Document:

<PAGE>
                                                                   EXHIBIT 10.18

                         JAPAN DISTRIBUTION AGREEMENT

                           dated as of April 1, 2000

                                by and between

                                BAXTER LIMITED

                                      and

                           EDWARDS LIFESCIENCES LLC
<PAGE>

                                                                         Page
                                                                         ----
                               TABLE OF CONTENTS

<TABLE>

<S>                                                                       <C>
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION............................    1
ARTICLE II DISTRIBUTION OF PRODUCTS.....................................    7
ARTICLE III RESTRICTIONS ON EDWARDS; EXCLUSIVITY........................    7
ARTICLE IV TERM.........................................................    8
ARTICLE V PRICES AND FEES...............................................    8
ARTICLE VI INVOICING AND PAYMENTS.......................................    9
ARTICLE VII BAXTER'S DUTIES.............................................   11
ARTICLE VIII EDWARDS' DUTIES............................................   11
ARTICLE IX STANDARD OF CARE; CONSULTATION...............................   11
ARTICLE X TRANSFER OF TITLE AND RISK OF LOSS............................   12
ARTICLE XI WARRANTIES...................................................   12
ARTICLE XII TRADEMARKS..................................................   13
ARTICLE XIII TERMINATION................................................   14
ARTICLE XIV INDEMNITY...................................................   15
ARTICLE XV COMPLIANCE WITH LAWS.........................................   21
ARTICLE XVI INSURANCE...................................................   23
ARTICLE XVII FORCE MAJEURE..............................................   23
ARTICLE XVIII CONFIDENTIALITY...........................................   23
ARTICLE XIX LIMITATION OF LIABILITY AND REMEDIES........................   25
ARTICLE XX DISPUTE RESOLUTION...........................................   26
ARTICLE XXI ASSIGNMENT..................................................   28
ARTICLE XXII MISCELLANEOUS PROVISIONS...................................   28
</TABLE>

                                       i
<PAGE>

                            EXHIBITS AND SCHEDULES

Exhibits
--------

Exhibit A -- Japanese Edwards Business
Exhibit B -  Direct Reporting Positions

Schedules
---------

Schedule A -- Baxter's Duties
Schedule B -- Edwards' Duties
Schedule C -- Products
Schedule D -- Product Prices
Schedule E -- Service Levels
Schedule F -  Agreed Accounting Policies and Allocation Methodology

                                      ii
<PAGE>

                         JAPAN DISTRIBUTION AGREEMENT

     THIS JAPAN DISTRIBUTION AGREEMENT (this "Agreement"), dated as of April 1,
                                              ---------
2000 (the "Effective Date"), is by and between Baxter Limited, a Japanese
           --------------
corporation with its principal offices at 4, Rokubancho, Chiyoda-ku, Tokyo 102-
8468 Japan ("Baxter Japan"), and Edwards Lifesciences LLC, a Delaware limited
             ------------
liability company with its principal offices at 17221 Red Hill Avenue, Irvine,
CA 92614 USA ("Edwards").
               -------

                                   RECITALS

     Prior to the Effective Date, Baxter Japan performed certain sales,
marketing, customer service, and distribution functions in connection with
Edwards' business.

     Baxter (as defined below) is willing to continue to perform such functions
without interruption commencing as of the Effective Date, provided that Edwards
is willing to commit to supplying Edwards' products to Baxter on a long-term
basis.

     Baxter and Edwards desire that Baxter continue to perform such functions as
Edwards' distributor pursuant to the terms and conditions set forth in this
Agreement.

                                   AGREEMENT

     In consideration of the mutual undertakings contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, Baxter and Edwards agree as follows:

                                   ARTICLE I

                      DEFINITIONS; RULES OF CONSTRUCTION

     1.1  Definitions.  As used in this Agreement:

          (a)  "Action" shall mean any action, claim, suit, arbitration,
                ------
inquiry,subpoena, discovery request, proceeding or investigation by or before
any court or grand jury, any governmental or other regulatory or administrative
entity, agency or commission or any arbitration tribunal.

          (b)  "Administrative and Legal Requirements" shall mean any applicable
                -------------------------------------
laws, statues, regulations, rules, codes (including the Fair Competition Code
approved by the Japan Fair Trade Commission), ordinances or orders enacted,
adopted, issued or promulgated by any court or Governmental Body.

          (c)  "Affiliate" shall mean any Person controlling, controlled by, or
                ---------
under common control with another Person. For the purpose of this definition and
Section 13.1(b), the term "control" means the power to direct the management of
                           -------
a Person, directly or indirectly, whether solely through the ownership of
voting securities (as in the case of a subsidiary), by contract, or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to
               -----------       ----------

                                       1
<PAGE>

the foregoing. Edwards Lifesciences Corporation and Baxter International shall
not be deemed to be Affiliates of each other.

          (d) "Agreed Accounting Policies and Allocation Methodology" shall mean
               -----------------------------------------------------
Japanese generally accepted accounting principles consistently applied, provided
                                                                        --------
that, with respect to any matter as to which there is more than one generally
accepted accounting principle, Agreed Accounting Policies and Allocation
Methodology means the generally accepted accounting principles applied in the
preparation of the Valuation Date Balance Sheet attached to the Japan Option
Agreement; provided further that, notwithstanding the foregoing, Agreed
           -------- -------
Accounting Policies and Allocation Methodology shall include the accounting
policies and be subject to the allocation methodology and direct accounts
described in Schedule F; and provided further that, for purposes of the Agreed
                             -------- -------
Accounting Policies and Allocation Methodology, no known adjustments for items
or matters, regardless of the amount thereof, shall be deemed to be immaterial.

          (e) "Annual Operating Plan" shall mean, with respect to any business
               ---------------------
of Baxter Japan, the operating plan for such business approved pursuant to the
normal annual budgeting process.

          (f) "Baxter" shall mean whichever of the following is the party-in-
               ------
interest hereunder at any given time:  (i) Baxter Japan, (ii) Baxter Japan's
direct or indirect successor-in-interest, or (iii) Baxter Japan's direct or
indirect assignee pursuant to ARTICLE XXI.

          (g) "Baxter International" shall mean Baxter International Inc., a
               --------------------
Delaware corporation.

          (h) "Baxter Japan" shall have the meaning set forth in the preamble to
               ------------
this Agreement.

          (i) "Baxter Japan Employee" means any employee of Baxter Japan who is
               ---------------------
not an Edwards Japan Employee.

          (j) "Baxter Japan Officer or Director" shall mean any officer or
               --------------------------------
director of Baxter Japan who is not an Edwards Japan Employee.

          (k) "Competitor" shall mean, with respect to Edwards, any Person to
               ----------
whom a Transfer of the exclusive distribution rights hereunder would violate the
prohibitions on such relationships set forth in Part 3, Chapter 1 (Sole
Distributorship Contract Between Competitors) of the Japan Antimonopoly Act
Guidelines Concerning Distribution Systems and Business Practices.

          (l) "Contract Year" means the period from the Effective Date through
               -------------
March 31, 2001, and each twelve-month period commencing upon April 1 of the year
2001 and each year thereafter during the Term.

                                       2
<PAGE>

          (m) "Edwards Japan Employee" shall mean the employees of Baxter Japan
               ----------------------
who are assigned to the Edwards Lifesciences division of Baxter Japan, including
those employees of the Edwards Lifesciences division at the Miyazaki plant.

          (n) "Edwards" shall have the meaning set forth in the preamble to this
               -------
Agreement.

          (o) "Edwards Lifesciences Corporation" shall mean Edwards Lifesciences
               --------------------------------
Corporation, a Delaware corporation.

          (p) "Edwards Optionholder" shall mean Edwards Lifesciences Limited, a
               --------------------
Japanese corporation.

          (q) "Expenses" shall mean any and all expenses incurred in connection
               --------
with investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals).

          (r) "Governmental Body" shall mean any national, prefectural, or other
               -----------------
governmental authority or regulatory body.

          (s) "Harm to Reputation" shall mean a loss in the fair value of the
               ------------------
goodwill associated with the Japanese Edwards Business or the Other Japanese
Businesses, as the case may be, but not including any loss in value attributable
to Lost Profits for which indemnification is available pursuant to clause (a) or
(b) of Section 14.1 or clause (i) or (ii) of Section 14.2(a), as the case may
be.

          (t) "Insurance Proceeds" shall mean those monies (i) received by an
               ------------------
insured from an insurance carrier, (ii) paid by an insurance carrier on behalf
of the insured or (iii) received from any third Person in the nature of
insurance, contribution or indemnification in respect of any Liability, in each
such case net of any applicable premium adjustments (including reserves and
retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.

          (u) "Japan Option Agreement" shall mean the Option Agreement dated as
               ----------------------
of March 31, 2000, by and between Baxter Japan and Edwards Optionholder.

          (v) "Liability" shall mean any and all debts, liabilities and
               ---------
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising (unless
otherwise specified in this Agreement), including all costs and expenses
relating thereto, and including those debts, liabilities and obligations arising
under any law, rule, regulation, Action, threatened Action, order or consent
decree of any Governmental Authority or any award of any arbitrator of any kind,
and those arising under any contract, commitment or undertaking.

                                       3
<PAGE>

          (w) "Japanese Edwards Business" shall mean the business of the
               -------------------------
Cardiovascular Group of Baxter International Inc. in Japan, all as more
specifically described in Exhibit A hereto, together with any additional
                          ---------
businesses undertaken after the date hereof by the Edwards Lifesciences division
of Baxter Japan.

          (x) "Losses" shall mean any and all losses, costs, obligations,
               ------
liabilities, settlement payments, awards, judgments, fines, penalties, damages,
expenses, deficiencies or other charges, and shall include (i) for the purpose
of clauses (a) and (b) of Section 14.1 and clauses (i) and (ii) of Section
14.2(a) only, Lost Profits for any period during which the sales activities of
Baxter Japan are suspended or restricted by any Governmental Body, and (ii) for
the purpose of clauses (a) and (b) of Section 14.1 and clauses (i) and (ii) of
Section 14.2(a) only, Harm to Reputation.

          (y) "Lost Profits" shall mean, for any period during which the sales
               ------------
activities of the Japanese Edwards Business or the Other Japanese Businesses are
suspended or restricted by any Governmental Body, the amount by which (i) its
Projected Profit for such period exceeds (ii) its actual Income (Loss) Before
Income Taxes for such period, determined in accordance with the Agreed
Accounting Policies and Allocation Methodology.

          (z) "Mutually Approved President" shall mean any person appointed as
               ---------------------------
President of the Edwards Lifesciences division of Baxter Japan and approved in
writing by Edwards.

         (aa) "Notice" shall mean notice given in accordance with Section 22.1.
               ------

         (bb) "Other Japanese Businesses" shall mean all businesses of Baxter
               -------------------------
Japan other than the Japanese Edwards Business.

         (cc) "Person" shall mean an individual, corporation, partnership,
               ------
limited liability company, unincorporated syndicate, association or
organization, trust, trustee, executor, administrator or other legal
representative, governmental authority or agency, or any group of Persons acting
in concert.

         (dd) "Products" shall mean the products manufactured by or on behalf
               --------
of Edwards and set forth in Schedule C (as amended from time to time in
accordance with the terms of this Agreement) together with the parts and
components necessary for the repair and replacement thereof.

         (ee) "Product Line" shall mean a group of Products in Schedule C
               ------------
designated as a product line.

         (ff) "Projected Profit" shall mean, for any period and business, the
               ----------------
projected Income (Loss) Before Income Taxes of such business for such period, as
shown in the most recent Annual Operating Plan for such business (the "Budgeted
                                                                       --------
Profit") multiplied by a fraction, the numerator of which shall be the actual
------
Income (Loss) Before Income Taxes for such business for the most recent twelve
months ending prior to such period and the denominator of which

                                       4
<PAGE>

shall be the Budgeted Profit for such twelve months; provided, however, that if,
                                                     --------  -------
as a result of an event (such as a material acquisition or disposition)
occurring after the approval of the Annual Operating Plan for any business, the
projected Income (Loss) Before Income Taxes shown in such Annual Operating Plan
is no longer representative of the expected Income (Loss) Before Income Taxes of
such business, the Projected Profit shall be an amount that fairly represents
the Income (Loss) Before Income Taxes that such business would have earned in
the relevant period if the event or state of facts giving rise to the claim for
Lost Profits had not occurred. If Projected Profit is determined pursuant to
foregoing proviso, all relevant factors, including the Annual Operating Plan,
          -------
any updated forecasts and the actual performance of the relevant business prior
to the relevant period, shall be taken into account.  Any dispute will respect
to the calculation of Projected Profits shall be resolved pursuant to the
procedures set forth in ARTICLE XX.  For the avoidance of doubt, Projected
Profit shall not take into account any event or state of facts that gives rise
to the claim for which Lost Profits are sought.

         (gg)  "Tax" shall mean:
                ---

         (i)   any federal, state, local or foreign net income, gross income,
     gross receipts, consumption, windfall profit, severance, property,
     production, sales, use, license, excise, franchise, employment, payroll,
     withholding, alternative or add-on minimum, ad valorem, value-added,
     transfer, stamp or environmental tax, or any other tax, custom, duty,
     governmental fee or other like assessment or charge of any kind whatsoever,
     together with any interest or penalty, addition to tax or additional amount
     imposed by any Governmental Body; and

        (ii)   any liability of either party for the payment of amounts with
     respect to payments of a type described in clause (i) above as a result of
     being a member of an affiliated, consolidated, combined or unitary group,
     or as a result of any obligation of either party under a tax sharing
     arrangement or tax indemnity arrangement.

        (hh)   "Term" shall mean the period of time provided in ARTICLE IV
                ----
hereof, including any and all extensions thereof.

        (ii)   "Territory" shall mean the country of Japan.
                ---------

        (jj)   "Third-Party Claims" shall mean any and all Actions by, and
                ------------------
liabilities to, third parties.

        (kk)   "Transfer" shall mean any assignment, transfer, sale or other
                --------
disposition to a Person that is not an Affiliate of the transferor, including
any transfer by way of merger or consolidation or otherwise by operation of law.

    1.2 Other Terms.  Terms defined in other Sections (or in any Schedule)
will have the meanings therein provided.

    1.3 Rules of Construction.  In this Agreement, unless a clear, contrary
intention appears:

                                       5
<PAGE>

          (a)  the singular number includes the plural number and vice versa;

          (b)  reference to any Person includes such Person's successors and
assigns that are permitted by this Agreement;

          (c)  reference to any gender includes the other gender;

          (d)  reference to any Section or Schedule means such Section of this
Agreement or such Schedule to this Agreement, as the case may be, and reference
in any Section or other provision to any clause means such clause of such
Section or provision;

          (e)  "herein," "hereunder," "hereof," "hereto," and words of similar
import shall be deemed references to this Agreement as a whole and not to any
particular Section or other provision hereof;

          (f)  "including" (and with correlative meaning "include") means
"including but not limited to";

          (g)  relative to the determination of any period of time, "from" means
"from and including," "to" means "to but excluding," and "through" means
"through and including";

          (h)  reference to any law (including statutes and ordinances) means
such law (including all rules and regulations promulgated thereunder) as
amended, modified, codified or reenacted, in whole or in part, and in effect at
the time of determining compliance or applicability;

          (i)  accounting terms used herein shall have the meanings historically
attributed to them by Baxter International and its subsidiaries based upon
Baxter International's internal financial policies and procedures in effect
prior to the date of this Agreement;

          (j)  the provisions contained in the Schedules shall control over any
conflicting provisions contained in the body of this Agreement; and

          (k)  the headings contained in this Agreement are for reference only
and are not to be used in construing this Agreement.

     1.4  Construction. The parties acknowledge that they negotiated this
Agreement with the benefit of legal representation, and no rule of construction
or interpretation otherwise requiring this Agreement to be construed or
interpreted against either party shall apply. Subject to Section 22.5, this
Agreement shall be interpreted and construed to the maximum extent possible so
as to uphold the enforceability of each of the terms and provisions hereof, it
being understood and acknowledged that this Agreement was entered into by the
parties after substantial negotiations and with full awareness by the parties of
the terms and provisions hereof and the consequences thereof.

                                       6
<PAGE>

                                   ARTICLE II

                            DISTRIBUTION OF PRODUCTS

     2.1  Grant of Distribution Rights. With respect to sales of all Products in
the Territory, Edwards hereby grants to Baxter and Baxter hereby accepts the
right (which shall be exclusive except as provided herein) to distribute the
Products to customers in the Territory. In connection therewith, Baxter shall
perform sales support, marketing support, customer service, physical
distribution, and distribution-related activities as set forth in ARTICLE VII.

     2.2  Exceptions and Limitations. Edwards reserves all rights not expressly
granted to Baxter hereunder. Subject to Section 21.3, Baxter may appoint
subagents or subdistributors to fulfill its obligations hereunder, provided that
Baxter shall be responsible for the acts and omissions of such subagents and
subdistributors, if any, as if such subagents and subdistributors were employees
of Baxter.

     2.3  Relationship. Baxter shall maintain the principal contractual
relationship with the customer for sales, sales support, credit, collections,
and customer service in connection with the provision of the Products. Edwards
shall use reasonable efforts to cooperate with Baxter and to facilitate Baxter's
fulfillment of its obligations hereunder.

                                  ARTICLE III

                     RESTRICTIONS ON EDWARDS; EXCLUSIVITY

     3.1  Restrictions on Edwards.

          (a)  Edwards and Edwards Lifesciences shall not, and shall cause their
Affiliates, and any other Person acting on behalf of any of them or their
Affiliates, not to distribute or grant, directly or indirectly, to any Person
other than Baxter the right to distribute the Products to customers in the
Territory, provided that Edwards shall have the right:

          (i)  to distribute Products to customers within the Territory other
     than through Baxter if and to the extent Baxter is unable to so distribute
     the Products due to (A) regulatory requirements; or (B) Baxter being
     otherwise prohibited or prevented from selling and/or distributing the
     Products to any customer or class of customers other than by customer
     decision; and

         (ii)  to sell and distribute Products to customers within the Territory
     other than through Baxter if (A) Baxter's rights under this Agreement are
     assigned to a Competitor, or (B) Baxter becomes a Competitor by selling
     products other than the Products.

        (iii)  except as set forth in Section 3.3, sell and distribute products
     that are not Products as defined herein through relationships that do not
     include Baxter.

          (b)  This Agreement shall in no way limit the right of Edwards and its
Affiliates to market, sell, or otherwise distribute the Products outside the
Territory.

                                       7
<PAGE>

     3.2  Exceptions. Edwards shall have the right to request exceptions to the
foregoing restrictions on a case-by-case basis in connection with sales to
specific customers. Such exceptions shall require written approval of Baxter's
President, but such approval shall not be unreasonably withheld.

     3.3  Product Exclusivity.

          (a)  Prior to directly or indirectly selling or distributing to
customers in the Territory any product (other than a Product) developed by
Edwards or manufactured by or on behalf of Edwards, Edwards shall notify
Baxter's President regarding Edwards' intent with respect to such product.
Baxter shall have the right, but not the obligation, to add such product to
Schedule C and this Agreement, and if so added, such product shall be deemed to
be one of the Products. Edwards may delete from Schedule C and this Agreement
any Product, the manufacture and sale of which has been generally discontinued
by Edwards. On or before November 30 of each Contract Year, Edwards shall
provide to Baxter an updated version of Schedule C including any Product
additions or deletions expected to occur in the subsequent Contract Year. In
addition, Edwards shall notify Baxter at least 90 days prior to generally
discontinuing the manufacture and sale of any Product.

