Closing, the first anniversary of
  the date of such termination and (c) the Second Stage Closing occurs,
  upon the Second Stage Closing.

  
	
   

  	
   

  
	
  “Buyer
  Restricted Activities”

  	
  As defined
  in Section 4.2(a).

  
	
   

  	
   

  
	
  “Buyer
  Shareholders”

  	
  The Buyer
  and each wholly owned Subsidiary of the Buyer that is the record holder of
  Common Shares for as long as such Person shall continue to be a wholly owned
  Subsidiary of the Buyer and the record holder of Common Shares.

  
	
   

  	
   

  
	
  “Cash
  Pooling Arrangements”

  	
  As defined
  in Section 6.2.

  
	
   

  	
   

  
	
  “Commercial
  Paper Program Guarantee”

  	
  The
  Guarantee dated as of October 28, 2002, made by the Seller for the
  benefit of the holders of commercial paper issued by the Company.

  
	
   

  	
   

  
	
  “Commercial
  Paper Program Services Agreement”

  	
  The
  Guarantee Fee and Commercial Paper Program Services Agreement effective as of
  October 28, 2002, between the Seller and the Company.

  



 


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  “Common
  Shares”

  	
  As defined
  on the title page.

  
	
   

  	
   

  
	
  “Company”

  	
  As defined
  on the title page.

  
	
   

  	
   

  
	
  “Company
  Key Employees”

  	
  Any employee
  of the Company or any of its Subsidiaries that is classified by the Company’s
  salary grade system at grade 28 or higher.

  
	
   

  	
   

  
	
  “Compensation
  Committee”

  	
  The
  compensation committee of the Board.

  
	
   

  	
   

  
	
  “Director”

  	
  Any director
  of the Company.

  
	
   

  	
   

  
	
  “Exchange
  Act”

  	
  The U.S.
  Securities Exchange Act of 1934, as amended, and the rules and
  regulations promulgated thereunder.

  
	
   

  	
   

  
	
  “Guarantee”

  	
  Of or by any
  Person, any obligation, contingent or otherwise, of such Person guaranteeing
  any obligation (a “guaranteed obligation”) of any other Person (the “primary
  obligor”) in any manner, whether directly or indirectly, and including
  any obligation of such Person, direct or indirect, (a) to purchase or
  pay (or advance or supply funds for the purchase or payment of) such
  guaranteed obligation or to purchase (or to advance or supply funds for the
  purchase of) any security for the payment of such guaranteed obligation,
  (b) to purchase property, securities or services for the purpose of
  assuring the owner of such guaranteed obligation of the payment of such
  guaranteed obligation or (c) to maintain working capital, equity capital
  or other financial statement condition or liquidity of the primary obligor so
  as to enable the primary obligor to pay such guaranteed obligation; provided,
  however, that the term Guarantee shall not include endorsements for
  collection or deposit, in each case in the ordinary course of business.

  
	
   

  	
   

  
	
  “Incidental
  Buyer Acquired Business”

  	
  As defined
  in Section 4.2(b).

  
	
   

  	
   

  
	
  “Incidental
  Seller Acquired Business”

  	
  As defined
  in Section 4.1(b).

  
	
   

  	
   

  
	
  “Indebtedness”

  	
  Of any
  Person, (a) all obligations of such Person for borrowed money or with
  respect to deposits or advances of any kind, (b) all obligations of such
  Person evidenced by bonds, debentures, notes or similar instruments and
  (c) all obligations of such Person upon which interest charges are 

  



 


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  required to
  be paid.

  
	
   

  	
   

  
	
  “Independent
  Director”

  	
  A Director
  who qualifies as an “independent director” of the Company under NYSE
  Rule 303A(2), as such Rule may be amended, supplemented or replaced
  from time to time.

  
	
   

  	
   

  
	
  “Investment
  Services Agreement”

  	
  The Services
  Agreement dated as of January 1, 2004, between an Affiliate of the
  Seller and the Company.

  
	
   

  	
   

  
	
  “Nominating
  and Corporate Governance Committee”

  	
  The
  nominating and corporate governance committee of the Board.

  
	
   

  	
   

  
	
  “NYSE”

  	
  The New York
  Stock Exchange, Inc.

  
	
   

  	
   

  
	
  “Person”

  	
  Individuals
  or entities, including any corporation, limited liability company, joint
  venture, trust, body corporate (wherever located), unincorporated
  association, partnership or other entity.

  
	
   

  	
   

  
	
  “Purchase
  and Option Agreement”

  	
  As defined
  in the Preamble.

  
	
   

  	
   

  
	
  “Remaining
  Shared Agreement”

  	
  Any Shared
  Site Agreement and any written agreement between the Seller and its
  Affiliates (other than the Company and its Subsidiaries), on the one hand,
  and the Company and its Subsidiaries, on the other hand, (a) pursuant to
  which an Affiliate of the Seller operating in a jurisdiction provides
  administrative, distribution, fleet management or warehousing services to a
  Subsidiary of the Company operating in such jurisdiction or (b) pursuant
  to which the Company and its Subsidiaries use commercial “off-the-shelf”
  software licensed to the Seller or its Affiliates (other than directly to the
  Company and its Subsidiaries).