          (b)  If Edwards or Edwards Lifesciences is Transferred, then, in
connection with any product of the transferee (or any of its Affiliates) that is
directly or indirectly sold or distributed to customers in the Territory and is
in the same domestic market (as such term is used in the Japan Antimonopoly Act
Guidelines Concerning Sole Distributorship) as the Products (each a "Transferee
                                                                     ----------
Product"), Baxter shall have the right, but not the obligation, to add such
-------
Transferee Product to Schedule C and this Agreement, and if so added, such
Transferee Product shall be deemed to be one of the Products. Notwithstanding
the foregoing, if a Transferee Product is subject to sale or distribution to
customers in the Territory pursuant to an agreement between a third-party
distributor and the transferee (or its Affiliate), then the foregoing right of
Baxter shall not apply to such Transferee Product during the term of such
agreement provided that (i) such agreement was entered into by such third-party
distributor and such transferee (or its Affiliate) more than 90 days prior to
such Transfer; (ii) such transferee (or its Affiliate) shall not extend or renew
the term of such agreement during or after the 90-day period immediately prior
to such Transfer; and (iii) such transferee shall exercise any right of
termination or nonrenewal in connection with such agreement to be effective as
soon as possible after such Transfer.

                                  ARTICLE IV

                                     TERM

     The term of this Agreement (the "Term") shall commence on the Effective
                                      ----
Date and, except as otherwise provided herein, expire at the end of the day on
March 31, 2015.

                                   ARTICLE V

                                PRICES AND FEES

     5.1  Product Prices.  For each Product ordered by Baxter and supplied by
Edwards, Baxter shall pay to Edwards the applicable purchase price set forth in
Schedule D.

                                       8
<PAGE>

     5.2  Price Changes.

          (a)  The purchase prices that Baxter shall pay to Edwards for the
Products shall be adjusted effective on January 1 of each Contract Year and
shall apply to all Products purchased by Baxter during such Contract Year. The
purchase price for each Product shall be set using a resale price method
pursuant to which the purchase price to be paid by Baxter to Edwards shall be
determined by applying a discount (the "Percentage Discount") to an estimate of
                                        -------------------
the Average Sales Price ("ASP") charged by Baxter to a third-party customer
                          ---
during the Term.

          (b)  The Percentage Discount shall be calculated for each Contract
Year and shall be set at a level designed to yield to Baxter an overall net
operating profit with respect to such sales of the Products by the Edwards
Lifesciences division of Baxter Japan that will be equivalent, as a percentage
of sales, to the simple average of the net operating profit of the
cardiovascular division of Baxter Japan for the years 1990 through 1997. The
Percentage Discount may vary from Product to Product, as mutually agreed by the
parties, so long as the overall projected result is consistent with this target.
For each Contract Year, Edwards, in consultation with Baxter, shall prepare the
estimates of the ASP for each Product and the sales volume for each Product. For
each Contract Year, Baxter, in consultation with Edwards and based upon Edwards'
estimates of sales volumes, shall prepare the estimates of Baxter's Costs to
distribute the Products and the total sales discounts, returns and allowances
for the Products.

          (c)  The purchase prices paid by Baxter for the Products shall be
subject to a quarterly adjustment to produce a margin to Baxter that is
equivalent to that which would have resulted if the actual ASPs for such quarter
were equal to the estimated ASPs used in determining the Percentage Discount.

     5.3  Other Fees.  Edwards shall pay or reimburse Baxter for any other fees,
costs or expenses set forth in this Agreement including paying to Baxter any
agreed-upon amounts in connection with the FCA services described in Section 6.3
of Schedule A.

                                  ARTICLE VI

                            INVOICING AND PAYMENTS

     6.1  Invoicing.  Edwards shall bill Baxter by submitting invoices to Baxter
for payment of amounts due under this Agreement. Such invoices will specify the
Products ordered and Baxter's purchase order number and will be accompanied by
or be followed by such other supporting detail as Baxter may reasonably request.

     6.2  Payment. Baxter will pay or cause its Affiliates to pay all amounts
due pursuant to this Agreement within 60 days after the date of each invoice
hereunder.

     6.3  Overdue Payments. If any amounts due hereunder have not been received
by the due date, such overdue amounts shall bear interest from the due date at
the rate of 1% per month, or portion thereof, until received.

     6.4  Disputed Amounts. Either party shall have the right to withhold any
amounts due hereunder if such party in good faith disputes the amount claimed by
the other party to be due

                                       9
<PAGE>

hereunder and such party notifies the other party of such dispute on or before
the applicable due date. The foregoing right to withhold payment of disputed
amounts shall be limited to amounts disputed in good faith, and interest will
accrue in accordance with Section 6.3 and be payable on the net amount
determined to be due. Any such dispute shall be resolved in accordance with
ARTICLE XX.

     6.5  Suspension of Performance.  In addition to any other rights available
to it at law or in equity, upon ten days' prior Notice to Baxter, Edwards may
cease acceptance of orders and suspend supply of Products hereunder if an
undisputed amount due hereunder has not been paid by Baxter within 30 days after
its due date, and such suspension may continue until such payment has been made.

     6.6  No Acknowledgement.  Neither payments made by Baxter nor the
acceptance of payments by Edwards in the amount of or less than the amount shown
on any invoice from Edwards shall be construed as an acceptance or agreement
with the amount so stated or the amount received.  Either party may recover from
the other the amount of any overpayment or underpayment.  Without limiting the
generality of the foregoing, Edwards may supplement any invoice it renders to
Baxter hereunder for less than the full amount to which it is entitled; provided
that such supplement is made within a reasonable time after the date of the
invoice being supplemented.

     6.7  Audit. Either party may audit the other party's books and records to
the extent necessary to determine such other party's compliance with the terms
of this Agreement. In addition, Baxter may inspect or review Edwards' production
and quality control processes and records, and such inspection or review shall
be deemed to be an "audit" subject to the terms of this Section 6.7. The party
performing the audit may use independent auditors who may participate fully in
such audit. If an audit is proposed with respect to information which the party
to be audited wishes not to disclose to the other party ("Restricted
                                                          ----------
Information"), then on the written demand of the party to be audited, the
-----------
individuals conducting the audit with respect to Restricted Information will be
limited to the independent auditors of the party requesting the audit. In such
event, the party to be audited shall pay the costs of the independent auditors
conducting such audit, but only with respect to that portion of the audit
relating to the Restricted Information. Such independent auditors shall enter
into an agreement with the parties hereto, on terms that are agreeable to both
parties hereto, under which such independent auditors shall agree to maintain
the confidentiality of the information obtained during the course of such audit
and establishing what information such auditors will be permitted to disclose to
report the results of any audit of Restricted Information to the party
requesting the audit. Any such audit shall be conducted during regular business
hours and in a manner that does not interfere unreasonably with the operations
of the party being audited. Each party may perform such an audit one time in
each twelve-month period during the Term; provided that a party may perform an
additional audit at any time if the preceding audit reveals a failure to conform
to the terms of this Agreement. Each audit shall begin upon the date specified
by the auditing party in a Notice to the other party a minimum of 30 days prior
to the commencement of the audit and shall be performed diligently and in good
faith and shall be completed within a reasonable period of time.

                                       10
<PAGE>

                                  ARTICLE VII
                                BAXTER'S DUTIES

     During the Term, Baxter shall maintain the facilities and personnel
necessary to fulfill its obligations and responsibilities hereunder including
the duties set forth in Schedule A.

                                 ARTICLE VIII
                                EDWARDS' DUTIES

     During the Term, Edwards shall maintain the facilities and personnel
necessary to fulfill its obligations and responsibilities hereunder including
the duties set forth in Schedule B.

                                  ARTICLE IX
                        STANDARD OF CARE; CONSULTATION

     9.1  General. Each party will use (and will cause its Affiliates to use)
commercially reasonable efforts in the performance of its obligations hereunder
and will do so with the same degree of care, skill and prudence customarily
exercised when engaged in similar activities for itself and its Affiliates.
Subject to the provisions of ARTICLE XIX, if a party's performance is
inaccurate, incomplete, or untimely, such party shall, if practicable, promptly
perform or reperform such obligations. In performing its responsibilities
hereunder, each party shall accord the other party and such other party's
Affiliates the same priority as it provides itself and its Affiliates under
comparable circumstances. Without limiting the generality of the foregoing, in
connection with its performance hereunder, neither party will discriminate
against the other party or any of such other party's Affiliates solely because
the other party or one of such other party's Affiliates is the recipient of such
performance. The parties shall consult with each other with respect to
performance of their obligations hereunder. Each party shall give due
consideration to any suggestion by the other to improve performance.

     9.2  Overall Level of Service. Each party will use commercially reasonable
efforts to perform its obligations with the same levels of efficiency, accuracy
and effectiveness as such obligations were performed immediately prior to the
effective date of this Agreement. In addition, Baxter will use commercially
reasonable efforts to perform its obligations in accordance with the service
levels set forth in Schedule E but shall not be liable for damages caused by any
failure to meet the specified service levels in the absence of gross negligence
or willful misconduct. The parties agree to consult with each other with respect
to such service levels and their respective performance in attaining same. Each
party shall consider any suggestion by the other to improve such party's
performance, but such party shall have no obligation to accept or implement any
such suggestion that it does not, in its sole discretion, deem advisable and in
its best interests.

     9.3  Annual Meetings. Baxter and Edwards shall hold an annual meeting to
discuss (a) the performance of the Japanese Edwards Business as well as product
and market developments relevant to the coming year's operations, and (b) budget
projections affecting the projected price discounts. The annual meeting shall be
held at Edwards Lifesciences headquarters in Irvine, California, or at such
other location as the parties may agree, and shall be

                                       11
<PAGE>

attended by the CEO and General Counsel of each of Baxter International and
Edwards Lifesciences (or their respective designees) and the Representative
Directors of Baxter Japan. The date of the annual meeting shall be determined by
mutual agreement of the parties.

                                   ARTICLE X
                      TRANSFER OF TITLE AND RISK OF LOSS

     Title to the Products and the risk of loss of such Products shall transfer
from Edwards to Baxter at the time that Baxter or Baxter's designee takes
delivery of the Products from Edwards DDU at the port of entry in Japan.

                                  ARTICLE XI

                                  WARRANTIES

     11.1 Product Warranty. The following shall apply to all Products sold or
transferred to Baxter Japan prior to or after the Effective Date. Edwards
warrants to Baxter that, at the time of delivery to Baxter (or Baxter's
designee): (a) the Products have been manufactured by Edwards in accordance with
Good Manufacturing Practices as required by the United States Food and Drug
Administration and Edwards quality control processes and standards which
processes and standards shall meet the minimum requirements of the Ministry of
Health and Welfare of Japan for medical devices and associated products; (b) the
Products conform to the Product specifications in all material respects; (c) the
Products will be free from defects in materials and workmanship under normal use
and service for a period of twelve months commencing on the date that such
Products are received by Baxter Japan; (d) the Products shall not be subject to
expiration for a minimum of nine months thereafter; (e) the design and material
of product packaging (and the quality systems and procedures governing packaging
and transportation operations) are adequate to prevent damage to the Products
including moisture damage, insect damage, and/or contamination with dust or
dirt; and (f) Edwards shall have good and marketable title to all Products free
and clear of all liens or encumbrances (other than any created by Baxter).

     11.2 Disclaimer. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY. IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, TORT
LIABILITY (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL EDWARDS BE LIABLE TO BAXTER
FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

     11.3 Limitation of Liability. ANY LIABILITY OF EDWARDS TO BAXTER UNDER THE
WARRANTY CONTAINED IN THIS ARTICLE XI SHALL BE LIMITED TO THE TOTAL PRICE PAID
BY BAXTER FOR THE PRODUCTS THAT ARE THE SUBJECT OF SUCH LIABILITY PLUS ALL COSTS
FOR FREIGHT AND OTHER DIRECT EXPENSES INCURRED BY BAXTER WITH RESPECT TO SUCH
PRODUCTS. SUBJECT TO THE FOREGOING, IF, AT THE TIME OF DELIVERY TO BAXTER (OR
BAXTER'S DESIGNEE), A PRODUCT FAILS TO CONFORM IN ALL MATERIAL RESPECTS TO THE

                                       12
<PAGE>

PRODUCT SPECIFICATIONS, THEN EDWARDS SHALL EITHER (AT EDWARDS' OPTION) (a)
REPLACE SUCH PRODUCT WITHOUT ANY ADDITIONAL CHARGE TO BAXTER, OR (b) REFUND TO
BAXTER THE PURCHASE PRICE PLUS ALL COSTS FOR FREIGHT AND OTHER DIRECT EXPENSES
INCURRED BY BAXTER.

                                  ARTICLE XII

                                  TRADEMARKS

     12.1 Ownership. Baxter acknowledges that Edwards or its Affiliates are the
owners or licensees of the trademarks and trade names that Edwards and its
Affiliates use in the promotion and sale of the Products hereunder, and that
Baxter has no right or interest in such trademarks or trade names. Prior to
using any such trademarks or trade names, Baxter shall provide to Edwards
specimens of the proposed use of such trademarks or trade names, and Baxter
shall not use such trademarks or trade names unless Edwards approves in writing
of each such proposed use, such approval not to be unreasonably withheld or
delayed. Notwithstanding the foregoing (a) Edwards hereby grants to Baxter Japan
the limited right during the Term to use the EDWARDS or EDWARDS LIFESCIENCES
mark in connection with and to refer to the operating division of Baxter Japan
that engages in the Japanese Edwards Business (i.e., the Edwards Lifesciences
                                               ----
division of Baxter Japan or similar uses); and (b) Edwards hereby grants to
Baxter during the Term the exclusive, limited right to use the EDWARDS and
EDWARDS LIFESCIENCES marks in the Territory in connection with the Japanese
Edwards Business. Baxter Japan's and Baxter's rights to use such Edwards marks
shall be subject to all reasonable usage guidelines communicated by Edwards to
Baxter Japan and Baxter, respectively. Edwards shall not grant to any third-
party the right to use such Edwards marks in the Territory during the Term in
connection with the development, manufacture, marketing, sales or support of
products that are competitive with or otherwise related to the Products
hereunder or any other products or services of the Japanese Edwards Business.

     12.2 Infringement.  Baxter shall notify Edwards promptly of any
infringement or improper use by any third party of the trademarks or trade names
connoting Edwards if it comes to Baxter's attention that such infringement or
improper use is taking place.  In connection therewith, Baxter shall provide to
Edwards all related information of which Baxter has knowledge.  Edwards shall
have sole discretion and control with regard to any proceedings related to
infringement or improper use of its trademarks and trade names.  Baxter may
choose to be represented by its own counsel in any such proceedings, but such
representation shall be solely at Baxter's expense.

     12.3 Equitable Remedies.  Baxter acknowledges that Edwards may not have an
adequate remedy at law for the breach by Baxter of any covenant contained in
Section 12.1.  Accordingly, if Baxter breaches any such covenant, Edwards may,
in addition to the other remedies that may be available to Edwards, file a suit
in equity to enjoin Baxter from any further breach of any of the terms of
Section 12.1.

                                       13
<PAGE>

                                 ARTICLE XIII
                                  TERMINATION

     13.1 Change in Control.

          (a)  General.
               -------

          (i)  In the event of a Change in Control of Edwards, Edwards shall
     give Notice to Baxter within 30 days after the occurrence of such Change in
     Control. Baxter may terminate this Agreement in whole, or solely with
     respect to Edwards' rights set forth in Section 7 of Schedule A, in the
     event of any such Change in Control with respect to Edwards, by giving
     Notice of such termination to Edwards as provided below.

         (ii)  Baxter may exercise the rights of termination described in the
     preceding paragraph (i) by providing to Edwards a Notice of termination,
     specifying the date of termination, at any time within the 60-day period
     immediately following the receipt by Baxter of the applicable Notice of
     Change in Control given by Edwards pursuant to the first sentence of
     Section 13.1(a)(i).

        (iii)  The date of termination specified by Baxter in the Notice of
     termination for a termination in whole shall be the last day of a calendar
     month that is not earlier than the third full calendar month following the
     date of the Notice of termination and not later than the sixth full
     calendar month following the date of the Notice of termination. The date of
     termination specified by Baxter in the Notice of termination for a
     termination solely with respect to Edwards' rights set forth in Section 7
     of Schedule A shall be the last day of a calendar month that is not earlier
     than the first full calendar month following the date of the Notice of
     termination and not later than the third full calendar month following the
     date of the Notice of termination.

          (b)  Definitions.  For purposes hereof, "Change in Control" shall mean
               -----------
(i) the acquisition, directly or indirectly, by any Person or Persons of more
than 30% of the voting stock of either party to this Agreement or any person
that controls either party, other than such an acquisition by a Person that is
controlled by the Ultimate Parent of such party, (ii) any merger or
consolidation involving the Ultimate Parent of Edwards or any Affiliate of such
Ultimate Parent that requires a vote of the stockholders of the Ultimate Parent
of Edwards, (iii) the acquisition by the Ultimate Parent of Edwards of any
Person that constitutes a "significant subsidiary" of such Ultimate Parent
within the meaning of Rule 1-02(w) of Regulation S-X of the Regulations of the
Securities and Exchange Commission, substituting 50 percent for 10 percent in
the tests used therein to determine significant subsidiary, and (iv) the sale,
assignment, transfer or other disposition (including any disposition through a
merger) of all or substantially all of the business and assets of any Person
that controls Edwards. "Ultimate Parent" means Baxter International in the case
of Baxter and Edwards Lifesciences in the case of Edwards.

          (c)  Confidential Information.  During the period commencing with any
               ------------------------
such Change in Control and continuing through the end of the Term (and
thereafter, if appropriate), Edwards shall take any and all action reasonably
requested by Baxter to protect any confidential

                                       14
<PAGE>

information of Baxter from disclosure to or use by any Affiliate of Edwards
other than a Person that, immediately prior to the occurrence of the Change in
Control, was an Affiliate of Edwards that regularly accessed such confidential
information for a reasonable business purpose.

     13.2 Other Terminations. Each party shall have the right to terminate this
Agreement effective upon delivery of Notice to the other party if the other
party materially defaults in the performance of any of its covenants or
obligations contained in this Agreement (including a failure to comply with the
Foreign Corrupt Practices Act (as amended)), and such default is not remedied to
the nondefaulting party's reasonable satisfaction within 30 days after Notice to
the defaulting party of such default, or if such default is not capable of
rectification within 30 days, if the defaulting party has not promptly commenced
to rectify the default within such 30-day period or is not proceeding diligently
to rectify the default.

     13.3 Procedures Upon Termination. Upon any termination of this Agreement,
each party shall complete its work in process and otherwise cooperate with the
other party as reasonably necessary to avoid disruption of the normal business
operations of such other party, and such termination shall not affect either
party's rights that arose prior to the effective date of such termination.
Except as otherwise required pursuant to ARTICLE XVIII and Section 22.10, each
party shall destroy or return to the other party all records made or obtained in
the course of performance hereunder that contain information that is protected
from disclosure by such party under ARTICLE XVIII. If either party elects to
destroy any records as permitted above, such party shall provide the other party
with written confirmation of such destruction.