  
	
   

  	
   

  
	
  “Seller”

  	
  As defined
  on the title page.

  
	
   

  	
   

  
	
  “Seller
  Acquired Business”

  	
  Any business
  acquired by the Seller or any of its Affiliates, or with which the Seller or
  any of its Affiliates effects a merger, consolidation or other business
  combination, or any partnership or joint venture in which the Seller or any
  of its Affiliates has a majority voting or economic interest, in each case
  after the date of this Agreement.

  
	
   

  	
   

  
	
  “Seller
  Career Employees”

  	
  Those
  individuals whose names are set forth in a letter provided by the Seller to
  the Buyer on or prior to the date of this Agreement.

  



 


4

















 


	
  “Seller
  Designee”

  	
  Any
  individual that is (a) designated by the Seller to serve as a Director
  in accordance with Section 2.1 and (b) eligible to serve as a
  Director in accordance with Legal Requirements.

  
	
   

  	
   

  
	
  “Seller Non-Competition Termination Date”

  	
  If
  (a) the Purchase and Option Agreement is terminated prior to the First
  Stage Closing, the date of such termination, (b) the Purchase and Option
  Agreement is terminated after the First Stage Closing but prior to the Second
  Stage Closing, the second anniversary of the date of such termination and
  (c) the Second Stage Closing occurs, the second anniversary of the
  Second Stage Closing Date.

  
	
   

  	
   

  
	
  “Seller Non-Solicitation Termination Date”

  	
  If
  (a) the Purchase and Option Agreement is terminated prior to the First
  Stage Closing, the date of such termination, (b) the Purchase and Option
  Agreement is terminated after the First Stage Closing but prior to the Second
  Stage Closing, the first anniversary of the date of such termination and
  (c) the Second Stage Closing occurs, the first anniversary of the Second
  Stage Closing Date.

  
	
   

  	
   

  
	
  “Seller
  Restricted Activities”

  	
  As defined
  in Section 4.1(a).

  
	
   

  	
   

  
	
  “Seller
  Shareholders”

  	
  The Seller
  and each wholly owned Subsidiary of the Seller that is the record holder of
  Common Shares for as long as such Person shall continue to be a wholly owned
  Subsidiary of the Seller and the record holder of Common Shares.

  
	
   

  	
   

  
	
  “Separation
  Agreement”

  	
  The
  Separation Agreement dated as of February 21, 2002, between the Seller
  and the Company governing the terms of the initial public offering of the
  Company and the governance of the Company following such initial public
  offering.

  
	
   

  	
   

  
	
  “Significant
  Actions”

  	
  As defined
  in Section 2.2(b).

  
	
   

  	
   

  
	
  “Surgical Business”

  	
  The development, manufacturing and marketing of ophthalmic surgical
  equipment, devices and other ophthalmic products, including ophthalmic
  equipment, devices and other products used during cataract surgery,
  vitreoretinal surgery and refractive surgery.

  



 


1.2                               Interpretation.  Except to the extent that the context otherwise, requires:


 


5

















 


(i)                                     when
a reference is made in this Agreement to a Section, such reference is to a Section of
this Agreement unless otherwise indicated;


 


(ii)                                  the
table of contents and headings for this Agreement are for reference purposes
only and do not affect in any way the meaning or interpretation of this
Agreement;


 


(iii)                               whenever
the words “include”, “includes” or “including” are used in this Agreement, they
are deemed to be followed by the words “without limitation”;


 


(iv)                              the
words “hereof”, “herein” and “hereunder” and words of similar import, when used
in this Agreement, refer to this Agreement as a whole and not to any particular
provision of this Agreement;


 


(v)                                 all
terms defined in this Agreement have the defined meaning when used in any
certificate or other document made or delivered pursuant hereto, unless
otherwise defined therein;


 


(vi)                              each
term used but not defined in this Agreement that is defined in the Purchase and
Option Agreement shall have the meaning assigned to such term in the Purchase
and Option Agreement; and


 


(vii)                           the
use of “or” is not intended to be exclusive unless expressly indicated
otherwise.


 


2.                                      CORPORATE GOVERNANCE


 


2.1                               Composition
of the Board; Board Committees; Resignation of Seller Directors.


 


(a)                                  At the 2008 Annual
General Meeting (“AGM”) of the Company, the Seller shall vote the Common Shares
it Beneficially Owns, and otherwise use its reasonable best efforts, to elect
to the Board two additional persons: (i) one (1) individual
designated by the Buyer and (ii) one (1) individual designated by the
Seller (together, the “Additional Directors”). 
The effectiveness of the election of the Additional Directors shall be
conditional on the subsequent occurrence of the First Stage Closing.  Immediately after the First Stage Closing,
the parties hereto shall use their reasonable best efforts to cause the Board
to establish a new order of rotation of the terms of the Directors (including
the Additional Directors) in accordance with Article 20 of the Articles of
Association of the Company, which new order shall take effect with respect to
each Director upon the expiry of the then current term of office of such
Director.  Following the AGM, the parties
hereto shall use their reasonable best efforts to cause the number of Directors
to be ten (10).


 


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(b)                                 With respect to each
meeting of the shareholders of the Company after the First Stage Closing Date
at which Directors come up for reelection, the parties hereto shall use their
reasonable best efforts to cause to be elected to the Board such individuals so
that, after such election and the due qualification of such individuals as
Directors, the Board shall be comprised of (A) one (1) individual
designated by the Buyer, (B) five (5) individuals designated by the
Seller, (C) three (3) individuals nominated by the Nominating and
Corporate Governance Committee that qualify as Independent Directors and who
are not Buyer Designees or Seller Designees and (D) the Chief Executive
Officer of the Company.  Upon the
resignation, removal or death of any Director after the First Stage Closing
Date, the parties hereto shall use their reasonable best efforts to have the
vacancy created thereby filled with an individual who was designated or
nominated by the party or the Nominating and Corporate Governance Committee, as
the case may be, that designated or nominated the resigning, removed or deceased
Director.  For purposes of this Section 2.1,
“reasonable best efforts” shall include voting (or causing such vote) with
respect to all Common Shares then held of record or Beneficially Owned by such
party or its wholly owned Subsidiaries (i) in favor of the election to the
Board of those individuals designated or nominated in accordance with this Section 2.1
and (ii) against the election to the Board of any individual not
designated or nominated in accordance with this Section 2.1.


 


(c)                                  As soon as practicable
before (and if possible at least 60 days before) each meeting of the
shareholders of the Company after the First Stage Closing Date at which
Directors are to be elected, the Buyer and the Seller shall notify the Company
and each other in writing of its designees, if any, to be elected to the Board
at such meeting.


 


(d)                                 After the First Stage
Closing Date, the parties shall use their reasonable best efforts to cause the
Buyer Designee to be appointed to the Compensation Committee and the Nominating
and Corporate Governance Committee.


 


(e)                                  Notwithstanding
anything to the contrary in this Agreement, (i) on the first day after the
First Stage Closing Date on which (such day, the “Board Representation
Termination Date”) (A) the Buyer Shareholders do not Beneficially Own
at least 10% of the Common Shares then outstanding or (B) the Seller
Shareholders do not Beneficially Own a majority of the Common Shares then
outstanding, the obligations under paragraphs (a) through (d) of this Section 2.1
and Sections 2.2 or 3.1 shall terminate and (ii) on the first day
after the First Stage Closing Date on which the Buyer Shareholders do not
Beneficially Own at least 10% of the Common Shares then outstanding, the Buyer
shall use its reasonable best efforts to cause the Buyer Designee to resign as
a Director.


 


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(f)                                    The Seller shall
use its reasonable best efforts to cause the Board to call and hold an
extraordinary general meeting of the shareholders of the Company prior to the
Second Stage Closing.  At such meeting of
the shareholders of the Company, the parties hereto shall vote the Common
Shares Beneficially Owned by them and otherwise use their reasonable best
efforts to elect to the Board five (5) individuals designated by the Buyer
as Directors to fill the vacancies created by the resignation of the Seller
Designees as hereinafter provided.  The
effectiveness of the election of such replacement Directors shall be
conditional on the subsequent occurrence of the Second Stage Closing.  The Seller shall use its reasonable best
efforts to cause each Seller Designee to resign as a Director effective at the
Second Stage Closing.  Notwithstanding
anything in this Agreement to the contrary, the Seller, at its election, may
take any of the actions referred to in this paragraph (f) at an annual
general meeting of the shareholders of the Company held prior to the Second
Stage Closing.


 


(g)                                 Notwithstanding
anything in this Agreement to the contrary, the Buyer Designee shall (i) not
be an officer or employee of any of the Buyer’s Specified Businesses, (ii) recuse
himself or herself from voting on matters relating to competition with the
Buyer or any of its Affiliates and (iii) not be entitled to receive, and
shall not receive, competitively sensitive information from the Company or any
of its Subsidiaries with respect to any business in which the Buyer or any of
its Subsidiaries compete.


 


2.2                               Board
Consultations; Significant Actions.


 


(a)                                  After the Signing
Date, the Buyer Designee and the Seller Designees shall, to the extent
consistent with applicable antitrust or competition Legal Requirements, consult
with each other prior to any Board meeting and in any event prior to any Board
action being taken.