     13.4 Continued Service. If this Agreement expires or is terminated pursuant
to this ARTICLE XIII, Baxter and Edwards shall comply fully with this Agreement
and use reasonable efforts to adequately service existing customers of the
Products until such expiration or termination becomes effective. Edwards shall
reimburse Baxter for (a) any termination or severance payments actually paid by
Baxter to any Edwards Japan Employees as a result of the termination or
expiration of this Agreement, and (b) any Losses incurred by Baxter as a result
of Baxter's inability to terminate the employment of any Edwards Japan Employees
following such termination or expiration.

     13.5 Sell-Off. Notwithstanding any provision of this Agreement or any other
agreement between Baxter, Edwards, and/or their respective Affiliates, the
parties acknowledge that Baxter and its Affiliates shall be entitled to continue
to sell or otherwise dispose of the Products within the Territory from and after
the effective date of the expiration or termination of this Agreement if such
Products were owned by Baxter on the date of such expiration or termination;
provided that Baxter shall not substantially increase its inventory of Products
in anticipation of such expiration or termination.

                                  ARTICLE XIV
                                   INDEMNITY

     14.1 Baxter's Obligation. Except as provided in Section 14.2(a)(v)(B) and
14.4, Baxter shall indemnify and hold harmless Edwards and each of its
Affiliates, directors, officers, employees, agents and counsel and each of the
heirs, executors, successors and assigns of any of

                                       15
<PAGE>

the foregoing (collectively, the "Edwards Indemnified Parties"), from and
                                  ---------------------------
against any and all Expenses or Losses incurred or suffered by Edwards (and/or
one or more of the Edwards Indemnified Parties), in connection with, relating
to, arising out of or due to, directly or indirectly, any of the following
items:

          (a)  any fines, penalties or other sanctions imposed by a Governmental
Body that (i) arise out of the operation of the Other Japanese Businesses at any
time prior to the fifth anniversary of this Agreement and (ii) affect the
Japanese Edwards Business;

          (b)  any failure of the Other Japanese Businesses to comply, at any
time prior to the fifth anniversary of this Agreement, with any applicable
Administrative and Legal Requirements;

          (c)  any exercise of control or influence over the operation of the
Japanese Edwards Business during the first five years of this Agreement by a
Baxter Japan Officer or Director, without the approval of the Mutually Approved
President; and

          (d)  any and all Third-Party Claims that arise out of or relate to:

          (i)  any actual or alleged patent, copyright or trademark
     infringement, or misappropriation or violation of any other proprietary
     right, arising out of Baxter's performance pursuant to this Agreement (but
     not arising out of or relating to any of the proprietary rights in the
     Products as delivered); or

         (ii)  any tort claim (including any claim for personal injury, wrongful
     death or property damage) to the extent such claim arises from any grossly
     negligent act or omission or willful misconduct by Baxter (or its employees
     or agents) in the course of its performance pursuant to this Agreement,
     including any misrepresentation concerning the characteristics or method of
     usage of Products or relating to the storage, handling or delivery of
     Products.

Expenses shall be reimbursed or advanced when and as incurred promptly upon
submission of statements to Baxter by Edwards or any Edwards Indemnified Party.

     14.2 Edwards' Obligation.

          (a)  Except as provided in Sections 14.2(b) and 14.4, Edwards shall
indemnify and hold harmless Baxter and each of its Affiliates, directors,
officers, employees, agents and counsel and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Baxter
                                                                   ------
Indemnified Parties"), from and against any and all Expenses or Losses incurred
-------------------
or suffered by Baxter (and/or one or more of the Baxter Indemnified Parties), in
connection with, relating to, arising out of or due to, directly or indirectly,
any of the following items (and to the extent related to Products shall apply to
all Products sold or transferred to Baxter Japan prior to or after the Effective
Date):

                                       16
<PAGE>

     (i)     any fines, penalties or other sanctions imposed by a Governmental
Body that (A) arise out of the operation of the Japanese Edwards Business at any
time prior to the fifth anniversary of this Agreement and (B) affect the Other
Japanese Businesses;

     (ii)    any failure of the Edwards Japanese Business to comply, at any time
prior to the fifth anniversary of this Agreement, with any applicable
Administrative and Legal Requirements;

     (iii)   any exercise of control or influence over the operation of Other
Japanese Businesses during the first five years of this Agreement by an officer
or director of the Edwards Lifesciences division of Baxter Japan and without the
approval of Baxter's President;

     (iv)    any claim or Action that is brought by a Edwards Employee against
Baxter Japan and that relates to or arises out of events that occurred at any
time prior to the fifth anniversary of this Agreement, other than a claim or
Action that arises out of (x) an event or action described in Section 14.1(c) or
(y) the gross negligence or willful misconduct of a Baxter Japan Employee; and

     (v)     any and all Third-Party Claims that arise out of or relate to:

             (A)  any tort claim (including any claim for personal injury,
                  wrongful death or property damage) to the extent such claim
                  arises from any grossly negligent act or omission or willful
                  misconduct by Edwards (or its employees or other agents) in
                  the course of its performance pursuant to this Agreement;

             (B)  defects in the Products;

             (C)  any actual or alleged patent, copyright or trademark
                  infringement, or misappropriation or violation of any other
                  proprietary right related to a Product;

             (D)  any actual or alleged breach of any warranty (including
                  written warranties included within the Product packaging) or
                  obligation, if any, accompanying the Products, subject to the
                  limitations in ARTICLE XI to the extent provided therein; and

             (E)  any claim for personal injury, wrongful death or property
                  damage arising out of the use of a Product.

Expenses shall be reimbursed or advanced when and as incurred promptly upon
submission of statements to Edwards by Baxter or any Baxter Indemnified Party.

         (b) Notwithstanding the foregoing, none of the Baxter Indemnified
Parties shall be entitled to indemnification under clause (i), (ii) or (iii) of
Section 14.2(a) for (i) any Expenses or Losses that are included in the Profits
and Losses allocated under the TK Agreement

                                       17
<PAGE>

or (ii) any period during which Baxter or its Affiliates shall cause (A) the
President of the Edwards Lifesciences division of Baxter Japan to be someone
other than a person approved by Edwards or (B) any of the positions listed in
Exhibit B hereto to report directly to anyone other than the Mutually Approved
---------
President.

     14.3 Applicability of Indemnification.  EXCEPT AS EXPRESSLY PROVIDED
HEREIN, THE INDEMNITY OBLIGATION UNDER THIS ARTICLE XIV SHALL APPLY
NOTWITHSTANDING ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY INDEMNIFIED PARTY
AND SHALL APPLY WITHOUT REGARD TO WHETHER THE LOSS, LIABILITY, CLAIM, DAMAGE,
COST OR EXPENSE FOR WHICH INDEMNITY IS CLAIMED HEREUNDER IS BASED ON STRICT
LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN OBLIGATION FOR CONTRIBUTION.

     14.4 Adjustment of Indemnifiable Losses.

          (a) The amount that any party (an "Indemnifying Party") is required to
                                             ------------------
pay to any Person entitled to indemnification hereunder (an "Indemnified Party")
                                                             -----------------
shall be reduced (including retroactively) by any Insurance Proceeds and other
amounts actually recovered by or on behalf of such Indemnified Party in
reduction of the related Expense or Loss.  If an Indemnified Party receives a
payment (an "Indemnity Payment") required by this Agreement from an Indemnifying
             -----------------
Party in respect of any Expense or Loss and subsequently actually receives
Insurance Proceeds or other amounts in respect of such Expense or Loss, then
such Indemnified Party shall pay to the Indemnifying Party a sum equal to the
lesser of (i) the amount of such Insurance Proceeds or other amounts actually
received or (ii) the net amount of Indemnity Payments actually received
previously. The Indemnified Party agrees that the Indemnifying Party shall be
subrogated to such Indemnified Party under any insurance policy.

          (b) An insurer who otherwise would be obligated to pay any claim shall
not be relieved of the responsibility with respect thereto, or, solely by virtue
of the indemnification provisions hereof, have any subrogation rights with
respect thereto, it being expressly understood and agreed that no insurer or any
other third party shall be entitled to a "windfall" (i.e., a benefit he or she
                                                     ----
would not be entitled to receive in the absence of the indemnification
provisions) by virtue of the indemnification provisions hereof.

          (c) If any Indemnified Party realizes a Tax benefit or detriment in
one or more Tax periods by reason of having incurred a Loss for which such
Indemnified Party receives an Indemnity Payment from an Indemnifying Party (or
by reason of the receipt of any Indemnity Payment), then such Indemnified Party
shall pay to such Indemnifying Party an amount equal to the Tax benefit or such
Indemnifying Party shall pay to such Indemnified Party an additional amount
equal to the Tax detriment (taking into account, without limitation, any Tax
detriment resulting from the receipt of such additional amounts), as the case
may be.  The amount of any Tax benefit or any Tax detriment for a Tax period
realized by an Indemnified Party by reason of having incurred a Loss (or by
reason of the receipt of any Indemnity Payment) shall be deemed to equal the
product obtained by multiplying (i) the amount of any deduction or loss or
inclusion in income for such period resulting from such Loss (or the receipt of
any Indemnity Payment or additional amount), as the case may be (without regard
to whether such deduction or loss or such

                                       18
<PAGE>

inclusion in income results in any actual decrease or increase in Tax liability
for such period), by (ii) the highest applicable marginal Tax rate for such
period (provided, however, that the amount of any Tax benefit attributable to an
        --------  -------
amount that is creditable shall be deemed to equal the amount of such creditable
item). Any payment due under this Section 14.4 with respect to a Tax benefit or
Tax detriment realized by an Indemnified Party in a Tax period shall be due and
payable within 30 days from the time the return for such Tax period is due,
without taking into account any extension of time granted to the Party filing
such return.

          (d) All Indemnity Payments under this ARTICLE XIV shall be denominated
in Yen.

     14.5 Procedures for Indemnification of Third-Party Claims.

          (a) In the event of a Third-Party Claim against any one or more of the
Indemnified Parties with respect to which an Indemnified Party intends to make
any claim for indemnification against Baxter under Section 14.1 or against
Edwards under Section 14.2, such Indemnified Party shall promptly give written
notice to the Indemnifying Party describing such Third-Party Claim in reasonable
detail, and the following provisions shall apply. Notwithstanding the foregoing,
the failure of any Indemnified Party to provide notice in accordance with this
Section 14.5(a) shall not relieve the related Indemnifying Party of its
obligations under this ARTICLE XIV, except to the extent that such Indemnifying
Party is actually prejudiced by such failure to provide notice.

          (b) The Indemnifying Party shall have 20 business days after receipt
of the notice referred to in Section 14.5(a) to notify the Indemnified Party
that it elects to conduct and control the defense of such Third-Party Claim.  If
the Indemnifying Party does not give the foregoing notice, the Indemnified Party
shall have the right to defend, contest, settle or compromise such Third-Party
Claim in the exercise of its exclusive discretion subject to the provisions of
Section 14.5(c), and the Indemnifying Party shall, upon request from any of the
Indemnified Parties, promptly pay to such Indemnified Parties in accordance with
the other terms of this Section 14.5(b) the amount of any Expense or Loss
resulting from their liability to the third-party claimant.  If the Indemnifying
Party gives the foregoing notice, the Indemnifying Party shall have the right to
undertake, conduct and control, through counsel reasonably acceptable to the
Indemnified Party, and at its sole expense, the conduct and settlement of such
Third-Party Claim, and the Indemnified Party shall cooperate with the
Indemnifying Party in connection therewith, provided that (i) the Indemnifying
                                            --------
Party shall not thereby permit any lien, encumbrance or other adverse charge to
thereafter attach to any asset of any Indemnified Party; (ii) the Indemnifying
Party shall not thereby permit any injunction against any Indemnified Party;
(iii) the Indemnifying Party shall permit the Indemnified Party and counsel
chosen by the Indemnified Party and reasonably acceptable to the Indemnifying
Party to monitor such conduct or settlement and shall provide the Indemnified
Party and such counsel with such information regarding such Third-Party Claim as
either of them may reasonably request (which request may be general or
specific), but the fees and expenses of such counsel (including allocated costs
of in-house counsel and other personnel) shall be borne by the Indemnified Party
unless (A) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (B) the named parties to any such
Third-Party Claim include the Indemnified Party

                                       19
<PAGE>

and the Indemnifying Party and in the reasonable opinion of counsel to the
Indemnified Party representation of both parties by the same counsel would be
inappropriate due to actual or likely conflicts of interest between them, in
either of which cases the reasonable fees and disbursements of counsel for such
Indemnified Party (including allocated costs of in-house counsel and other
personnel) shall be reimbursed by the Indemnifying Party to the Indemnified
Party; and (iv) the Indemnifying Party shall agree promptly to reimburse to the
extent required under this ARTICLE XIV the Indemnified Party for the full amount
of any Expense or Loss resulting from such Third-Party Claim and all related
expenses incurred by the Indemnified Party. In no event shall the Indemnifying
Party, without the prior written consent of the Indemnified Party, settle or
compromise any claim or consent to the entry of any judgment that does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party a release from all Liability in respect of
such claim. If the Indemnifying Party shall not have undertaken the conduct and
control of the defense of any Third-Party Claim as provided above, the
Indemnifying Party shall nevertheless be entitled through counsel chosen by the
Indemnifying Party and reasonably acceptable to the Indemnified Party to monitor
the conduct or settlement of such claim by the Indemnified Party, and the
Indemnified Party shall provide the Indemnifying Party and such counsel with
such information regarding such Third-Party Claim as either of them may
reasonably request (which request may be general or specific), but all costs and
expenses incurred in connection with such monitoring shall be borne by the
Indemnifying Party.

          (c) So long as the Indemnifying Party is contesting any such Third-
Party Claim in good faith, the Indemnified Party shall not pay or settle any
such Third-Party Claim.  Notwithstanding the foregoing, the Indemnified Party
shall have the right to pay or settle any such Third-Party Claim, provided that
                                                                  --------
in such event the Indemnified Party shall waive any right to indemnity therefor
by the Indemnifying Party, and no amount in respect thereof shall be claimed as
an Expense or a Loss under this Section 14.5(c). If the Indemnifying Party shall
have undertaken the conduct and control of the defense of any Third-Party Claim
as provided above, the Indemnified Party, on not less than 30 days prior written
notice to the Indemnifying Party, may make settlement (including payment in
full) of such Third-Party Claim, and such settlement shall be binding upon the
Parties for the purposes hereof, unless within said 30-day period the
Indemnifying Party shall have requested the Indemnified Party to contest such
Third-Party Claim at the expense of the Indemnifying Party. In such event, the
Indemnified Party shall promptly comply with such request and the Indemnifying
Party shall have the right to direct the defense of such claim or any litigation
based thereon subject to all the conditions of Section 14.5(b). Notwithstanding
anything in this Section 14.5(c) to the contrary, if the Indemnified Party, in
the belief that a claim may materially and adversely affect it other than as a
result of money damages or other money payments, advises the Indemnifying Party
that it has determined to settle a claim, the Indemnified Party shall have the
right to do so at its own cost and expense, without any requirement to contest
such claim at the request of the Indemnifying Party, but without any right under
the provisions of this Section 14.5(c)for indemnification by the Indemnifying
Party.

     14.6 Procedures for Indemnification of Direct Claims. Any claim for
indemnification on account of an Expense or a Loss made directly by the
Indemnified Party against the Indemnifying Party and that does not result from a
Third-Party Claim shall be asserted by written notice from the Indemnified Party
to the Indemnifying Party specifically

                                       20
<PAGE>

claiming indemnification hereunder. Such Indemnifying Party shall have a period
of 30 business days after the receipt of such notice within which to respond
thereto. If such Indemnifying Party does not respond within such 30 business-day
period, such Indemnifying Party shall be deemed to have accepted responsibility
to make payment and shall have no further right to contest the validity of such
claim. If such Indemnifying Party does respond within such 30 business-day
period and rejects such claim in whole or in part, such Indemnified Party shall
be free to pursue resolution as provided in ARTICLE XX

     14.7 No Third-Party Beneficiaries. Except to the extent expressly provided
otherwise in this ARTICLE XIV, the indemnification provided for in this
Agreement shall not inure to the benefit of any third party or parties and shall
not relieve any insurer or other third party who otherwise would be obligated to
pay any claim or assume the responsibility with respect thereto, or, solely by
virtue of the indemnification provisions hereof, provide any subrogation rights
with respect thereto, and each Party agrees to waive such rights against the
other to the fullest extent permitted.

     14.8 Remedies Cumulative. The remedies provided in this ARTICLE XIV shall
be cumulative and, subject to the provisions of ARTICLE XIX below, shall not
preclude assertion by an Indemnified Party of any other rights or the seeking of
any and all other remedies against any Indemnifying Party.

                                  ARTICLE XV
                              COMPLIANCE WITH LAWS

     15.1 Baxter Compliance.  Baxter shall comply (or cause compliance) in all
material respects with all laws, rules, regulations and directives applicable to
the conduct of Baxter's business or the possession of Products pursuant to this
Agreement including the following:

          (a) giving prompt written notice to Edwards if Baxter should become
aware of any defect or condition (actual or alleged) which may alter the quality
of the Products in any material respect or may render any of the Products in
violation of any applicable law, rule, regulation or directive including any
violation which could require any alteration of the specifications of any
Product, affect the sale of any Product, cause revocation of any regulatory
approval with respect to any Product or its sale hereunder, or give rise to a
claim against Edwards by any person, and Baxter shall promptly notify Edwards
upon becoming aware of any changes in any laws, rules, regulations or directives
applicable to the manufacture, sale, packaging, labeling, possession or use of
the Products;

          (b) keeping appropriate records of all lot coded Products and serial
numbered Products shipped to customers; and

          (c) complying with Edwards' reasonable instructions regarding the
return or disposal of any Products affected by holds or recalls.

     15.2 Edwards Compliance.  Edwards shall comply (or cause compliance) in all
material respects with all laws, rules, regulations and directives applicable to
the conduct of

                                       21
<PAGE>

Edwards' business or the manufacture, packaging, labeling and sale to Baxter of
Products pursuant to this Agreement including the following:

          (a)  giving prompt written notice to Baxter if Edwards should become
aware of any defect or condition (actual or alleged) which may alter the quality
of the Products in any material respect or may render any of the Products in
violation of any applicable law or regulation of the Territory, including,
without limitation, any violation which could require any alteration of the
specifications of any Product, affect the sale of any Product, cause revocation
of any federal, state or other regulatory approval with respect to any Product
or its sale hereunder or give rise to a claim against Baxter by any person; and

          (b)  giving prompt written notice to Baxter of any and all Products
affected by holds or recalls and, if Edwards requests that Baxter return or
dispose of any of such Products, promptly reimburse Baxter for the price paid by
Baxter for such returned or disposed Products along with any direct costs of
returning or disposing of such Products.

     15.3 Specific Federal Requirements.

          (a)  To the extent applicable to the subject matter of this Agreement,
and pursuant to the requirements of 42 CFR 420.300 et seq., Baxter shall make
                                                   -------
available to the Secretary of Health and Human Services ("HHS"), the Comptroller
                                                          ---
of the General Accounting Office ("GAO"), or their authorized representatives,
                                   ---
all contracts, books, documents and records relating to the nature and extent of
costs hereunder for a period of four years after the furnishing of services
hereunder.  In addition, if any part of Baxter's obligations is to be provided
by subcontract, Baxter shall require by contract that such subcontractor make
available to the HHS and GAO, or their authorized representatives, all
contracts, books, documents and records relating to the nature and costs
thereunder for a period of four years after the furnishing of services
thereunder.

          (b)  The services provided hereunder will be provided in compliance
with applicable Equal Employment Opportunity requirements including, where
applicable, those set forth in Section 202 of Executive Order 11246, as amended.

     15.4 Additional Requirements.

          (a)  Baxter will periodically confirm that the Products to be imported
are produced under and in accordance with appropriate manufacturing and quality
control systems, and such confirmation will include reviewing the current the
United States Food and Drug Administration Certificate to Foreign Government
(CFG) document which certifies that the applicable manufacturing plant is in
compliance with current Good Manufacturing Practice requirements.

          (b)  Edwards will promptly communicate to Baxter any proposed change
or changes in the Products having the potential to impact product quality,
safety or efficacy, and such changes may include changes in or to: (i) the
design of the Product; (ii) the composition or source of any raw material; (iii)
the method of producing, processing or testing the Product;

                                       22
<PAGE>

(iv) the subcontractors that produce, process or test; (v) the site of
manufacture; (vi) labeling; (vii) the design or material of any packaging
component; and (viii) the sterilization method, condition or site. Such
communications will be directed to Baxter Japan's Regulatory and Scientific
Affairs Director and QA Manager.

          (c)  Edwards will promptly communicate to Baxter any decision by
Edwards to recall or hold any Product if such decision is related to the
Product's quality, safety or efficacy, and such communication shall include: (i)
Product code number of affected Products, (ii) lot or serial number(s) of
affected Products, (iii) the reason for such hold or recall, and (iv)
instructions for the disposition of the Products. Such communications will be
directed to the President of Baxter.

                                  ARTICLE XVI
                                   INSURANCE

     Each party is responsible for carrying any insurance desired by it in its
sole discretion, including comprehensive general liability insurance, insurance
to cover its facilities, products liability insurance and business interruption
insurance.

                                  ARTICLE XVII
                                 FORCE MAJEURE

     The obligations of either party to perform under this Agreement shall be
excused during each period of delay caused by matters (not including lack of
funds or other financial causes) such as strikes, supplier delays, shortages of
raw materials, government orders or acts of God, that are reasonably beyond the
control of the party obligated to perform; provided that nothing contained in
this Agreement shall affect either party's ability or discretion with respect to
any strike or other employee dispute or disturbance and all such strikes,
disputes or disturbances shall be deemed to be beyond the control of such party.
A condition of force majeure shall be deemed to continue only so long as the
affected party shall be taking all reasonable actions necessary to overcome such
condition. If either party shall be affected by a condition of force majeure,
such party shall give the other party prompt Notice thereof, which Notice shall
contain the affected party's estimate of the duration of such condition and a
description of the steps being taken or proposed to be taken to overcome such
condition of force majeure. Any delay occasioned by any such cause shall not
constitute a default under this Agreement, and the obligations of the parties
shall be suspended during the period of delay so occasioned. During any period
of force majeure, the party that is not directly affected by such condition of
force majeure shall be entitled to take any reasonable action necessary to
mitigate the effects of such condition of force majeure, and the provisions of
Section 3.1 shall be suspended to the extent necessary to permit any such
action, and any financial obligations shall be adjusted in a fair and equitable
manner.

                                 ARTICLE XVIII
                                CONFIDENTIALITY

     18.1  Baxter Information. Edwards shall hold (and shall use reasonable
efforts to cause its employees and representatives to hold) in confidence (in a
manner consistent with

                                       23
<PAGE>

Edwards' treatment of its own confidential information) all information
concerning Baxter (a) contained in any of the Schedules to this Agreement or
otherwise received by Edwards from Baxter after the Effective Date relating to
the determination of the fees and charges payable hereunder, (b) obtained from
Baxter using access to Baxter's information through any interface between
Baxter's systems and Edwards' systems maintained in connection with Baxter's
provision of services hereunder, (c) obtained from Baxter in the course of an
audit pursuant to Section 6.7, or (d) furnished to or obtained by Edwards after
the Effective Date in the course of its receipt of services hereunder. Edwards
shall not use such information for any purpose other than as contemplated under
this Agreement or for verifying compliance with this Agreement.

     18.2 Edwards Information. Baxter shall hold (and shall use its reasonable
efforts to cause its employees and representatives to hold) in confidence (in a
manner consistent with Baxter's treatment of its own confidential information)
all information concerning Edwards (a) furnished to or obtained by Baxter after
the Effective Date in the course of providing services hereunder, or (b)
obtained from Edwards using access to Edwards' information through any interface
between Baxter's systems and Edwards' systems maintained in connection with
Baxter's provision of services hereunder. Baxter shall not use such information
for any purpose other than as contemplated under this Agreement or for verifying
compliance with this Agreement.

     18.3 General.

          (a)  Each party shall be responsible for preventing unauthorized
access by such party's agents and employees to data transferred to or otherwise
made available to the other party under this Agreement.

          (b)  The obligations of confidentiality and nondisclosure imposed
under this ARTICLE XVIII shall not apply to data and information that the
recipient can demonstrate:

          (i)   is published or is or otherwise becomes available to the general
     public as part of the public domain without breach of this Agreement by the
     recipient;

          (ii)  has been furnished or made known to the recipient by a third
     party without any obligation on the recipient to keep it confidential and
     under circumstances that are not known to the recipient to involve a breach
     of the third party's obligations to the other party;

          (iii) was developed independently of information furnished to the
     recipient under this Agreement; or

          (iv)  was known to the recipient at the time of receipt thereof from
     the other party, was not improperly obtained from the other party and is
     not otherwise subject to (a) the confidentiality restrictions contained in
     the Reorganization Agreement dated as of March 15, 2000, between Baxter
     International and Edwards Lifesciences or (b) any other obligation to keep
     it confidential.

     18.4 Injunctive Relief. Each party (the "first party") acknowledges that
the other party would not have an adequate remedy at law for the breach by the
first party of any one or more of

                                       24
<PAGE>

the covenants contained in this ARTICLE XVIII and agrees that, in the event of
such breach, the other party may, in addition to the other remedies which may be
available to it, apply to a court for an injunction to prevent breaches of this
ARTICLE XVIII and to enforce specifically the terms and provisions of this
Article.

     18.5 Required Disclosures. The provisions of this Section shall not
preclude disclosures required by law; provided, however, that each party will
use reasonable efforts to notify the other, prior to making any such disclosure,
and permit the other to take such steps as it deems appropriate (including
obtaining a protective order) to minimize any loss of confidentiality.

                                  ARTICLE XIX
                      LIMITATION OF LIABILITY AND REMEDIES

     19.1 Damages.

          (a)  Except for the right to recover Lost Profits and Harm to
Reputation under clauses (a) and (b) of Section 14.1 and clauses (i) and (ii) of
Section 14.2(a) and except for damages asserted by a third party against a party
entitled to indemnification hereunder, in no event, whether based on contract,
indemnity, warranty, tort (including negligence), strict liability or otherwise,
shall either party or any of its directors, officers, employees or agents, be
liable for incidental, consequential, special, exemplary, or punitive damages.
The foregoing limitation and disclaimer shall apply irrespective of whether the
possibility of such incidental, consequential, special, exemplary, or punitive
damages had been disclosed in advance or could have reasonably been foreseen.

          (b)  The limitations and disclaimers of obligations and liabilities
contained in this ARTICLE XIX are intended to apply to the fullest extent
permitted by law; provided that such limitations and disclaimers shall not limit
amounts payable with respect to any express indemnity provided for in this
Agreement.

     19.2 Exclusive Remedies.

          (a)  Except in the case of the gross negligence or willful misconduct
of Baxter or its Affiliates, Edwards' exclusive remedies against Baxter for any
breach of, or other act or omission arising out of or relating to, this
Agreement or Baxter's performance hereunder shall be:

          (i)   the right to receive refunds of the amount of any payment in
     excess of amounts owed under this Agreement;

          (ii)  the right to require reperformance of any obligation to the
     extent required pursuant to ARTICLE IX;

          (iii) the right to indemnification as provided in Section 14.1;

          (iv)  the right to injunction, specific performance or other equitable
     nonmonetary relief when available under applicable law;

                                       25
<PAGE>

          (v)   the right to terminate this Agreement for material breach as set
     forth in Section 13.2; and

          (vi)  the right to actual damages for breach of ARTICLE XVIII.

          (b)   Except in the case of the gross negligence or willful misconduct
of Edwards or its Affiliates, Baxter's exclusive remedies against Edwards for
any breach of, or other act or omission arising out of or relating to, this
Agreement or Edwards' performance hereunder shall be:

          (i)   the right to indemnification as provided in Section 14.2;

          (ii)  the right to require Edwards to repair or replace (at Edwards'
     option and expense) any Product that proves not to be in conformity with
     applicable labeling or specifications, and Edwards shall pay the
     transportation and other costs incurred by Baxter with respect to any
     Products returned to Baxter for repair or replacement under this Section
     19.2(b)(ii), or, at Edwards' option, reimburse Baxter for any such costs;

          (iii) the right to injunction, specific performance or other equitable
     nonmonetary relief when available under applicable law;

          (iv)  the right to terminate this Agreement for material breach as set
     forth in Section 13.2; and

          (v)   the right to actual damages for breach of ARTICLE XVIII.

                                  ARTICLE XX
                              DISPUTE RESOLUTION

     20.1 General. Any dispute arising out of or relating to this Agreement
shall be resolved in accordance with the procedures specified in this ARTICLE
XX, which shall be the sole and exclusive procedures for the resolution of any
such disputes.

     20.2 Escalation.  The parties will attempt in good faith to resolve any
claim or controversy arising out of or relating to the execution, interpretation
and performance of this Agreement (including the validity, scope and
enforceability of this mediation and arbitration provision) promptly by
negotiations between executives who have authority to settle the controversy and
who are at a higher level of management than the persons with direct
responsibility for the administration of this Agreement.  Any party may give the
other party written notice of any dispute not resolved in the normal course of
business.  Within fifteen days after delivery of the notice, the receiving party
shall submit to the other a written response.  The notice and the response shall
include (a) a statement of each party's position and a summary of arguments
supporting that position, and (b) the name and title of the executive who will
represent that party and of any other person who will accompany the executive.
Within 30 days after delivery of the notifying party's notice, the executives of
both parties shall meet at a mutually acceptable time and place, and thereafter
as often as they reasonably deem necessary, to attempt to resolve the dispute.
All reasonable requests for information made by one party to the other

                                       26
<PAGE>

will be honored. All negotiations pursuant to this clause are confidential and
shall be treated as compromise and settlement negotiations for purposes of
applicable rules of evidence.

     20.3 Arbitration.  Any dispute arising out of or relating to this Agreement
or its breach, termination or validity which has not been resolved by the
specified non-binding procedure within 90 days of the initiation of the date of
delivery of notice shall be settled by binding arbitration in accordance with
the CPR Non-Administered Arbitration Rules in effect on the date of this
Agreement, by three independent and impartial arbitrators, none of whom shall be
appointed by either party.  The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment upon the award
rendered by the arbitrators may be entered by any court having jurisdiction
thereof. The place of the arbitration shall be Lake County, Illinois, or Orange
County, California, and shall be determined by the party that initiated the
dispute resolution process. The arbitrators may award attorneys' fees in their
discretion. Otherwise, the arbitrators are not empowered to award damages in
excess of compensatory damages, and each party hereby irrevocably waives any
right to recover such damages.

     20.4 Procedures.  The parties may request limited discovery in accordance
with the Federal Rules of Civil Procedure for a period of 120 days after the
initiation of the arbitration process.  All issues regarding compliance with
discovery requests shall be decided by the arbitrators pursuant to the Federal
Rules of Civil Procedure.  The parties agree that the recipient of a discovery
request shall have ten business days after the receipt of such request to object
to any or all portions of such request and shall respond to any portions of such
request not so objected within 30 business days of the receipt of such request.
All objections shall be in writing and shall indicate the reasons for such
objections.  The objecting party shall ensure that all objections and responses
are received by the other party within the above time periods; failure to comply
with the specified time period shall be addressed as set forth in F.R.C.P. 37.
Any party seeking to compel discovery following receipt of an objection shall
file with the other party and the arbitrators a motion to compel, including a
copy of the initial request and the objection.  The arbitrators shall allow ten
business days for the responses to the motion to compel before ruling.  Claims
of privilege and other objections shall be determined as they would be in United
States federal court in a case applying Illinois law.  The arbitrators may grant
or deny the motion to compel, in whole or in part, concluding that the discovery
request is or is not appropriate under the circumstances, taking into account
the needs of the parties and the desirability of making discovery expeditious
and cost-effective.  The statute of limitations of the State of Illinois
applicable to the commencement of a lawsuit shall apply to the date of initial
written notification of a dispute and shall be extended until commencement of
arbitration if all interim deadlines have been complied with by the notifying
party.

     20.5 Injunctive Relief.  Nothing contained in this ARTICLE XX shall prevent
either party from resorting to judicial process if injunctive or other equitable
relief from a court is necessary to prevent serious and irreparable injury to
one party or to others.  The use of arbitration procedures will not be construed
under the doctrine of laches, waiver or estoppel to affect adversely either
party's right to assert any claim or defense.

                                       27
<PAGE>

                                  ARTICLE XXI
                                  ASSIGNMENT

     21.1 General.  This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, provided, however, that, except as provided below, Edwards shall not
Transfer its interest in the Agreement, including Transfers by operation of law
such as by way of merger or consolidation, without Baxter's prior written
consent, which consent may not be unreasonably withheld.

     21.2 Transfers by Baxter.  Baxter may Transfer its rights and obligations
hereunder to any Person to which Baxter shall Transfer the business and assets
of Baxter related to Baxter's fulfillment of its obligations hereunder, provided
that any such acquiring Person shall assume in writing the portion of Baxter's
obligations hereunder relating to the business and assets so Transferred, and
shall deliver a signed copy of such assumption instrument to Edwards.  Baxter
shall have no further liability in connection with any of its obligations so
assumed by such acquiring Person.

     21.3 Delegation.  Baxter shall have the right to delegate performance of
any of its obligations hereunder to any Person that is not a Competitor of
Edwards, but no such delegation shall relieve Baxter of any liability therefor
except as otherwise provided in Section 21.2.

                                 ARTICLE XXII
                           MISCELLANEOUS PROVISIONS

     22.1 Notices.  All notices and other communications required under this
Agreement shall be in writing and shall be deemed to have been given if
delivered by hand, or sent by courier or facsimile transmission (provided that
in the case of facsimile transmission, a confirmation copy of the notice shall
be delivered by hand or sent by courier within 2 days of transmission),
addressed:

     To Baxter:

          Baxter Limited
          4, Rokubancho, Chiyoda-ku
          Tokyo 102-8468 Japan
          Attention:  President
          (facsimile number:  81-3-5213-5111)

                                       28
<PAGE>

          with a copy to:

               Baxter International Inc.
               One Baxter Parkway
               Deerfield, Illinois 60015
               USA
               Attention:  General Counsel
               (facsimile number:  847-948-4634)

          To Edwards:

               Edwards Lifesciences LLC
               17221 Red Hill Avenue
               Irvine, California 92614
               USA
               Attention:  International Counsel
               (facsimile number:  949-250-6868)

          with copies to:

               Edwards Lifesciences Limited
               Rokubancho 2-8, Chiyoda-ku
               Tokyo 102-0085 Japan
               Attention:  Chairman and Representative Director
               (facsimile number:  81-3-5213-5802)

          and

               Edwards Lifesciences Corporation
               17221 Red Hill Avenue
               Irvine, California 92614
               USA
               Attention:  General Counsel
               (facsimile number:  949-250-6868)

until notice of a change in address or addressee is given as provided in this
Section 22.1.  All notices given in accordance with this Section 22.1 shall be
effective, if delivered by hand or by courier, at the time of delivery, and, if
communicated by facsimile transmission, at the time of transmission.

                                       29
<PAGE>

     22.2 Entire Agreement.  This Agreement is the entire agreement between the
parties hereto with respect to the subject matter hereof, there being no prior
written or oral promises or representations not incorporated herein.

     22.3 Choice of Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois and the federal
laws of the United States of America applicable therein, as though all acts and
omissions related hereto occurred in Illinois.  Subject to ARTICLE XX (including
the right to obtain judgment upon the award rendered by the arbitrators in any
court having jurisdiction thereof), any lawsuit arising from or related to this
Agreement shall only be brought in the United States District Court for the
Northern District of Illinois, the Circuit Court of Lake County, Illinois, the
United States District Court for the Central District of California, or the
Superior Court of Orange County, California, and the specific choice from among
the foregoing shall be determined by the party initiating such lawsuit.  To the
extent permissible by law, the parties hereby consent to the jurisdiction and
venue of such courts.  Each party hereby waives, releases and agrees not to
assert, and agrees to cause its Affiliates to waive, release and not assert, any
rights such party or its Affiliates may have under any foreign law or regulation
that would be inconsistent with the terms of this Agreement as governed by
Illinois law.

     22.4 Amendment; Waiver.  No amendment or modification of the terms of this
Agreement shall be binding on either party unless reduced to writing and signed
by (a) in the case of Baxter, its President, and (b) in the case of Edwards, its
President.  The waiver by either party of any particular default by the other
party shall not affect or impair the rights of the party so waiving with respect
to any subsequent default of the same or a different kind; nor shall any delay
or omission by either party to exercise any right arising from any default by
the other affect or impair any rights which the nondefaulting party may have
with respect to the same or any future default.

     22.5 Severability.  If any provision of this Agreement is held to be
invalid, illegal, void or otherwise unenforceable in any jurisdiction by reason
of any rule of law, administrative decision, judicial decision, public policy or
otherwise, such provision shall be ineffective in such jurisdiction to the
extent of such invalidity, illegality, voidness or unenforceability without
affecting, impairing or invalidating any remaining provisions of this Agreement.
Any such invalid, illegal, void or otherwise unenforceable provisions shall be
replaced by valid enforceable substitute provisions that are as similar as
possible to such invalid, illegal, void or otherwise unenforceable provisions
with respect to the economic and other commercial effects upon the parties,
which substitute provisions shall be established pursuant to the dispute
resolution procedure set forth in ARTICLE XX.

     22.6 Relationship of the Parties.  By virtue of this Agreement, neither
party shall be deemed the other party's agent, partner, joint venturer, or legal
representative, and neither party has express or implied authority to bind the
other in any manner whatsoever.

     22.7 Survival.  The rights and obligations of the parties under ARTICLE IX,
ARTICLE XI, ARTICLE XIV, ARTICLE XVIII, ARTICLE XIX, and ARTICLE XX and Sections
6.7, 13.1(c), 13.3, 13.4 and 13.5, as well as all rights and obligations with
respect to any

                                       30
<PAGE>

amounts that remain unpaid under ARTICLE VI hereof as of the date of termination
or expiration, shall survive any termination or expiration of this Agreement.

     22.8  Counterparts.  For convenience of the parties hereto, this Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original for all purposes.