 


(b)                                 After the Signing
Date, if requested by the Buyer with respect to any of the following acts (the “Significant
Actions”), the Seller shall use its reasonable best efforts to cause each
Seller Designee to take one or both of the following actions: (i) vote
against such Significant Action to the extent such Significant Action is
submitted to the Board for its approval or (ii) request that the Board
submit such Significant Action to a vote of the shareholders of the Company to
the extent it is legally permissible for such Significant Action to be resolved
by a meeting of the shareholders of the Company; provided, however,
that to the extent (1) it is legally permissible for such Significant
Action to be resolved by a meeting of the shareholders of the Company and (2) the
Buyer so requests, the Seller shall use its reasonable best efforts to cause
each Seller Designee to request that the Board submit such Significant Action
to a vote of shareholders of the Company; provided, further, however,
that no Seller Designee shall be required to take any of the foregoing actions
if the


 


8














 


taking of the
applicable action would violate such Seller Designee’s fiduciary duties to the
Company under Swiss corporate law:


 


(i)             acquisitions
and dispositions that are material to the Company and its Subsidiaries, taken
as a whole;


 


(ii)            the
entry by the Company or any of its Subsidiaries into intellectual property
licensing transactions with any Person (other than the Company or any of its
Subsidiaries) that are material to the Company and its Subsidiaries, taken as a
whole;


 


(iii)           any
change to the capital structure of the Company (as it exists on the First Stage
Closing Date) (including any dividends, distributions or stock repurchases
other than Normal Dividends (as defined in the Purchase and Option Agreement)
and any changes in the voting or other rights of the Common Shares or any other
class of capital stock);


 


(iv)          any
material operational restructuring of the Company and its Subsidiaries (as they
exist on the First Stage Closing Date);


 


(v)           the
entry by the Company or any of its Subsidiaries into material non-compete
agreements in the pharmaceutical or contact lens businesses of the Company and
its Subsidiaries;


 


(vi)          the
entry into any material tax sharing agreement, material tax settlement
agreement, material advance pricing agreement, or any other material agreement,
the principal purpose of which is to create or alter a material tax liability
of the Company or to alter the long-term tax position of the Company;


 


(vii)         any
amendment (other than as required by Legal Requirements applicable to the
Company) to Company employee compensation plans or adoption of new Company
employee compensation plans (other than any retention arrangement appropriate
to protect the Company’s interest in the context of the transactions
contemplated by this Agreement or the Purchase and Option Agreement) if such
amendments and/or adoptions are likely to materially increase the employee
compensation cost to the Company and its Subsidiaries;


 


(viii)        the
listing of the Common Shares or other securities of the Company on any stock
exchange other than the New York Stock Exchange; and


 


(ix)           any
amendment of Article III, Section 3 or Annex 3.3(k) of the
Company’s Board of Directors Organizational Regulations concerning matters
subject to Board approval.


 


9

















 


If a Significant Action is to be submitted to
a vote of the shareholders of the Company, the Seller shall use its reasonable
best efforts to cause each Seller Designee to vote as Directors against taking
any action to adopt or implement such Significant Action pending the
shareholder vote and, if the shareholders do not approve such Significant
Action, after the shareholder vote; provided, however, that no
Seller Designee shall be required to take any of the foregoing actions if the
taking of the applicable action would violate such Seller Designee’s fiduciary
duties to the Company under Swiss corporate law.


 


3.             SHAREHOLDER
ACTIONS.


 


3.1          Consultation; Voting
Agreement.


 


(a)           After
the Signing Date, the Seller and the Buyer shall, to the extent consistent with
applicable antitrust or competition Legal Requirements, consult with each other
prior to any shareholder vote being taken.


 


(b)           After
the Signing Date, if so requested by the Buyer with respect to any Significant
Action that is submitted to a vote of the shareholders of the Company, the
Seller shall, and shall cause the other Seller Shareholders to, vote the Common
Shares then held of record or Beneficially Owned by it or them against such
Significant Action.


 


(c)           Notwithstanding
anything in this Agreement to the contrary, the Seller shall not be required to
take any action that would be inconsistent with the Seller’s obligation to vote
in favor of the dividend proposals made by the Board to the shareholders of the
Company pursuant to Section 3.6 of the Separation Agreement.


 


(d)           The
Seller and the Buyer acknowledge and agree that during the period beginning on
the Signing Date and continuing through the Second Stage Closing Date and
except as set forth herein or in the Purchase and Option Agreement, it is their
mutual intention as shareholders that the Company shall continue to carry on
its businesses in the usual, regular and ordinary course.  The foregoing shall not be construed as a limitation
on any actions taken or not taken by the Seller Designees as Directors.


 


4.             NON-COMPETITION;
NON-SOLICITATION


 


4.1          Non-Competition by
Seller


 


(a)           Subject
to Section 4.1(b), from the date of this Agreement through (and including)
the Seller Non-Competition Termination Date, the Seller shall not, and shall
cause its Affiliates (other than the Company and its Subsidiaries) not to,
directly or indirectly, engage in the development, manufacture, marketing,
distribution or sale of any product that directly competes with any product in
development, manufactured, marketed, 


 


10

















 


distributed or
sold by the Company or any of its Subsidiaries on the date of this Agreement
(such activities,  the “Seller
Restricted Activities”).