     22.9  Beneficiaries.  Except for the provisions of ARTICLE XIV, which are
also for the benefit of the other Persons indemnified, this Agreement is solely
for the benefit of the parties hereto and their respective Affiliates,
successors and permitted assigns and shall not confer upon any other Person any
remedy, claim, liability, reimbursement or other right in excess of those
existing without reference to this Agreement.

     22.10 Records Retention.

           (a) Each party will retain all information obtained or created in the
course of performance hereunder in accordance with the records retention
guidelines of the other party existing from time to time.  Each party has
advised the other of its respective guidelines as in effect on the Effective
Date and will advise the other party of any subsequent changes therein.

           (b) The following provisions of this Section apply only to records
required for tax purposes as identified in Edwards' record retention guidelines.
In accordance with Baxter's records retention policy as of the date hereof with
respect to such records, Baxter shall retain (as necessary for a period of up to
10 years or more) all information needed for tax audits which was obtained or
created in the course of performance hereunder with respect to Edwards.  If any
particular hardware or software is necessary to access any information to be
retained by Baxter pursuant to this Section 22.10(b), then Baxter shall ensure
that it has the continuing right to use such hardware and software for as long
as Baxter is obligated to retain such information hereunder.  Baxter has advised
Edwards of Baxter International's records retention policy currently in effect.
Baxter will provide Edwards (and afford Edwards full access to, and the right to
inspect and copy at any reasonable time) such information and use of such
equipment and software upon Edwards' reasonable request, at no cost to Edwards
(other than reasonable out-of-pocket expenses of Baxter).  At the expiration of
the applicable records retention period, Baxter may dispose of the information
upon prior Notice to Edwards.  For a period of 45 days immediately following
such Notice, Edwards shall have the right to remove and take title to all such
information (in any form including books, records, computer tapes, and computer
disks).  Edwards shall reimburse Baxter for any reasonable out-of-pocket
expenses incurred to retain such information after this Agreement is terminated
or expires.

           (c) The foregoing record retention requirements are in addition to
any record retention requirements that are contained in the Reorganization
Agreement between Baxter International and Edwards Lifesciences dated as of
March 15, 2000. In the event of any conflict in the period for retention of
records between this Agreement and the Reorganization Agreement, the longest
retention period shall be applicable.

                               *  *  *  *  *  *

                                       31
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their authorized representatives as of the effective date of this Agreement.

BAXTER LIMITED                               EDWARDS LIFESCIENCES LLC

By: /s/ James Robert Hurley                  By: /s/ Jay P. Wertheim
   -------------------------                    ---------------------
   Name:  James Robert Hurley                   Name:  Jay P. Wertheim
   Title: President and Representative          Title: Assistant Secretary
          Director

For purposes of Sections 3.1 and 3.3(b) only:

EDWARDS LIFESCIENCES CORPORATION

By: /s/ Bruce P. Garren
    -------------------
    Name:  Bruce P. Garren
    Title: Corporate Vice President

                                       32
<PAGE>

                                   EXHIBIT A
                           JAPANESE EDWARDS BUSINESS

The Cardiovascular Group sells or is engaged in the development of following
product categories in Japan through its three business units (Cardiovascular
Surgery or CVS, Anesthesia and Medication Delivery or AMD, Vascular and
Interventional Cardiology or VIC);

 .    Tissue and mechanical heart valves and rings, pericardial patches,
     oxygenators, and cardiopulmonary bypass circuits including reservoirs and
     arterial filters, cardioplegia devices, heart-lung machines, centrifugal
     pumps, arterial and venous cannulae, CDI oxygen monitor cells, Novacor left
     ventricular assist devices

 .    Thermo-dilution (Swan-Ganz) catheters, pacing catheters, central venous
     catheters, venous introducers, Invos cerebral tissue oxygen monitor
     devices, and VIA continuous arterial blood gas monitor devices, Lifespan
     PTFE endovascular grafts, Fogarty atraumatic occlusion clips and clamps,
     Intramed angioscopy equipment, Thombex PMT clot extraction catheters

 .    Direct blood pressure monitor kit, disposable pressure transducers,
     Embolectomy (Fogarty) catheters, Lifepath abdominal aortic aneurysm
     endovascular graft system, Datascope intra-aortic balloon pumps and
     catheters, VasoSeal collagen hemostasis devices, UniCath percutaneous
     transluminal coronary angioplasty balloon catheters and stents, Medtronic
     pacemakers

The Cardiovascular Group in Japan also manufacturers Custom Pac cardiopulmonary
circuits and direct blood pressure monitor kits at Miyazaki plant.

                                       1
<PAGE>

                                   EXHIBIT B

                           DIRECT REPORTING POSITIONS

            Name                        Responsibilities
--------------------------------------------------------------
     Kosuke Kato                    GM, CVS
                                    Manufacturing
     Akihiko Honda                  GM, AMD
     Pawan Tomkoria                 GM, VIC
                                    Logistics
     Hitoshi Fukuhara               Finance
                                    Information Services
     Shinsaku Murakawa              Business Development
                                    Communications
     Masami Ikezawa                 Human Resources
                                    General Administrative
     Takeshi Aizawa                 Regulatory Affairs
                                    Quality Control
     Open                           Legal

                                       1
<PAGE>

                                  SCHEDULE A

                                BAXTER'S DUTIES

1.   Sales.  Baxter shall use commercially reasonable efforts to make sales of
     -----
     the Products in accordance with the following, and such efforts shall be in
     lieu of any standard of performance implied by any applicable statute or
     regulation:

     1.1  Baxter shall generate sales interest in the Products.

     1.2  Baxter shall promote sales of the Products, and such promotion shall
          be at a level that is no less than the level of promotion by Baxter
          prior to the Effective Date.

     1.3  Baxter shall participate with Edwards in quarterly reviews of Baxter's
          performance relative to applicable service levels.

     1.4  Baxter shall permit Edwards to offer sales incentives directly to
          Baxter sales personnel in accordance with Baxter's marketing plan.

2.   Marketing.  Baxter shall use commercially reasonable efforts to market the
     ---------
     Products in accordance with the following and such efforts shall be in lieu
     of any standard of performance implied by any applicable statute or
     regulation:

     2.1  Baxter shall provide all appropriate marketing services that are
          reasonably commensurate with the Product sales targets agreed upon by
          the parties.

     2.2  Baxter shall develop and implement a marketing plan for the Territory
          and shall use reasonable efforts to ensure that such plan complements
          Edwards' overall marketing strategy.

     2.3  Baxter shall maintain its own communications resources and, prior to
          publication, shall submit to Edwards for Edwards' approval all Baxter
          promotional/ communication endeavors specifically referring to the
          Products.

3.   Materials Management.
     --------------------

     3.1  Finished Goods Requirements Planning.  Baxter will adhere to
          ------------------------------------
          reasonable stocking, storage and delivery levels established by
          Edwards for the Products in the Territory; provided that Baxter shall
          not be required to carry more than 60 days inventory on hand in the
          Territory based upon either (a) sales targets agreed upon by the
          parties, if any; or (b) Baxter's forecasts provided in accordance with
          Section 3.6 of this Schedule.

     3.2  Purchasing.  Baxter shall submit purchase orders to Edwards for the
          ----------
          Products in accordance with Edwards' reasonable procedures therefor.

                                       1
<PAGE>

     3.3  Inspection.  Baxter shall implement inspection procedures to verify
          ----------
          that the Products are free from damage when received.

     3.4  Reporting.  Baxter shall provide to Edwards a monthly sales report
          ---------
          detailing Product sales for such month by customer, subdivision and
          Product.

     3.5  Tracing Reports.  In addition, upon Edward's reasonable request,
          ---------------
          Baxter will provide to Edwards electronically (to the extent that
          Baxter is reasonably capable) a sales tracing report.  At a minimum,
          such report will include for all Products (a) the model number, (b)
          the quantity shipped, (c) the average selling price, (d) the lot
          number or serial number, and (e) the customer name and address.

     3.6  Forecasts.  Within seven business days after the end of each calendar
          ---------
          month, Baxter shall provide to Edwards a rolling twelve-month forecast
          (beginning with the then-current month) of Baxter's requirements for
          the Products including such requirements for sales, samples,
          promotions, consignment, inventories and backorders.  Baxter shall
          send each forecast to Irvine, California, or shall load it into
          Baxter's Global Data Exchange system in a manner that will permit
          access by Edwards.

4.   Distribution.
     ------------

     4.1  Warehouse Management.
          --------------------

          4.1.1  Baxter will be responsible for the management of all Baxter
                 facilities.

          4.1.2  Except as otherwise agreed, Baxter will adhere to existing
                 receiving, storage, and shipping practices including such
                 practices applicable to time-/ temperature-sensitive Products.

     4.2  Order Fulfillment.
          -----------------

          4.2.1  Baxter shall take and process customer orders for the Products.

          4.2.2  Baxter will pick, pack, and ship each customer order in
                 accordance with the terms of the order or other terms agreed
                 upon between Baxter and the customer.

     4.3  Outbound Shipment.
          -----------------

          4.3.1  Baxter shall be responsible for the selection and routing
                 (private fleet or commercial carrier) of each customer order.

          4.3.2  Baxter shall pay for freight for all outbound shipments (i.e.,
                                                                          ----
                 shipments to customers).

                                       2
<PAGE>

          4.3.3  Baxter will be responsible for freight claims and will be
                 responsible for resolving with customers any disputes regarding
                 product deliveries, shortages, and overages.

     4.4  Lot Tracing.  For each Product shipment, Baxter shall maintain records
          -----------
          including the model number, lot or serial number, quantity shipped,
          and the name and address of the first consignee.

     4.5  Returned Goods Management.  Except as otherwise provided in connection
          -------------------------
          with FCAs, Baxter shall be solely responsible for all dealings with
          customers related to Product returns.

     4.6  Customer Service.  Baxter shall provide customer service and support
          ----------------
          as follows:

          4.6.1  Product/Service Specifications.  Baxter shall forward to
                 ------------------------------
                 Edwards any requests for Product information that is not
                 reasonably available to Baxter.

          4.6.2  Service Commitment.  Baxter shall use commercially reasonable
                 ------------------
                 efforts to provide high-quality, professional customer service
                 to customers of the Products.

          4.6.3  Order Tracing.  Baxter shall maintain the ability to identify
                 -------------
                 to customers the location of Products in the order process.

     4.7  Post-Sales Service.
          ------------------

          4.7.1  Credit and Collection.  Baxter shall be responsible for all
                 ---------------------
                 collection and credit approval processes for all invoices.
                 Baxter shall have the sole authority to issue credits.

          4.7.2  Credits for Shortages, Damages, and Misdeliveries.  Baxter
                 -------------------------------------------------
                 shall issue credits and resolve customer issues. Baxter shall
                 communicate with Edwards regarding same if there are recurring
                 problems that may affect Edwards' responsibilities.

          4.7.3  Pricing Disputes.  Baxter will handle pricing disputes between
                 ----------------
                 Baxter and its customers.

          4.7.4  Back Order Status and Resolution.  Baxter will be accountable
                 --------------------------------
                 for managing customer communication of back orders to provide
                 accurate and timely information on resolution. Appropriate
                 product substitution information will be communicated to
                 customer. Baxter will transmit back order details in the same
                 manner as such details were transmitted immediately prior to
                 the Effective Date.

          4.7.5  Product Complaint.  Initial customer complaints will be logged
                 -----------------
                 by Baxter customer service and forwarded to Edwards' Vice
                 President of Regulatory

                                       3
<PAGE>

                 Affairs (or such person's designee) at a frequency to be agreed
                 upon by the parties. Such complaints may be escalated for
                 resolution per applicable regulatory procedures.

     4.8  Pricing/Billing.
          ---------------

          4.8.1  Baxter will negotiate the delivered price for the Products.

          4.8.2  Baxter shall process all billing to the customer.

     4.9  Product Registrations.  Baxter shall hold all Product registrations
          ---------------------
          and shall be the importer of record for all Products.

5.   Communications With Regulatory Agencies.
     ---------------------------------------

     5.1  The parties shall mutually agree upon a strategy for all
          communications by Baxter with applicable regulatory authorities in
          connection with the Products.

     5.2  Baxter shall be responsible for communications with applicable
          regulatory authorities in the Territory if such regulatory authorities
          require notification in connection with their regulation of the
          Products.

6.   Product Field Corrective Actions.
     --------------------------------

     6.1  Baxter shall cooperate with Edwards in performing any FCA by
          identifying affected Products and customers, developing an action-
          specific management plan detailing specific responsibilities, and
          notifying customers of any such action.  Baxter shall encourage
          customers to follow instructions related to any hold or recall
          situation.

     6.2  Baxter shall perform field corrective action ("FCA") services in a
                                                         ---
          manner consistent with the quality systems, procedures and
          specifications as of the Effective Date including:

          6.2.1  identification of customers who received the Product involved
                 in the FCA;
          6.2.2  notification to customers of the FCA in accordance with the FCA
                 strategy developed by Edwards;
          6.2.3  retrieval of affected Products from customers and storage of
                 such Products inside a Baxter facility for up to six months
                 from the date of initiation of the FCA;
          6.2.4  if instructed by Edwards, shipment of Products affected by the
                 FCA to Edwards, freight collect;
          6.2.5  minor inspection of Products by Baxter if required by the FCA
                 strategy developed by Edwards;
          6.2.6  discard and destruction of Products by Baxter utilizing
                 nonhazardous waste disposal methods;

                                       4
<PAGE>

          6.2.7  preparation of an FCA report for Edwards that identifies all
                 customers that received the affected Product, defines the
                 number of Product units returned to Baxter, specifies the
                 number of Product units used by the Customer, and specifies any
                 evidence of harm or injury related to the use of the affected
                 Product; and storage of Products affected by an FCA for periods
                 longer than six months or storage of such Products in rented
                 trailers; an incoming inspection of all Products for open FCAs
                 for periods longer than 12 months from the date of initiation
                 of the FCA; and

          6.2.8  payment of third-party invoices for any of the services listed
                 above.

     6.3  At Edwards' request and with Edwards' approval, Baxter shall perform
          FCA services not included above for additional compensation to be
          agreed upon. Edwards will be invoiced separately for such additional
          services. Examples of additional FCA services addressed by this
          Section include:

          6.3.1  payment of all third-party invoices related to expenses
                 incurred by Baxter that arise out of the need for Edwards to
                 issue an FCA for Products;
          6.3.2  inspection (if more than minor) or rework of Products by
                 Baxter;
          6.3.3  storage of Products affected by an FCA for periods longer than
                 six months or storage of such Products in rented trailers; and
          6.3.4  incoming inspection of all Products for open FCAs for periods
                 longer than 12 months from the date of initiation of the
                 FCA.

     6.4  Baxter shall use commercially reasonable efforts to accomplish the FCA
          tasks identified within the time periods specified by Edwards in its
          FCA strategy. If extraordinary volume or other circumstances make such
          time periods impracticable, Edwards and Baxter will make reasonable
          adjustments by extending time periods, setting priorities or
          otherwise.

     6.5  Subject to local restrictions regarding disposition of affected
          Products, routine dispositions (as designated by Edwards) shall be
          issued to Baxter's facilities within five business days, and Baxter
          shall process such dispositions within five business days thereafter.

     6.6  Subject to local restrictions regarding disposition of affected
          Products, expedited or extraordinary dispositions (as designated by
          Edwards) shall be issued to Baxter's facilities within one business
          day, and Baxter shall process such dispositions within one business
          day.

     6.7  Reconciled disposition reports for quantity variance shall be
          negotiated between Baxter and Edwards at the time of disposition.

     6.8  The necessity for and content of sampling plans and protocols shall be
          negotiated by the parties at the time of the FCA.

                                       5
<PAGE>

7.   Consultation.  Baxter shall consult with Edwards prior to implementing any
     ------------
     capital expenditure that could be expected to have a substantial impact
     upon pricing under ARTICLE V of this Agreement. Any capital expenditure or
     series of related capital expenditures related to the Japanese Edwards
     Business which shall exceed (Yen)26,750,000 shall be deemed to have a
     substantial impact on pricing for purposes of this provision.

                                       6
<PAGE>

                                   SCHEDULE B

                                EDWARDS' DUTIES

1.   Sales.
     -----
     1.1  Edwards shall participate with Baxter in quarterly reviews of
          performance relative to applicable service levels.

     1.2  Edwards shall develop and provide to Baxter a recommended price list
          for the Products.

     1.3  Edwards shall work with Baxter to develop mutually agreed-upon sales
          targets.

2.   Marketing.
     ---------

     2.1  Edwards shall develop a marketing plan and shall provide Baxter with
          access to Edwards' global marketing, strategic and other information
          that Baxter will need in order to fulfill its duties under this
          Agreement and to maintain and expand the Japanese Edwards Business.
          Edwards shall provide reasonable assistance and advice regarding
          clarification and implementation of Edwards' marketing strategy.

     2.2  Edwards shall maintain its own communications resources and will
          coordinate communications messages with Baxter where appropriate. If
          Baxter is required to obtain Edwards approval regarding a
          communication, Edwards shall not unreasonably withhold or delay such
          approval.

3.   Training.  Edwards shall provide to Baxter a reasonable amount of training
     --------
     in connection with the sales, marketing and distribution of Products.
     Edwards shall provide a trainer at Edwards' cost and expense, provided that
     Baxter shall pay all costs and expenses of its personnel attending such
     training.

4.   Product Changes.  Edwards will promptly notify Baxter of any proposed
     ---------------
     change or changes in the Products having the potential to impact product
     quality, safety and/or efficacy, and such changes include changes in (a)
     product design; (b) composition or source or any raw material; (c) method
     of producing, processing or testing; (d) subcontractors for producing,
     processing or testing; (e) site of manufacture; (f) labeling, (g) design
     and material of any packaging component; and (h) sterilization method,
     condition and/or site.

5.   Packaging Quality and Load Build Configuration.  Edwards shall be
     ----------------------------------------------
     responsible for ensuring that the quality of packaging and load build
     configuration will conform to uniform distribution standards (e.g.,
                                                                   ----
     palletized, etc.) as agreed by the parties.

                                       1
<PAGE>

6.   Returned Goods Processing.  Edwards shall promptly provide instructions to
     -------------------------
     Baxter regarding the disposal or return to Edwards of Products returned by
     customers.

7.   Product FCAs.
     ------------

     7.1  Edwards shall provide to Baxter in a format to be agreed upon by the
          parties all information reasonably required by Baxter to perform
          Baxter's duties in connection with Product FCAs. Such information
          shall include, without limitation, product identifiers, reason
          priority, and any information related to disposition plans.

     7.2  Edwards shall have sole authority to initiate any FCA. If Edwards is
          required to initiate an FCA for any Product, Edwards' Vice President,
          Quality (or such person's designee) shall notify the senior Baxter
          quality or regulatory officer for the Territory (or such person's
          designee).

     7.3  Edwards shall cooperate with Baxter in performing any FCA by
          identifying affected Products and customers, developing an action-
          specific management plan detailing specific responsibilities, and
          notifying customers of any such action. Edwards and Baxter shall
          encourage customers to follow instructions related to any FCA
          situation.

8.   Customer Service Support.  Edwards will use commercially reasonable efforts
     ------------------------
     to provide Product-related technical support to Baxter, including the basic
     technical information resident on Edwards' computer system, technical
     letters and clinical information. Edwards will respond to Product-related
     technical questions from or referred by Baxter.

9.   Technical Support.  Edwards shall continue to provide technical support
     -----------------
     services in the same manner as provided in connection with the Japanese
     Edwards Business prior to the Effective Date.

                                       2<PAGE>

                                                                     EXHIBIT 4.1

                           ARTICLES OF INCORPORATION

                                    Title I

                  NAME--REGISTERED OFFICE--DURATION--PURPOSE

Article 1.--Name

There exists among the subscribers and all those who may become owners of Shares
hereafter issued, a public limited company (societe anomyme) qualifying as a
societe d'investissement a capital fixe within the meaning of Article 72-3 of
the amended law of August 10, 1915, under the name of Security Capital U.S.
Realty.

Article 2.--Registered Office

The registered office of the Company is established in Luxembourg, Grand Duchy
of Luxembourg. Branches, subsidiaries or other offices may be established either
in the Grand Duchy of Luxembourg or abroad.

In the event that the board of directors determines that extraordinary political
or military events have occurred or are imminent which would interfere with the
normal activities of the Company at its registered office or with the ease of
communication between such office and persons abroad, the registered office may
be temporarily transferred abroad until the complete cessation of these abnormal
circumstances; such provisional measures shall have no effect on the nationality
of the Company which, notwithstanding such temporary transfer, shall remain a
Luxembourg corporation.

Article 3.--Duration

The Company is established for an unlimited period of time.

Article 4.--Purpose

The exclusive purpose of the Company is to invest in real estate (i) directly or
(ii) through one or several subsidiaries or (iii) through direct or indirect
shareholdings in and convertible and other debt of real estate companies with
the purpose of spreading investment risks and affording its shareholders the
results of the management of its assets.

On an ancillary basis or for defensive purposes, the Company may temporarily
invest all or part of its assets in cash, cash equivalents, similar financial
instruments or debt securities.

                                     Page 1
<PAGE>

The investment objectives and policies shall be determined by the board of
directors pursuant to Article 18 hereof and shall be disclosed in the sales
documents of the Shares to be issued by the board of directors of the Company
from time to time (the "Sales Documents").

The Company may take any measures and carry out any transaction which it may
deem useful for of the fulfilment and development of its purpose to the largest
extent permitted under the law of 30 March 1988 on Undertakings for Collective
Investment.

                                   Title II

                    SHARE CAPITAL--SHARES--NET ASSET VALUE

Article 5.--Share Capital--Series of Shares

The Company shall have an authorized capital of One Billion United States
Dollars ($1,000,000,000) consisting of 500,000,000 (five hundred million) Shares
of a par value of Two United States Dollars ($2.00) per Share.  The Company has
an issued capital of Three Hundred and Forty-Six Million Two Hundred and Forty
Seven Thousand, Four Hundred and Eighty Six United States Dollars and Seventy-
Three point Two cents ($346,247,486.732) consisting of One Hundred and Seventy
Three Million, One Hundred and Twenty Three Thousand, Seven Hundred and Forty
Three point Three Hundred and Sixty-Six (173,123,743.366) Shares of a par value
of Two United States Dollars ($2.00) per Share.  All the Shares in issue have
been fully paid up by payment in cash.

The authorized and issued capital of the Company may be increased or reduced by
a resolution of the shareholders adopted in the manner required for amendment of
these Articles of Incorporation, as prescribed in Article 30 hereof.  In
addition, the issued capital of the Company may be increased in accordance with
Article 7 by the issuance of new Shares for subscription up to the amount of the
authorized capital.  Each time the board of directors shall so act to render
effective, in whole or in part, an increase of the issued capital as authorized
by these Articles of Incorporation, the board of directors shall cause this
Article 5 to be amended so as to reflect such increase of capital and shall take
or authorize the taking of all necessary action for the purpose of effecting
such amendment in accordance with Luxembourg law.

The board of directors may create such capital reserves from time to time as it
may determine is proper (in addition to those which are required by law) and
shall create a paid-in surplus from funds received by the Company as issue
premiums on the issue and sale of its shares, which reserves or paid-in surplus
may be used to provide for the payment for any Shares which the Company may
redeem in accordance with these Articles of Incorporation, for setting off any
realized or unrealized capital losses or for the payment of any dividend or
other distribution (it being understood that the board of directors may decide
to make distributions within the limits set out in Article 72-3 of the law dated
10 August 1915 on commercial companies).

                                     Page 2
<PAGE>

Article 6.--Form of Share

(1)  Shares will only be issued in registered form.

All issued registered Shares of the Company shall be registered in the register
of shareholders which shall be kept by the Company or by one or more persons
designated thereto by the Company, and such register shall contain the name of
each owner of registered Shares, his residence or elected domicile as indicated
to the Company, the number of registered Shares held by him and the amount paid
up on each such Share.

The inscription of the shareholder's name in the register of Shares evidences
his right of ownership of such registered Shares.  The Company shall decide
whether a certificate for such inscription shall be delivered to the shareholder
or whether the shareholder shall receive a written confirmation of his
shareholding.

The Share certificates shall be signed by two directors or by any officer of the
Company duly authorised by the board of directors.  Such signatures shall be
either manual, or printed, or in facsimile.  The Company may issue temporary
Share certificates in such form as the board of directors may determine.

(2)  Transfer of registered Shares shall be effected (i) if Share certificates
have been issued, upon delivering the certificate or certificates representing
such Shares to the Company along with other instruments of transfer satisfactory
to the Company, and (ii) if no Share certificates have been issued, by a written
declaration of transfer to be inscribed in the register of shareholders, dated
and signed by the transferor and transferee, or by persons holding suitable
powers of attorney to act therefor.  Any transfer of registered Shares shall be
entered into the register of shareholders; such inscription shall be signed by
one or more directors or officers of the Company or by one or more other persons
duly authorized thereto by the board of directors.  Shares are freely
transferable, subject to the provisions of Articles 5 and 9 hereof.

(3)  Shareholders shall provide the Company with an address to which all notices
and announcements may be sent.  Such address will also be entered into the
register of shareholders.

In the event that a shareholder does not provide an address, the Company may
permit a notice to this effect to be entered into the register of shareholders
and the shareholder's address will be deemed to be at the registered office of
the Company, or at such other address as may be so entered into by the Company
from time to time, until another address shall be provided to the  Company by
such shareholder.  A shareholder may, at any time, change his address as entered
into the register of shareholders by means of a written notification to the
Company at its registered office, or at such other address as may be set by the
Company from time to time.

(4)  If any shareholder can prove to the satisfaction of the Company that his
Share certificate has been mislaid, mutilated or destroyed, then, at his
request, a duplicate Share certificate may be issued

                                     Page 3
<PAGE>

under such conditions and guarantees, including but not restricted to a bond
issued by an insurance company, as the Company may determine.  At the issuance
of the new Share certificate, on which it shall be recorded that it is a
duplicate, the original Share certificate in replacement of which the new one
has been issued shall become void.

Mutilated Share certificates may be cancelled by the Company and replaced by new
certificates.

The Company may, at its election, charge to the shareholder the costs of a
duplicate or of a new Share certificate and all reasonable expenses incurred by
the Company in connection with the issue and registration thereof or in
connection with the annulment of the original Share certificate.

(5)  In the event that a Share is registered in the name of more than one
person, the board of directors may decide that the first named holder in the
register shall be deemed to be the representative of all other joint holders and
shall alone be entitled to be treated as the holder of such Share for all
purposes, including without limitation entitlement to receive notices from the
Company.

(6)  The Company may decide to issue fractional Shares.  Such fractional Shares
shall carry no entitlement to vote but shall entitle the holder to participate
in the net assets of the Company on a pro rata basis.

Article 7.--Issue and Sale of Shares

(1)  Subject to the provisions of this Article 7, the board of directors of the
Company is authorized (i) to issue additional Shares up to the total authorized
capital by contributions in cash, contributions in kind or by conversion of the
net profits or any other available reserves into share capital, in whole or in
part, from time to time as the board of directors in its discretion may
determine, within a period expiring on June 30, 2004; and (ii) to determine the
conditions of any such increase in capital, including, in relation to
contributions in cash and in kind, the price per Share and payment terms, and
terms of delivery, respectively.  Any contributions in kind have to be
compatible with the investment policy of the Company.  Furthermore, such
contributions have to be made in accordance with Article 26-1 of the law of the
10 August 1915 on commercial companies and thus are subject to a valuation
report being established by the auditor of the Company.  Such valuation report
will be established at the expense of the Company.  In addition, in relation to
a contribution in kind of a real estate property or properties or in relation to
a contribution in kind of more than 50% of the share capital of any company, the
Company shall commission a valuation report by an Independent Appraiser (as
defined in the Sales Document) as to the value of such contribution in kind.

(2)  The board of directors may impose restrictions on the frequency at which
Shares shall be issued; the board of directors may, in particular, decide that
Shares shall only be issued during one or more offering periods or at such other
frequency as provided for in the Sales Documents.  No Shares will be issued
during any period when the calculation of the net asset value per Share in the
Company is suspended pursuant to the provisions of Article 11.  Any application
for subscription

                                     Page 4
<PAGE>

shall be irrevocable except in the event of a suspension of the calculation of
the net asset value.  If, during the offering period for any particular
offering, there is a suspension of the calculation of the net asset value, any
application for subscription made prior to such suspension may be revoked by the
subscriber.

(3)  The Company may issue its Shares for subscription either: (i) at a price
per Share which is  no less than the net asset value per Share as determined in
compliance with Article 11 hereof as of such Valuation Day (as defined in
Article 12 hereof) as is determined in accordance with such policy as the board
of directors may from time to time determine; or (ii) at a price per Share which
is below the net asset value per Share (as so determined) either (A) by
reserving for existing shareholders the right to subscribe for new shares on a
preferential and rateable basis in compliance with the provisions of this
Article 7 ("Rights Offering"), provided however that the Company does not have
to reserve such preferential and rateable right in circumstances where the price
per Share at which the Shares are offered for subscription is no less than the
last available sales price (on the stock exchange having the highest average
daily volume in Shares or ADR's representing such Shares), reported on the last
trading day preceding the time upon which the board of directors approved the
pricing of the Shares or (B) in connection with the conversion of outstanding
debt securities, which are convertible into Shares (whether by way of
conversion, subscription or otherwise) ("convertible debt securities").

(4)  The price per Share at which the Company offers Shares for subscription or
sale may be increased by an amount representing a percentage estimate of costs
and expenses to be incurred by the Company when investing the proceeds of the
offering and/or by an amount representing applicable sales commissions, and fees
and expense reimbursement as determined from time to time by the board of
directors, in its discretion, as shall be disclosed in the Sales Documents.  The
price so determined shall be payable within a period as determined by the board
of directors.  The Company may decide, at the discretion of the board of
directors, to pay such costs and expenses, commissions and fees and expense
reimbursement out of the assets of the Company, provided however, any applicable
sales commissions payable in this manner to the Advisor (as defined in Article
17) or an affiliate of the Advisor shall be approved by a majority of the
independent directors (as defined in Article 13) in accordance with Article 13.

(5)  If the Company offers its Shares for subscription within the five-year
period referred to in the first paragraph of this Article 7 at (i) a price per
Share which equals or exceeds the net asset value per Share, or at (ii) a price
per Share which is below the net asset value per Share but no less than the last
available sales price (on the stock exchange having the highest average daily
volume in Shares or ADR's representing such Shares), reported on the last
trading day preceding the time upon which the board of directors approved the
pricing of the Shares, the board of directors is authorized to issue such Shares
without reserving for the existing shareholders a preferential right to
subscribe for the Shares to be issued.

(6)  Where the board of directors determines it to be in the best interests of
the shareholders and the Company to issue Shares at a price below the net asset
value per Share by way of Rights

                                     Page 5
<PAGE>

Offerings:  (i) the rights to subscribe for such Shares shall be reserved for
existing shareholders on a preferential and rateable basis, (ii) such offering
shall be on such terms and conditions as the board of directors determines are
fair and reasonable to the existing shareholders and (iii) the board of
directors of the Company shall use its reasonable efforts to ensure that any
existing shareholders electing not to subscribe for Shares pursuant to the
Rights Offering receive value for such rights, at market prices, by a method
which the board of directors determines to be appropriate and to be in the best
interest of the relevant shareholders.

(7)  Within the five-year period referred to in the first paragraph of this
Article 7 and within the limit of the authorized capital, the board of directors
is authorized to issue convertible debt securities to such persons and at such
conversion prices and on such other terms and conditions as the board of
directors shall consider from time to time to be in the best interest of the
Company; provided, however, that the price per Share at which such debt
securities are convertible shall exceed the last reported sales price (on the
stock exchange having the highest average daily volume in Shares or ADR's
representing such Shares), reported on the last trading day preceding the time
upon which the board of directors approved the pricing of the convertible debt
securities and provided further that the price per Share at which such debt
securities are convertible shall be capable of adjustment as deemed fit by the
board of directors in order to prevent the holders of the convertible debt
securities from being diluted.

(8)  The board of directors may delegate to any director, manager or officer of
the Company the power to accept subscriptions and to receive payment of the
price of the new shares to be issued and to deliver them.

(9)  The board of directors may accept subscriptions to be made on a cash or on
a cash and terms or instalment basis.

(10) without object

(11) The Company also may offer Shares which have been previously redeemed by it
for sale on the same terms (including pricing terms) and subject to the same
conditions as the Company is entitled to offer Shares for subscription
hereunder.

Article 8.--Preferred Shares

     Subject to the provisions of this Article 8, within the limit of the
authorized capital of the Company, the board of directors of the Company is
hereby authorized to issue, from time to time as the board of directors may
determine in its discretion, additional Shares of the Company with limited
voting rights as Cumulative Convertible Redeemable Preferred Shares or
Cumulative Redeemable Preferred Shares, as the case may be (the "Preferred
Shares").  The board of directors may, in its discretion, designate a portion of
the Preferred Shares as separate classes upon any issuance of Preferred Shares
from time to time.  The following sets forth the general terms of the Preferred
Shares, including the preferences, conversion and other rights, voting powers,
restrictions,

                                     Page 6
<PAGE>

limitations as to dividends, qualifications and terms and conditions of
redemption thereof.  The board of directors is authorized to cause a notary to
update these Articles to reflect any issuance of Preferred Shares as permitted
hereunder including with respect to each class of Preferred Shares as to the
dividend rate determined by the board of directors, the Original Contribution
Amount (as defined in section 2) and the terms of any redemption right of the
Company (as set forth in section 3).  The Company may issue its Preferred Shares
for subscription, from time to time, at a price which the Company is permitted
to issue its Shares as provided in Article 7.  The Company shall in all cases
issue Share certificates to the holders of Preferred Shares for their
inscription in the register of Shares, as permitted by Article 6 hereof.

Section 1.  Dividends.
            ---------

     The holders of Preferred Shares shall be entitled to receive, when, as and
if declared by the shareholders of the Company at a general meeting of the
shareholders, out of funds legally available for the payment of dividends,
cumulative preferential dividends payable in cash in an amount per share equal
to an annual percentage rate multiplied by the sum of the par value of a
Preferred Share plus the Issue Premium of that class of Preferred Shares, which
percentage rate shall be equal to the United States 30-Year Treasury Rate (as
defined below), plus a percentage rate of not more than 5% (five percent) per
anum, and shall be determined by the board of directors in its sole discretion
as of a date (the "Rate Determination Date") which is not later than the date
the shares of the relevant class of Preferred Shares are first issued (the
"Issue Date"). "Issue Premium" as used herein means, with respect to any
Preferred Shares, the Original Contribution Amount applicable to such class of
Preferred Shares less the par value of a Preferred Share.  Such dividends shall
begin to accrue and shall be fully cumulative from the applicable Issue Date for
each class of Preferred Shares, whether or not in any period there shall be
funds of the Company legally available for the payment of such dividends, and
shall be payable not less than annually, when, as and if declared by the general
meeting of shareholders for the Preferred Shares existing at the time of such
decision, in arrears on each dividend payment date ("Dividend Payment Date") set
by the board of directors on an annual basis (a "Dividend Period").  Each such
dividend shall be payable in arrears to the holders of record of Preferred
Shares as they appear in the records of the Company at the close of business on
such record dates, not less than 10 nor more than 50 days preceding such
Dividend Payment Dates thereof, as shall be fixed by the board of directors.
Accrued and unpaid dividends for any past Dividend Periods may be declared and
paid at any time and for such interim periods, without reference to any regular
Dividend Payment Date, to holders of record on such date, not less than 10 nor
more than 50 days preceding the payment date thereof, as may be fixed by the
board of directors in accordance with Article 72-2 of the Law of 1915 on
commercial companies.  Any dividend payment made on Preferred Shares shall first
be credited against the earliest accrued but unpaid dividend due with respect to
Preferred Shares which remains payable.  "United States 30-Year Treasury Rate"
means, with respect to any Rate Determination Date, the rate for the auction
held on such Rate Determination Date of direct obligations of the United States
("Treasury bills") having a 30 year maturity as published in H.15 (519) under
the heading "U.S. Government Securities Treasury bill auction average
(investment)" or, if not so published by 9:00 a.m., New York City time, on the
Rate Determination Date, the auction average rate (expressed as a bond
equivalent, on the basis of a year

                                     Page 7
<PAGE>

of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury.  In the event that
the results of the auction of Treasury bills having a 30 year maturity are not
published or reported as provided above by 3:00 p.m. New York City time, on such
Rate Determination Date or if no such auction is held in a particular week, then
the United States 30-Year Treasury Rate shall be calculated by the Company and
shall be a yield to maturity (expressed as a bond equivalent, on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Rate Determination Date, of three leading
primary United States government securities dealers selected by the Company for
the issue of Treasury bills with a remaining maturity closest to a 30 year
maturity.

     The initial Dividend Period for any Preferred Shares will commence from the
applicable Issue Date for these Preferred Shares.  The amount of dividends
payable for such period, or any other period shorter than a full Dividend
Period, on the Preferred Shares shall be computed on the basis of a 360 day year
of twelve 30 day months.  Holders of Preferred Shares shall not be entitled to
any dividends, whether payable in cash, property or shares, in excess of
cumulative dividends, as herein provided (including dividends, paid pursuant to
Section 4(c) hereof), on the Preferred Shares.  No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Preferred Shares which may be in arrears unless the payment of
such amount is specifically approved by the general meeting of shareholders.

     So long as more than one class of Preferred Shares is outstanding, no
dividends, except as described in the immediately following sentence, shall be
declared by a general meeting of shareholders or paid or set apart for payment
by the Company on a class of Preferred Shares for any period unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on each other outstanding class of Preferred Shares for all Dividend Periods
terminating on or prior to the dividend payment date on such class of Preferred
Shares.  When dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all dividends declared upon Preferred
Shares shall be paid or set apart for payment ratably in proportion to the
respective amounts of dividends accumulated and unpaid on the respective classes
of Preferred Shares.  As used herein, the term "set apart for payment" shall be
deemed to include, without any action other than the following, the recording by
the Company in its accounting ledgers of any accounting or bookkeeping entry
which indicates, pursuant to a declaration of dividends or other distribution by
the general meeting of shareholders, the allocation of funds to be so paid on
any class of shares of the Company; provided, however, that if any funds for any
class of Junior Shares (as defined below) or any class of Preferred Shares as to
the payment of dividends are placed in a separate account of the Company or
delivered to a disbursing, paying or other similar agent, then "set apart for
payment" with respect to the other classes of Preferred Shares shall mean
placing such funds in a separate account or delivering such funds to a
disbursing, paying or other similar agent.  As used in this Article 8, "Junior
Shares" means the Shares of the Company and any other class of shares of the
Company over which the Preferred Shares have preference or priority in the
payment of dividends and in the distribution of assets on liquidation or
dissolution of the Company.