 


(b)           The
restrictions set forth in Section 4.1(a) shall not apply to any
Seller Acquired Business that at the time of the acquisition is engaged in
Seller Restricted Activities if the consolidated annual revenues directly
attributable to such Seller Restricted Activities in the previous fiscal year
constitutes less than 10% of the consolidated annual revenues of such Seller
Acquired Business during the same period (an “Incidental Seller Acquired
Business”).  In the event that such
annual revenues attributable to such Seller Restricted Activities constitutes
more than an Incidental Seller Acquired Business, the business activities of
such Seller Restricted Activities will nevertheless be excluded from the
prohibitions set forth in Section 4.1(a); provided that the Seller
or its Affiliates shall sell or otherwise dispose of such Seller Restricted
Activities within six (6) months after the consummation of the transaction
with such Seller Acquired Business.  The
restrictions in Section 4.1(a) shall not prohibit or restrict the
Seller and its Affiliates from (i) investing in securities of any entity
that is listed on any recognized securities exchange (whether U.S. or
non-U.S.); provided that, in the case of the Seller or any of its
Affiliates that is not a retirement, pension, medical or other benefit plan
(where a fiduciary of the beneficiaries of such plan exercises independent
oversight over the assets of such plan), the Seller or such Affiliate does not
hereafter Beneficially Own, or have the right to acquire, more than 5% of the
outstanding voting securities of an entity engaged in Seller Restrictive
Activities, (ii) developing, manufacturing or marketing (A) in the
case of human use, non-prescription and (B) in the case of non-human use,
prescription and non-prescription nutritional supplements, vitamins,
antioxidants or any other such product to be taken orally or otherwise, whose
first aim is to prevent or contribute to the treatment of vision, ear and nose
diseases or (iii) manufacturing, marketing, distributing or selling any
product (or any replacement thereof) that the Seller or any of its Affiliates
(other than the Company and its Subsidiaries) manufactures, markets,
distributes or sells on the date of this Agreement.


 


4.2          Non-Competition by
Buyer.


 


(a)           Subject
to Section 4.2(b), from the date of this Agreement through (and including)
the Buyer Non-Competition Termination Date, the Buyer shall not, and shall
cause its Affiliates (other than the Company and its Subsidiaries) not to,
directly or indirectly, engage in the development, manufacture, marketing,
distribution or sale of any product that directly competes with the Surgical
Business of the Company (such activities, the “Buyer Restricted Activities”).


 


(b)           The
restrictions set forth in Section 4.2(a) shall not apply to any Buyer
Acquired Business that at the time of the acquisition is engaged in Buyer 


 


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Restricted
Activities if the consolidated annual revenues directly attributable to such
Buyer Restricted Activities in the previous fiscal year constitutes less than
10% of the consolidated annual revenues of such Buyer Acquired Business during
the same period (an “Incidental Buyer Acquired Business”).  In the event that such annual revenues
attributable to such Buyer Restricted Activities constitutes more than an
Incidental Buyer Acquired Business, the business activities of such Buyer
Restricted Activities will nevertheless be excluded from the prohibitions set
forth in Section 4.2(a); provided that the Buyer or its Affiliates
shall sell or otherwise dispose of such Buyer Restricted Activities within six (6) months
after the consummation of the transaction with such Buyer Acquired
Business.   The restrictions in Section 4.2(a) shall
not prohibit or restrict the Buyer and its Affiliates from (i) investing
in securities of any company that is listed on any recognized securities
exchange (whether U.S. or non-U.S.); provided that, in the case of the
Buyer or any of its Affiliates that is not a retirement, pension, medical or
other benefit plan (where a fiduciary of the beneficiaries of such plan
exercises independent oversight over the assets of such plan), the Buyer or
such Affiliate does not hereafter Beneficially Own, or have the right to
acquire, more than 5% of the outstanding voting securities of an entity engaged
in Buyer Restrictive Activities or (ii) manufacturing, marketing,
distributing or selling any product (or any replacement thereof) that the Buyer
or any of its Subsidiaries manufactures, markets, distributes or sells on the
date of this Agreement.


 


4.3          Non-Solicitation by
Seller.


 


From the date of this Agreement
through (and including) the Seller Non-Solicitation Termination Date, the
Seller shall not, and shall cause its Affiliates (other than the Company and
its Subsidiaries) not to, hire or solicit for hire any Company Key Employee; provided
that this covenant shall not apply to (a) general advertisements for
employment not targeted at the Company Key Employees, (b) the hiring or
solicitation for hire of any Seller Career Employee, (c) the hiring or
solicitation for hire of any Company Key Employee that the Company or any of
its Subsidiaries has previously terminated or (d) as otherwise may be
agreed by the Seller and the Buyer.