                                     Page 8
<PAGE>

     So long as any Preferred Shares are outstanding, no dividends (other than
dividends or distributions paid solely in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Junior Shares) shall be declared
or paid or set apart for payment or other distribution shall be declared or made
or set apart for payment upon Junior Shares, nor shall any Junior Shares be
redeemed, purchased or otherwise acquired (other than a redemption, purchase or
other acquisition of Shares made for purposes of an employee incentive or
benefit plan of the Company or any subsidiary) for any consideration (or any
moneys be paid to or made available for a "sinking fund" (as defined below) for
the redemption of any Junior Shares) by the Company, directly or indirectly
(except by conversion into or exchange for Junior Shares), unless in each case
(i) the full cumulative dividends on all outstanding Preferred Shares of the
Company shall have been or contemporaneously are declared and paid or declared
and set apart for payment for all past Dividend Periods with respect to the
Preferred Shares and (ii) sufficient funds shall have been or contemporaneously
are declared and paid or declared and set apart for the payment of the dividend
for the current Dividend Period with respect to the Preferred Shares.  "Sinking
Fund" shall mean a fund established by the Company with cash or other assets
which, together with any earnings thereon, are to be used for the redemption or
retirement of securities of the Company.

     No distributions on Preferred Shares shall be declared by the general
meeting of shareholders or paid or set apart for payment by the Company at such
time as the terms and provisions of any agreement of the Company, including any
agreement relating to its indebtedness, prohibits such declaration, payment or
setting apart for payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default thereunder, or
if such declaration or payment shall be restricted or prohibited by law.

Section 2.  Liquidation Preference.
            ----------------------

     In the event of any liquidation or dissolution of the Company, whether
voluntary or involuntary, before any payment or distribution of the assets of
the Company (whether capital or surplus) shall be made to or set apart for the
holders of Junior Shares, each holder of the Preferred Shares shall be entitled
to receive, out of funds legally available for payment thereof, the Original
Contribution Amount applicable to the class of each such Preferred Share owned
by that holder plus an amount equal to all dividends (whether or not earned or
declared) accrued and unpaid thereon to the date of final distribution to such
holders with respect to such class of Preferred Shares; but such holders shall
not be entitled to any further payment.  "Original Contribution Amount" as used
herein means the price per Preferred Share (expressed in United States dollars)
at which the applicable class of Preferred Shares has been first issued by the
Company, as determined by the board of directors of the Company as permitted
hereunder; provided, however, that the Original Contribution Amount may be
adjusted as follows:  in the event the outstanding Shares shall be subdivided
into a greater number of Shares, the Original Contribution Amount in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in the
event the outstanding Shares shall each be combined into a smaller number of
Shares, the Original Contribution Amount in effect at the opening of business on
the day following the day upon which such combination becomes effective shall be
proportionately

                                     Page 9
<PAGE>

increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.  If, upon any
liquidation or dissolution of the Company, the assets of the Company, or
proceeds thereof, distributable among the holders of the Preferred Shares shall
be insufficient to pay in full the preferential amount aforesaid, then such
assets, or the proceeds thereof, shall be distributed among the holders of
Preferred Shares ratably in accordance with the respective amounts that would be
payable on each class of Preferred Shares if all amounts payable thereon were
paid in full.  For the purposes of this Section 2, (i) a merger of the Company
(including by creation of a new company through a consolidation) with one or
more corporations, or other entities, (ii) a demerger of the Company, (iii) a
sale, lease or conveyance of all or substantially all of the Company's property
or business or (iv) a share exchange, shall not be deemed to be a liquidation or
dissolution, voluntary or involuntary, of the Company.

     After payment shall have been made in full to the holders of the Preferred
Shares, as provided in this Section 2, any other class or classes of Junior
Shares shall, subject to the respective terms and provisions (if any) applying
thereto, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Preferred Shares shall not be entitled to
share therein.

Section 3.   Redemption at the Option of the Company.
             ---------------------------------------

     Subject to Section 7 of this Article 8, the board of directors in its
discretion may determine on a Rate Determination Date whether, and at what
times, the relevant class of Preferred Shares may be redeemable by the Company.
If the Preferred Shares (or any class thereof) are made redeemable by the
Company, the Company, at the discretion of the board of directors, may redeem
the applicable class of Preferred Shares, in whole at any time or from time to
time pro rata in part at the option of the Company, at a redemption price equal
to the Original Contribution Amount applicable to such Preferred Share (with
respect to each class of Preferred Share), plus the amounts indicated in Section
3(b).  On a Rate Determination Date, the board of directors may determine,
provided such determination is in the best interest of the Company, that the
relevant class of Preferred Shares may not be redeemed prior to any date it may
set.

     Upon any redemption of Preferred Shares (or any class thereof) pursuant to
this Section 3, the Company shall pay all accrued and unpaid dividends, if any,
thereon to the Call Date (as defined in Section 3(d) below), without interest.
If the Call Date falls after a dividend payment record date and prior to the
corresponding Dividend Payment Date, then each holder of such Preferred Shares
at the close of business on such dividend payment record date shall be entitled
to the dividend payable on such shares on the corresponding Dividend Payment
Date notwithstanding the redemption of such shares before such Dividend Payment
Date.  Except as provided above, the Company shall make no payment or allowance
for unpaid dividends, whether or not in arrears, on Preferred Shares called for
redemption.

     If full dividends accrued on the Preferred Shares (or any class thereof)
have not been declared and paid or declared and set apart for payment, Preferred
Shares may not be redeemed under this

                                    Page 10
<PAGE>

Section 3 in part and the Company may not purchase or acquire Preferred Shares,
otherwise than pursuant to a purchase or exchange offer made on the same terms
to all holders of Preferred Shares or pursuant to Article 10.

     Notice of the redemption of any Preferred Shares under this Section 3 shall
be given to each holder of record of such Preferred Shares to be sent by
registered mail to the address of each such holder as shown on the Company's
records, not less than 30 nor more than 90 days prior to the Call Date.  Any
notice which was mailed in the manner herein provided shall be conclusively
presumed to have been duly given on the date mailed.  Each such mailed notice
shall state, as appropriate: (1) the Call Date; (2) the number of Preferred
Shares to be redeemed and, if fewer than all the shares held by such holder are
to be redeemed, the number of such shares to be redeemed from such holder; (3)
the redemption price (per class of Preferred Shares, if applicable); (4) the
place or places at which certificates, if applicable, for such shares are to be
surrendered; and (5) that dividends on the shares to be redeemed shall cease to
accrue on such Call Date except as otherwise provided herein.  Notice having
been mailed as aforesaid, from and after the Call Date (unless the Company shall
fail to make available an amount of cash necessary to effect such redemption),
(i) except as otherwise provided herein, dividends on the Preferred Shares so
called for redemption shall cease to accrue, (ii) such shares shall no longer be
deemed to be outstanding, and (iii) all rights of the holders thereof as holders
of Preferred Shares of the Company shall cease (except the rights to convert and
to receive cash payable upon such redemption, without interest thereon, upon
surrender and endorsement of their certificates if so required and to receive
any dividends payable thereon).  The Company's obligation to provide cash in
accordance with the preceding sentence shall be deemed fulfilled if, on or
before the Call Date, the Company shall deposit with a bank or trust company or
savings institution which is subject to the jurisdiction of Luxembourg (which
bank or trust company or savings institution may utilize a correspondent bank
for payments which has an office in the Borough of Manhattan, City of New York,
and that has, or is an affiliate of a bank or trust company that has, capital
and surplus of at least U.S. $50,000,000), an amount in cash necessary for such
redemption, in trust, with irrevocable instructions that such cash be applied to
the redemption of the Preferred Shares so called for redemption.  No interest
shall accrue for the benefit of the holders of Preferred Shares to be redeemed
on any cash so set aside by the Company.  Subject to applicable escheat laws,
any such cash for redemptions unclaimed at the end of two years from the Call
Date shall revert to the general funds of the Company, after which reversion the
holders of such shares so called for redemption shall look only to the general
funds of the Company for the payment of such cash.

     As promptly as practicable after the surrender in accordance with such
notice of the certificates, if applicable, for any such shares so redeemed
(properly endorsed or assigned for transfer, if the Company shall so require and
if the notice shall so state), such shares shall be exchanged for any cash
(without interest thereon) for which such shares have been redeemed.  If fewer
than all the outstanding Preferred Shares of the applicable class are to be
redeemed, shares to be redeemed shall be selected by the Company from
outstanding Preferred Shares of such class not previously called for redemption
pro rata (as nearly as may be) among all holders of such Preferred Shares based
upon the number of such Preferred Shares owned by each holder. To the extent

                                    Page 11
<PAGE>

applicable, if fewer than all the Preferred Shares represented by any
certificate are redeemed, then new certificates relating to the unredeemed
shares shall be issued without cost to the holder thereof.

     Promptly following the Call Date, the Company shall publish a notice of the
redemption in the Memorial, Recveil Special des Societes et Associations.

Section 4.   Conversion.
             ----------

     If the board of directors determines to issue Cumulative Convertible
Redeemable Preferred Shares, holders of such Preferred Shares shall have the
right to convert all or a portion of such shares into Shares other than
Preferred Shares on a one-for-one basis, as follows:

     Subject to and upon compliance with the provisions of this Section 4, a
holder of convertible Preferred Shares shall have the right, at his or her
option, at any time to convert each such Preferred Share into one fully paid and
non-assessable Share by surrendering such shares to be converted, such surrender
to be made in the manner provided in paragraph (b) of this Section 4; provided,
however, that the right to convert Preferred Shares called for redemption
pursuant to Section 3 shall terminate at the close of business on the fifth
Business Day prior to the Call Date fixed for such redemption, unless the
Company shall default in making payment of the cash payable upon such redemption
under Section 3.

     In order to exercise the conversion right, the holder of each Preferred
Share to be converted shall surrender the certificate, if applicable, relating
to such share, duly endorsed or assigned to the Company, at the office of the
Company or at the office of the Company's agent designated for that purpose by
written notice to the holders of such Preferred Shares (such applicable office,
for purposes of this Article 8, to be known as the "Transfer Agent"),
accompanied by written notice to the Company that the holder thereof elects to
convert such Preferred Shares, and together with such other instruments or
documents as the Company may request to evidence the election of the holder of
Preferred Shares to convert.  Unless the shares issuable on conversion are to be
issued in the same name as the name in which such Preferred Share is registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Company, duly executed by the holder or
such holder's duly authorized attorney and an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the Company
demonstrating that such taxes have been paid).

     Holders of Preferred Shares (except shares converted after the issuance of
notice of redemption with respect to a Call Date during such period, such
Preferred Shares being entitled to such dividend or the Dividend Payment Date)
at the close of business on a dividend payment record date whose Preferred
Shares are surrendered for conversion following such dividend payment record
date and prior to the corresponding Dividend Payment Date shall not be entitled
to receive the dividend payable on such shares on such corresponding Dividend
Payment Date. A holder of Preferred Shares on a dividend payment record date who
(or whose transferee) tenders any such shares for conversion into Shares on the
corresponding Dividend Payment Date will receive the

                                    Page 12
<PAGE>

dividend payable by the Company on such Preferred Shares on such date.  Except
as provided above, the Company shall make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for dividends on
the Shares issued upon such conversion.  As promptly as practicable after the
surrender of certificates, if applicable, for Preferred Shares as aforesaid, the
Company shall issue and shall deliver at such office to such holder, or on his
or her written order, a certificate or certificates, if applicable, for the
number of Shares issuable upon the conversion of such shares in accordance with
provisions of this Section 4.

     Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates, if applicable, for
Preferred Shares shall have been surrendered and such notice shall have been
received by the Company as aforesaid, and the person or persons in whose name or
names any certificate or certificates, if applicable, for Shares shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the Shares represented thereby at such time on such date
and such conversion shall be in effect at such time on such date unless the
share transfer books of the Company shall be closed on that date, in which event
such person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such share
transfer books are open.

     Any adjustment of the par value of Shares, including as a result of any
action by the Company to (i) subdivide its outstanding Shares into a greater
number of shares, or (ii) combine its outstanding Shares into a smaller number
of shares shall include an equal and automatic adjustment in the par value of
the Preferred Shares (including, without limitation, any such subdivision or
combination of Shares).  In addition, in the event of any action by the Company
to (I) pay a dividend or make a distribution on its Junior Shares in Shares or
(II) issue any shares by reclassification of its Shares, each Preferred Share
shall be entitled to receive the same dividend, distribution or issuance as each
Share.

     If the Company shall be a party to any transaction, including without
limitation a merger (including by creating a new company through consolidation),
a demerger, share exchange, a repurchase by the Company of all or substantially
all Junior Shares, sale of all or substantially all of the Company's assets or
recapitalization of the Shares (each of the foregoing being referred to herein
as a "Transaction"), in each case as a result of which all or substantially all
Shares are converted into the right to receive shares, securities or other
property (including cash or any combination thereof), each convertible Preferred
Share which is not redeemed or converted into the right to receive shares,
securities or other property prior to such Transaction shall thereafter be
convertible into the kind and amount of shares, securities and other property
(including cash or any combination thereof) receivable upon the consummation of
such Transaction by a holder of one Junior Share, assuming such holder of Junior
Shares (i) is not a Person with which the Company consolidated or into which the
Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be ("Constituent Person"), or an affiliate of
a Constituent Person and (ii) failed to exercise his rights of election, if any,
as to the kind or amount of shares, securities and other property (including
cash) receivable upon such Transaction (provided that if the kind or amount of
shares,

                                    Page 13
<PAGE>

securities and other property (including cash) receivable upon such Transaction
is not the same for each Share held immediately prior to such Transaction by
other than a Constituent Person or an affiliate thereof and in respect of which
such rights of election shall not have been exercised ("Non-Electing Share"),
then for the purpose of this paragraph (d) the kind and amount of shares,
securities and other property (including cash) receivable upon such Transaction
by each Non-Electing Share shall be deemed to be the kind and amount so
receivable per share by a plurality of the Non-Electing Shares).  The Company
shall not be a party to any Transaction unless the terms of such Transaction are
consistent with the provisions of this paragraph (d), and it shall not consent
or agree to the occurrence of any Transaction until the Company has entered into
an agreement with the successor or purchasing entity, as the case may be, for
the benefit of the holders of the convertible Preferred Shares that will contain
provisions enabling the holders of such Preferred Shares that remain outstanding
after such Transaction to convert into the consideration received by holders of
Shares.  The provisions of this paragraph (d) shall similarly apply to
successive Transactions.

     If:
     --

     the Company shall declare a dividend (or any other distribution) on the
Junior Shares (other than cash dividends or distributions paid with respect to
the Shares not in excess of the sum of the Company's cumulative undistributed
EBDADT (as defined below) minus the cumulative amount of dividends accrued or
paid in respect of all classes of Preferred Shares after the Issue Date); or

     the Company shall authorize the granting to the holders of Junior Shares of
rights, options or warrants to subscribe for or purchase any shares of any class
or any other rights, options or warrants; or

     there shall be any reclassification of the Shares or any merger or demerger
to which the Company is a party and for which approval of any shareholders of
the Company is required, or a share exchange, or a repurchase by the Company for
all or substantially all of its outstanding Shares or the sale or transfer of
all or substantially all of the assets of the Company as an entirety; or

     there shall occur the voluntary or involuntary liquidation or dissolution
of the Company; then, to the extent not then provided for in a substantially
similar requirement under Luxembourg law (and in addition to any other
requirement under Luxembourg law), the Company shall cause to be filed with the
Transfer Agent and shall cause to be mailed to the holders of convertible
Preferred Shares at their addresses as shown on the records of the Company, as
promptly as possible, but at least 10 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or granting of rights,
options or warrants, or, if a record is not to be taken, the date as of which
the holders of Junior Shares of record to be entitled to such dividend,
distribution or rights, options or warrants are to be determined or (B) the date
on which such reclassification, merger, share exchange, sale, transfer,
liquidation or dissolution is expected to become effective, and the date as of
which it is expected that holders of Junior Shares of record shall be entitled
to exchange their Junior Shares for securities or other property, if any,
deliverable upon such reclassification, merger, share exchange, sale, transfer,
liquidation or

                                    Page 14
<PAGE>

dissolution.  Failure to give or receive such notice or any defect therein shall
not affect the legality or validity of the proceedings described in this Section
4. For purposes of this Article 8, "EBDADT" shall mean earnings before
depreciation, amortization and deferred taxes, as each item is reflected on the
Company's consolidated statement of operations prepared in accordance with
generally accepted accounting principles.

     Prior to the delivery of any securities that the Company shall be obligated
to deliver upon conversion of Preferred Shares, the Company shall endeavor to
comply with all laws and regulations of the Grand Duchy of Luxembourg, and of
any other applicable jurisdiction requiring the registration of such securities
with, or any approval of or consent to the delivery thereof by, any governmental
authority.

     The Company will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of Shares or other
securities or property on conversion of Preferred Shares pursuant hereto;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issue or delivery of
Shares or other securities or property in a name other than that of the holder
of the Preferred Shares to be converted, and no such issue or delivery shall be
made unless and until the person requesting such issue or delivery has paid to
the Company the amount of any such tax or established, to the reasonable
satisfaction of the Company, that such tax has been paid.

Section 5.   Ranking.
             -------

     Any class of Shares of the Company other than Preferred Shares shall be
deemed to rank junior to the Preferred Shares, as to the payment of dividends
and as to the distribution of assets upon liquidation or dissolution, if such
class shall be Junior Shares.

Section 6.   Voting; Limitations on Actions.
             ------------------------------

     If and whenever (i) dividends payable on any class of Preferred Shares
shall be in arrears (which shall, with respect to any such dividend, mean that
any such dividend has not been paid in full) for a period of one year, whether
or not earned or declared, (ii) dividends have been declared and distributed in
respect of Shares in breach of the preferential rights of Preferred Shares, or
(iii) Preferred Shares represent more than 50% of the issued Share capital of
the Company, then the holders of Preferred Shares shall be entitled to vote at
each general meeting of shareholders, together with the holders of all Shares,
in accordance with the requirements of Luxembourg company law.  Whenever (i) all
arrears in dividends on the Preferred Shares then outstanding shall have been
paid and dividends thereon for the current period shall have been paid or
declared and set apart for payment and (ii) Preferred Shares shall not then
represent more than 50% of the issued share capital of the Company, then the
right of the holders of the Preferred Shares to vote together with all holders
of Shares shall cease (but subject always to the same provision for the vesting
of such voting rights in the case of any similar future arrearages or in the
event Preferred Shares represent more than 50% of the issued share capital of
the Company).