 


4.4          Non-Solicitation by
Buyer.


 


From the date of this Agreement
through (and including) the Buyer Non-Solicitation Termination Date, the Buyer
shall not, and shall cause its Affiliates (other than the Company and its
Subsidiaries) not to, hire or solicit for hire any Company Key Employee; provided
that this covenant shall not apply to (a) general advertisements for
employment not targeted at the Company Key Employees, (b) the hiring or
solicitation for hire of any Company Key Employee that the Company or any of
its Subsidiaries has previously terminated or (c) as otherwise may be
agreed by the Seller and the Buyer.


 


12

















 


5.             TERM


 


This Agreement shall expire
upon the earlier of (a) the Second Stage Closing and (b) the
termination of the Purchase and Option Agreement; provided that (i) if
this Agreement is terminated pursuant to clause (b) above after the
First Stage Closing, the provisions of paragraphs (a) through (e) of Section 2.1
shall nonetheless remain in full force and effect until the Board Representation
Termination Date, (ii) the covenants contained in Section 4 shall
survive in accordance with their terms and (iii) if the Second Stage
Closing occurs, the covenants in Section 6 shall survive indefinitely.


 


6.             ARRANGEMENTS
BETWEEN THE SELLER AND THE COMPANY


 


6.1          Shared Arrangements
prior to the Second Stage Closing.


 


Following the First Stage
Closing but prior to the Second Stage Closing, all Shared Arrangements shall
remain in full force and effect.


 


6.2          Shared Arrangements upon
the Second Stage Closing.


 


Upon the Second Stage Closing, (a) the
parties hereto shall, and shall use their reasonable best efforts to cause the
Company to, terminate the Separation Agreement; provided, however,
that the provisions of Section 2.6.2 of the Separation Agreement shall
survive such termination until the expiration of the applicable statute of
limitations; and provided further, that the provisions of Sections 4,
6.7, 8, 9.2.2, 10 and 11 of the Separation Agreement shall survive such
termination for a period of 18 months after the Second Stage Closing Date, (b) the
parties hereto shall, and shall use their reasonable best efforts to cause the
Company to, terminate the Commercial Paper Program Services Agreement and
ensure that no new commercial paper notes that benefit from the Commercial
Paper Guarantee will be issued following the Second Stage Closing; provided,
however, that the provisions of Sections 3.6 and 3.7 of the Commercial
Paper Program Services Agreement shall survive such termination for a period of
18 months after the Second Stage Closing Date, (c) the parties hereto
shall use their reasonable best efforts to cause the Company and its
Subsidiaries to repay any Indebtedness they owe to the Seller or any of its
Affiliates (other than the Company and its Subsidiaries), (d) the parties
hereto shall, and shall use their reasonable best efforts to cause the Company
and its Subsidiaries to, use their reasonable best efforts to cause any
Guarantees issued by the Seller or any of its Affiliates (other than the
Company and its Subsidiaries) on behalf of the Company or any of its
Subsidiaries (including those contemplated by the Separation Agreement, those
disclosed in the 2007 20-F, those issued under the Commercial Paper Program
Guarantee and the Commercial Paper Program Services Agreement and those
relating to the lines of credit associated with the Cash Pooling Arrangements)
to be extinguished as soon as reasonably practicable after the Second Stage
Closing with no further liability to the Seller or its applicable Affiliate
(and pending any such extinguishment, the Buyer shall enter into an appropriate
back-to-back guarantee in favor of the Seller or its applicable Affiliate), (e) the
parties hereto shall, and shall use their reasonable best efforts to cause the
Company and its Subsidiaries to, (i) terminate the cash pooling
arrangements (the “Cash Pooling Arrangements”) between the Company and its
Subsidiaries, on the one 


 


13

















 


hand, and the Seller and its
Affiliates (other than the Company and its Subsidiaries), on the other hand
(including by transferring any cash and cash equivalents of the Company and its
Subsidiaries, on the one hand, and the Seller and its Affiliates (other than
the Company and its Subsidiaries), on the other hand, that are subject to the
Cash Pooling Arrangements to an individual account of the Company, the Seller
or their applicable Affiliates) and (ii) use their reasonable best efforts
to cause any Guarantees issued by the Company or any of its Subsidiaries on
behalf of the Seller or any of its Affiliates (other than the Company and its
Subsidiaries) relating to the lines of credit associated with the Cash Pooling
Arrangements to be extinguished as soon as reasonably practicable after the Second
Stage Closing with no further liability to the Company or its applicable
Subsidiary (and pending any such extinguishment, the Seller shall enter into an
appropriate back-to-back guarantee in favor of the Company or its applicable
Subsidiary), (f) the parties hereto shall, and shall use their reasonable
best efforts to cause the Company to, terminate the Investment Services
Agreement; provided, however, that the provisions of Sections 6
and 7 of the Investment Services Agreement shall survive such termination for a
period of 18 months after the Second Stage Closing Date and (g) the
parties hereto shall, and shall use their reasonable best efforts to cause
their Affiliates (including the Company and its Subsidiaries) to, terminate all
other Shared Arrangements (other than the Remaining Shared Agreements) in
accordance with applicable Legal Requirements; provided, however,
that any compensation, expense reimbursement, confidentiality, limitation of
liability and indemnification provision in any such other Shared Arrangement
shall survive such termination for a period of 18 months after the Second Stage
Closing Date.  Notwithstanding anything
in this Agreement to the contrary, (i) the modification or termination of
any Shared Arrangement, and any transactions in connection therewith, shall be
deemed to not be a Significant Action and (ii) the Seller acknowledges
that actions taken under this Section 6.2 and Section 6.3 by the
Company will be subject to Article V, Section 5(a) of the
Company’s Board of Directors Organizational Regulations.


 


6.3          Remaining Shared
Agreements.


 


Following the Second Stage
Closing through the applicable date of termination as determined in accordance
with the immediately following sentence, the Remaining Shared Agreements shall
remain in full force and effect on the same terms and conditions as in effect
immediately prior to the Second Stage Closing. 
With respect to (a) each Remaining Shared Agreement (other than a
Shared Site Agreement), on or prior to the Second Stage Closing, the parties
hereto shall agree on one or more dates (none of which shall be a date after
the first anniversary of the Second Stage Closing Date) on which the parties
hereto shall, and shall use their reasonable best efforts to cause their
Affiliates (including the Company and its Subsidiaries) to, terminate such
Remaining Shared Agreement and (b) any Shared Site Agreement, such Shared
Site Agreement shall remain in full force and effect through the remainder of
its term and thereafter shall not be renewed, except, in each case, as
otherwise agreed by the parties hereto; provided, however, that
any compensation, expense reimbursement, confidentiality, limitation of
liability and indemnification provision in any such Remaining Shared Agreement
shall survive such termination for a period of 18 months after the date of such
termination.  


 


14

















 


Notwithstanding anything in
this Agreement to the contrary, no Remaining Shared Agreement shall remain in
full force and effect to the extent inconsistent with the rights of any
applicable third parties (including landlords or licensors of software); provided
that the parties hereto shall use their reasonable best efforts to obtain any
consents or waivers from the applicable third party necessary to avoid any such
inconsistency.


 


7.             MISCELLANEOUS


 


7.1          Entire Agreement.


 


This Agreement, together with
the Purchase and Option Agreement, constitutes the entire agreement between the
parties with respect to the subject matter of this Agreement and the Purchase
and Option Agreement, and supersedes any and all prior agreements,
negotiations, correspondence, undertakings, understandings and communications
of the parties with respect to the subject matter of this Agreement and the
Purchase and Option Agreement.


 


7.2          Transaction Costs.


 


The parties to this Agreement
will pay their own costs and expenses (including legal, accounting and other
fees) relating to this Agreement.  Any
notary fees and/or registration costs will be borne by the Buyer (other than
any such fees or costs relating to agreements between the Seller and the
Company, which shall be borne by the Seller).


 


7.3          Modifications.


 


This Agreement, including this
undertaking itself, may not be amended or modified except by a document in
writing duly executed by the parties hereto. 
The parties agree that they jointly negotiated and prepared this
Agreement and that this Agreement will not be construed against any party on
the grounds that such party prepared or drafted the same.


 


7.4          Notices.


 


Notices hereunder will be in
writing in the English language.  Notices
will be deemed to have been received (a) upon receipt of a registered
letter or a signature confirming receipt from an internationally recognized
overnight express delivery service, (b) the next Business Day following
proper deposit with an internationally recognized express overnight delivery
service or (c) upon confirmation of a facsimile transmission.  Notices will be addressed as follows:


 


15

















 


	
  If to any
  Seller Shareholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Nestlé S.A.

  
	
   

  	
   

  	
  Avenue Nestlé 55

  
	
   

  	
   

  	
  1800 Vevey

  
	
   

  	
   

  	
  Switzerland

  
	
   

  	
   

  	
  Attention:

  	
  Group General Counsel

  
	
   

  	
   

  	
  Facsimile:

  	
  + 41 21 924 4592

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  Cravath, Swaine & Moore LLP

  
	
   

  	
   

  	
  825 Eighth Avenue

  
	
   

  	
   

  	
  Worldwide Plaza

  
	
   

  	
   

  	
  New York, New York 10019

  
	
   

  	
   

  	
  Attention:

  	
  Alan C. Stephenson, Esq.

  
	
   

  	
   

  	
   

  	
  Robert I. Townsend, Esq.

  
	
   

  	
   

  	
  Facsimile:

  	
  (212) 474-3700

  
	
   

  	
   

  	
   

  
	
  If to any
  Buyer Shareholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Novartis AG

  
	
   

  	
   

  	
  Lichstrasse 35

  
	
   

  	
   

  	
  4056 Basel

  
	
   

  	
   

  	
  Switzerland

  
	
   

  	
   

  	
  Attention:

  	
  Group General Counsel

  
	
   

  	
   

  	
  Facsimile:

  	
  +41 61 324 7826

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  Allen & Overy LLP

  
	
   

  	
   

  	
  1221 Avenue of the Americas

  
	
   

  	
   

  	
  New York, New York 10020

  
	
   

  	
   

  	
  Attention:

  	
  Daniel P. Cunningham, Esq.

  
	
   

  	
   

  	
   

  	
  Eric S. Shube, Esq.

  
	
   

  	
   

  	
  Facsimile:

  	
  (212) 610-6399

  



 


or to such other address as may
be hereafter communicated in writing by the Seller to the Buyer or vice versa
in a notice given in accordance with this Section 7.4.


 


7.5          Public Announcements.


 


Except as required by Legal
Requirements or by the requirements of any stock exchange on which the
securities of a party hereto are listed, no party to this Agreement will make,
or cause to be made, any press release or public announcement in respect of
this Agreement or the transactions contemplated hereby or otherwise communicate
with any news media without prior notification to the other party, and the
parties to this Agreement will cooperate as to the form, timing and contents of
any such press release, public announcement or disclosure.


 


16














 


7.6          Severability.


 


Each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement will be held to be unenforceable or invalid under applicable law,
such provision will be ineffective only to the extent of such unenforceability
or invalidity, and the parties will negotiate in good faith to modify this
Agreement so that the unenforceable or invalid provision is replaced by such
valid and enforceable provision which the parties consider, in good faith, to
match as closely as possible the invalid or unenforceable provision and to
achieve the same or a similar economic effect and to give effect to the parties’
original intent.  The remaining
provisions of this Agreement will continue to be binding and in full force and
effect.


 


7.7          Assignment.


 


No party hereto may assign, in whole or in part, or delegate all or any
part of its rights, interests or obligations under this Agreement without the
prior written consent of the other party. 
Any assignment or delegation made without such consent will be void.


 


7.8          Governing Law.


 


This Agreement will be governed by and construed in accordance with the
laws (without regard for principles of conflict of laws) of Switzerland with the
exclusion of the Vienna Convention on the International Sale of Goods dated 11 April 1980.


 


7.9          Dispute Resolution.


 


Each party hereto will give the other party written notice of any and
all disputes arising out of or in connection with this Agreement.  The parties will attempt to resolve all such
disputes promptly by negotiations between their respective executive officers
who have authority to settle such disputes. 
If any such dispute has not been resolved by such negotiation within
forty five (45) days after the receipt of written notice of such dispute, such
dispute will be finally settled under the Rules of Arbitration of the
International Chamber of Commerce (Paris) by three (3) arbitrators
appointed in accordance with such Rules, with the Buyer and the Seller each
appointing one (1) arbitrator, and the arbitrators so elected appointing
the president of the tribunal within thirty (30) days.  The proceedings will be held in English.  The place of arbitration will be Zurich,
Switzerland.  Any award, judgment or
decree of such tribunal shall be enforceable against any party hereto in any
court of competent jurisdiction.


 


7.10        Counterparts; Facsimile
Signature.


 


This Agreement is executed in one or more counterparts, by original or
facsimile signature, each of which will be deemed an original, but all of which
will constitute one and the same instrument.


 


17

















 


7.11        Rights Cumulative.


 


All rights and remedies of each of the parties under this Agreement
will be cumulative, and the exercise of one or more rights or remedies will not
preclude the exercise of any other right or remedy available under this
Agreement or applicable law.


 


7.12        Specific Performance.


 


Each party hereto acknowledges
and agrees that the other party hereto would be irreparably damaged if the
provisions hereof are not performed in accordance with their terms and that any
breach of this Agreement and the non-consummation of the transactions
contemplated hereby by such party could not be adequately compensated in all
cases by monetary damages alone. 
Accordingly, in addition to any remedy to which such other party hereto
may be entitled under Section 7.9, provisional measures and injunctive
relief necessary to protect the possibility of each party to seek specific
performance from the other from the tribunal referred to in Section 7.9
can be sought from any court of competent jurisdiction.


 


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left blank]


 


18

















 


IN WITNESS WHEREOF, the parties have caused this Shareholders Agreement
to be duly executed as of the date first written above.


 


 


	
  NESTLÉ S.A.,

  	
  NOVARTIS AG,

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:  

  	
   

  	
   

  	
  By:  

  	
   

  
	
  Name:    Peter Brabeck-Letmathe

  	
   

  	
  Name:   

  	
  Dr. Daniel Vasella

  
	
  Title:      Chairman and 

  	
   

  	
  Title:     

  	
  Chairman and 

  
	
  Chief Executive Officer

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:    James Singh

  	
   

  	
  Name:

  	
  Dr. Raymund Breu

  
	
  Title:      Executive Vice President

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
  and Chief Financial Officer