                                    Page 15
<PAGE>

     So long as any Preferred Shares are outstanding, the Company shall not
cause any amendment, alteration or repeal of any of the provisions of the
Company's Articles of Incorporation to be effected that materially and adversely
affects the voting powers, rights or preferences of the holders of any Preferred
Shares; provided, however, that the amendment of the provisions of the Articles
of Incorporation so as to authorize or create or to increase the authorized
amount of, any Junior Shares that are not senior in any respect to the Preferred
Shares, or any Preferred Shares shall not be deemed to materially adversely
affect the voting powers, rights or preferences of the holders of any Preferred
Shares.

     The Company shall not cause to be effected any share exchange, a merger of
the Company into another entity, or a merger of another entity into the Company
(or a merger creating a new company through consolidation), unless in each such
case each Preferred Share (i) shall remain outstanding without a material and
adverse change to its terms and rights or (ii) shall be converted into or
exchanged for convertible or non-convertible preferred shares, as applicable, of
the surviving entity having preferences, conversion, if applicable, or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms or conditions of redemption thereof identical to that of the
applicable Preferred Share (except for changes that do not materially and
adversely affect the holders of such Preferred Shares).

     Notwithstanding clauses (b) and (c) of this Section 6, no such action
identified therein shall be restricted if, at or prior to the time when such
amendment, alteration or repeal is to take effect, or when the issuance of any
such prior shares or convertible or non-convertible security, as applicable, is
to be made, as the case may be, provision is made for the redemption of all
Preferred Shares at the time outstanding.

     Notwithstanding any other provision of this Article 8, the holders of the
Preferred Shares shall be entitled to vote, together with the holders of all
Shares, in accordance with the requirement of Luxembourg company law, at any
general meeting of shareholders convened in order to act upon any resolution
concerning any of the following matters:  (i) the issuance of new Shares
entitled to preferential rights otherwise than as permitted by these Articles of
Incorporation within the authorized capital; (ii) the modification of the
preferred dividend attached to Preferred Shares; (iii) the reduction of the
Share capital of the Company; (iv) the modification of the corporate objective
of the Company; (v) the issuance of convertible notes otherwise than as
permitted by these Articles of Incorporation within the authorized capital; (vi)
the liquidation, merger or consolidation of the Company; (vii) the change of the
corporate form of the Company; (viii) the election of directors of the Company;
and (ix) the conversion of Preferred Shares into any class of voting shares.

Section 7.   Limitation on Ownership.
             -----------------------

     The restrictions on ownership of Shares and the other provisions set forth
in Article 9 shall apply separately to each class of Preferred Shares except to
the extent otherwise determined by the board of directors consistent with the
requirements of Article 9.

                                    Page 16
<PAGE>

Section 8.   Record Holders.
             --------------

     The Company and the Transfer Agent may deem and treat the record holder of
any Preferred Shares as the true and lawful owner thereof for all purposes, and
neither the Company nor the Transfer Agent shall be affected by any notice to
the contrary.

Section 9.   Sinking Fund.
             ------------

     The Preferred Shares shall not be entitled to the benefits of any sinking
fund.

Section 10.  Exchange.
             --------

     The Company shall be entitled to offer to each holder of a class of
Preferred Shares, as selected by the board of directors of the Company, the
right (without the requirement of making such offer to holders of other classes
of Shares) to exchange the Preferred Shares of that class on any Dividend
Payment Date for Debentures of the Company, which may or may not be convertible
into Shares (the "Debentures") and such other terms as to be determined by the
board of directors at the time of such offer.  In addition, the Company shall be
entitled to mandate the exchange on any Dividend Payment Date of any class of
Preferred Shares, as selected by the board of directors (without the requirement
of the mandatory exchange of any other classes of Shares), in whole but not in
part, for an aggregate principal amount of Debentures of not less than the
number of outstanding Preferred Shares of that class multiplied by the Original
Contribution Amount for a Preferred Share of that class, with such other terms
as to be determined by the board of directors at the Issue Date of such class of
Preferred Shares.  Any such mandatory exchange may not occur unless all
accumulated dividends on all Preferred Shares through the Dividend Payment Date
established as the exchange date have been paid or set aside for payment, and
any such mandatory exchange shall be effected in the same manner, and upon the
same notice, as a redemption of Preferred Shares, as aforesaid.  Upon any
exchange, the Preferred Shares being exchanged shall (provided such exchange is
duly and properly effected) be deemed to cease to be outstanding as of the close
of business on the date established for such exchange, and all rights of any
holder thereof shall be extinguished except the right to receive Debentures in
exchange therefor and the right to receive accrued and unpaid dividends on such
Preferred Shares to the date established for such exchange.  As in the case of a
redemption of Preferred Shares, holders of Preferred Shares being exchanged must
surrender, if applicable, the certificates relating to such Preferred Shares in
order to receive the Debentures for which such Preferred Shares have been
exchanged, but upon such surrender such holders will be entitled to receive all
interest accrued on such Debentures from the date of exchange at the time and in
the manner that such interest would be paid in the ordinary course pursuant to
the Indenture pursuant to which such Debentures shall be issued.  Dividends due
on the Preferred Shares being exchanged on the Dividend Payment Date on which
the exchange is effected will be mailed to holders in the regular course.

     No exchange of any class of Preferred Shares for Debentures may be effected
unless prior to such exchange the Company causes to be delivered to the Trustee
under the Indenture establishing

                                    Page 17
<PAGE>

such Debentures:  (i) a certificate of any Managing Director, Senior Vice
President or Vice President of the Company, reasonably satisfactory to the
Trustee, to the effect that the Debentures are valid and binding obligations of
the Company in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, whether considered in a proceeding at law or in equity, and that all
necessary corporate and governmental approvals, including without limitation any
securities registrations, for the issuance of the Debentures have been obtained;
and (ii) an opinion of counsel to the Company, reasonably satisfactory to the
Trustee, to the same effect as the foregoing certificate.  Such certificate and
opinion shall be available for inspection during normal business hours by the
holders of the Preferred Shares being exchanged upon request to the Trustee.

Article 9.--Redemption of Shares

The Company is a closed-end undertaking for collective investment. Consequently,
Shares in the Company shall not be redeemable at the request of a shareholder.

The Company, however, may redeem its Shares whenever the board of directors
considers this to be in the best interest of the Company, subject to the terms
and conditions it shall determine and within the limitations set forth by law
and these Articles.  In particular, at the option of the board of directors,
Shares may be redeemed on a pro rata basis as between existing shareholders of
the Company, in order to distribute to the shareholders upon the disposal of an
investment asset by the Company the net proceeds of such investment,
notwithstanding any other distribution pursuant to Article 26 hereof.  Any such
redemption shall be made only out of the Company's retained profits and non-
compulsory reserves (including any paid-in surplus but excluding any reserve
required by Luxembourg law).

The Company shall seek to qualify as a "venture capital operating company" under
United States Employee Retirement Income Security Act ("ERISA") and will
therefore be exempt from the application of ERISA.  Should the Company be
subsequently determined to be subject to ERISA, it will redeem Shares held by
pension plans pro rata and other retirement funds to the extent necessary to
cause such investors, as a group, to thereafter own less than 25% of the
outstanding Shares of the Company.

     The redemption price per Share, other than a Preferred Share, shall be the
net asset value per Share determined in accordance with the provisions of
Article 11 as at the Valuation Day specified by the board of directors in their
discretion, less an amount, if any, equal to any duties and charges which will
be incurred upon the disposal of the Company's investments as at the date of
redemption in order to fund such a redemption, provided however that if Shares
are redeemed otherwise than on a pro rata basis between all existing
shareholders, the board of directors may elect, if it considers this to be
necessary for the protection of the interests of the remaining shareholders, to
fix a redemption price below the net asset value per Share, but being no less
than the last available sales price (on the stock exchange having the highest
average daily volume in Shares or ADR's representing such

                                    Page 18
<PAGE>

Shares), reported on such trading day as specified by the board of directors in
their discretion, provided further, however, that if redemptions initiated by
the board of directors are effected in privately negotiated transactions with
the consent of the relevant shareholders as to the price and the number of
Shares to be redeemed, the redemption price may be lower than such last
available sales price.

Notwithstanding the provisions of the preceding paragraph, redemptions may take
place at market price if the Company elects to buy back Shares on the stock
exchange, provided however that such market price is not above the net asset
value per Share.

     The redemption price per Share shall be paid within a period as determined
by the board of directors which shall not exceed such number of business days
from the date fixed for redemption as the board of directors may fix, provided
that the Share certificates, if any, and the transfer documents have been
received by the Company, subject to the provision of Article 12 hereof.

     The redemption price per Preferred Share shall be as described in Article 8
hereof.

     To the extent Shares redeemed by the Company remain in existence they shall
not have any voting rights or any right to participate in any dividends declared
by the Company or in any distribution paid upon the liquidation or winding up of
the Company and shall be disregarded for purposes of determining net asset value
per Share, in each case, for so long as such Shares are held by the Company.  If
such Shares are reissued by the Company, the consideration received in respect
of such Shares shall be no less than (i) the net asset value per Share as
determined by the board of directors as of the Valuation Day immediately
preceding the date of such reissue, or (ii) the price which is no less than the
last available sales price (on the stock exchange having the highest average
daily volume in Shares or ADR's representing such Shares), reported on the last
trading day preceding the time upon which the board of directors priced the
reissue of Shares unless such Shares are reissued by way of Rights Offering (as
defined in Article 7 hereof).

Article 10.--Restrictions on Ownership of Shares

Section 1.   Definitions.
             -----------

     For the purposes of this Article 10, the following terms shall have the
following meanings:

     "Beneficial Ownership", when used with respect to any ownership of Shares
by any Person, shall initially mean, without duplication, all Shares which are
(i) directly owned by such Person, (ii) constructively owned by such Person
taking into account the constructive ownership rules of Section 544 of the Code
as modified by Section 856(h)(1)(B) of the Code, and (iii) owned (directly,
indirectly, or beneficially) within the meaning of Section 13(d) of the
Securities Exchange Act of 1934 as amended by such Person (including Shares that
would otherwise be excluded by Section 13(d)(6) and Rule 13d-4 thereof and
Shares beneficially owned by any group of Persons).

                                    Page 19
<PAGE>

The terms "Beneficial Owner", "Beneficially Owns" and "Beneficially Own" shall
have the correlative meanings.

     "Charitable Beneficiary" shall mean an organisation or organisations
described in Sections 170(b)(1)(A) (other than clauses (vii) or (viii) thereof)
and 170(c) of the Code and identified by the board of directors as the
beneficiary or beneficiaries of the Shares held in a fiduciary capacity.

     "Code" shall mean the United States of America Internal Revenue Code of
1986, as amended from time to time.

     "CFC" shall mean a controlled foreign corporation within the meaning of
Sections 951 through 958 of the Code or any corresponding provisions of any
amended or successor statute.

     "Event" shall have the meaning given to such term in Section 3(A) of this
Article 10.

     "Excess Shares" shall mean Shares resulting from an exchange or Event
described in Section 3 of this Article 10.

     "Excess Shares Fiduciary" shall mean a Person unaffiliated with the
Company, any Purported Beneficial Transferee or any Purported Record Transferee,
identified by the board of directors as a fiduciary.

     "Excluded Holder" shall mean Security Capital Group Incorporated, a
Maryland (United States of America) corporation, and its affiliates, successors,
or assigns and any Person (an "Indirect Excluded Holder") who Beneficially Owns
Shares that are also Beneficially Owned by an Excluded Holder ("Overlapping
Shares") but limited in the case of each such Indirect Excluded Holder to the
Overlapping Shares.  However, an affiliate, successor, or assignee (other than a
direct or indirect wholly owned subsidiary of Security Capital Group
Incorporated) will be treated as an Excluded Holder only if Security Capital
Group Incorporated obtains an opinion of counsel that any ownership of Shares by
such affiliate, successor, or assignee will not cause the Company to be treated
as a PHC, a FPHC, or a CFC.

     "FPHC" shall mean a foreign personal holding company within the meaning of
Section 552 of the Code or any corresponding provisions of any amended or
successor statute.

     "German Ownership Limit" shall mean 50% of the share capital or voting
rights in the Company.  The overall participation of German Tax Residents in the
Company shall be determined by the board of directors in good faith, which
determination shall be conclusive for all purposes hereof.

     "German Tax Resident" means any individual, corporation or other entity
which is resident in Germany for tax purposes under Section 1 of the German
Income Tax Act or Section 1 of the German Corporate Tax Act.

                                    Page 20
<PAGE>

     "Individual" shall mean a natural person or an organisation described in
Section 401(a), 501(c)(17), or 509(a) of the Code or a portion of a trust
permanently set aside or to be used exclusively for the purposes described in
Section 642(c) of the Code or a corresponding provision of a prior income tax
law.

     "Market Price" as of a relevant date shall be determined from data provided
by the stock exchange, having the highest average daily volumes in Shares or
ADR's representing such Shares for the 20 trading days preceding such date.
Market Price shall mean the last reported sales price on such exchange for the
trading day immediately preceding the relevant date.  If the Shares are not then
traded on an exchange, Market Price shall mean the last reported sales price for
Shares on the trading day immediately preceding the relevant date as reported on
any exchange or quotation system over or through which such Shares may be
traded, or if not then so traded, the market price of such Shares on the
relevant date as determined in good faith by the board of directors.

     "Ownership Limit" shall initially mean 9.5% of the (i) value of (a) the
Company's outstanding Shares or, (b) if Shares are issued in more than one
class, the outstanding Shares of any class of Shares or (ii) voting power of all
Shares entitled to vote.  The value and voting power of the outstanding Shares
of the Company shall be determined by the board of directors in good faith,
which determination shall be conclusive for all purposes hereof.

     "Person" shall mean an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c) (17) of the Code),
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity.

     "PHC" shall mean a personal holding company within the meaning of Section
542 of the Code or any corresponding provisions of any amended or successor
statute.

     "Purported Beneficial Transferee" shall mean, with respect to any purported
Transfer or Event which results in Excess Shares, the beneficial holder of the
Shares, if such Transfer had been valid under Section 2 of this Article 10 or
such Event had not occurred.

     "Purported Record Transferee" shall mean, with respect to any purported
Transfer or Event which results in Excess Shares, the record holder of the
Shares, if such Transfer had been valid under Section 2 of this Article 10 or
such Event had not occurred.

     "Settlement Amount" shall have the meaning given to such term in Section 14
of this Article 10.

     "Shares" shall mean all of the shares of the Company, including common and
preferred, as may be authorised and issued from time to time pursuant to Article
7 and Article 8.

                                    Page 21
<PAGE>

     "Transfer" (as a noun) shall mean any sale, transfer, gift, assignment,
devise or other disposition of Shares (including (a) the granting of any option
or entering into any agreement for the sale, transfer or other disposition of
Shares, (b) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Shares, but excluding
the exchange of debt or any security of the Company for Shares and (c) any
transfer or other disposition of any interest in Shares as a result of a change
in the marital status of the holder thereof), whether voluntary or involuntary,
whether of record, constructively or beneficially and whether by operation of
law or otherwise.  The terms "Transfer" (as a verb), "Transfers" and
"Transferred" shall have the correlative meanings.

     "United States Shareholder" shall mean any United States person (as defined
in section 957(c) of the Code) that would be treated as a "United States
shareholder" (within the meaning of section 95 1 (b)) with respect to the
Company.

Section 2.   Ownership Limitations and Transfer Restrictions.
             -----------------------------------------------

     (A)  Subject to Section 11 of this Article 10, no Person (other than an
Excluded Holder) shall Beneficially Own Shares in excess of the Ownership Limit.

     (B)  Subject to Section 11 of this Article 10, any Transfer that would
result in any Person (other than an Excluded Holder) Beneficially Owning Shares
in excess of the Ownership Limit shall be unenforceable against the Company as
to such Shares in excess of the Ownership Limit.

     (C)  Subject to Section 11 of this Article 10, any Transfer that would
result in five or fewer Individuals Beneficially Owning more than 50% in value
of (i) the Company's outstanding Shares or (ii) the outstanding Shares of any
class of the Company's Shares, shall be unenforceable against the Company as to
the Transfer of those Shares that result in such excess.

     (D)  Subject to Section 11 of this Article 10, German Tax Residents shall
not directly or indirectly (whether through a subsidiary, trust arrangement or
otherwise) collectively own Shares in excess of the German Ownership Limit.  Any
Transfer of Shares that would result in German Tax Residents collectively owning
directly or indirectly (whether through a subsidiary, trust arrangement or
otherwise) Shares in excess of the German Ownership Limit shall be unenforceable
against the Company.

     (E)  Nothing contained in this Article 10 shall preclude the settlement of
any transaction entered into through the facilities of any securities exchange.
The fact that the settlement of any transaction is permitted shall not negate
the effect of any other provision of this Article 10 and any transferee in such
a transaction shall be subject to all of the provisions and limitations set
forth in this Article 10.

     (F)  Subject to Section 11 of this Article 10, any Transfer that would
result in any Person (other than an Excluded Holder) becoming a United States
Shareholder shall be unenforceable

                                    Page 22
<PAGE>

against the Company as to the Transfer of those Shares that results in such
Person becoming a United States Shareholder.

     (G)  Subject to Section 11 of this Article 10, any Transfer that would
result in the Company becoming a PHC shall be unenforceable against the Company
as to the Transfer of those Shares that results in the Company becoming a PHC.

     (H)  Subject to Section 11 of this Article 10, any Transfer that would
result in the Company becoming a FPHC shall be unenforceable against the Company
as to the Transfer of those Shares that results in the Company becoming a FPHC.

Section 3.   Excess Shares.
             -------------

     (A)  If in event, including a purported Transfer (an "Event"), occurs that
would cause any Person (other than in Excluded Holder) to Beneficially Own
Shares in excess of the Ownership Limit, then (i) except as provided in Section
11 of this Article 10 if the event is a Transfer, the Shares that would be
otherwise acquired by the Purported Beneficial Transferee (or in the case of an
Event that is not a Transfer, Shares held by the Person holding record title to
the Shares Beneficially Owned by such Person) in excess of the Ownership Limit
(rounded up to the nearest whole Share) shall be exchanged for an equal number
of Excess Shares to the extent necessary to eliminate such excess ownership,
(ii) such Excess Shares shall be transferred to the Excess Shares Fiduciary as
provided in Section 13 hereof, and (iii) the prohibited owner of the Shares
exchanged for Excess Shares shall return Share certificates to the Company.
Such exchange shall be effective as of the close of business on the business day
prior to the date of the Event even if the certificates for the Shares exchanged
for Excess Shares are returned to the Company at a later date.  In determining
which Shares arc exchanged, Shares directly owned by any Person who caused the
Event to occur shall be exchanged before any other Person's Shares. Where
several Persons exist or where such Person owns Shares constructively through
one or more Persons and the Shares so constructively held must be exchanged, the
board of directors shall determine in good faith which particular Shares are to
be exchanged pursuant to the foregoing provisions.

     (B)  If an Event occurs that would cause the Company to become a PHC or a
FPHC, then (i) except as provided in Section 11 of this Article 10 if the Event
is a Transfer the Shares that would be otherwise acquired by the Purported
Beneficial Transferee (or in the case of an Event that is not a Transfer, Shares
held by a Person holding record title to the Shares that would have caused the
Company to become a PHC or FPHC) (rounded up to the nearest whole Share) shall
be exchanged for an equal number of Excess Shares to the extent necessary to
eliminate such status, (ii) such Excess Shares shall be transferred to the
Excess Shares Fiduciary as provided in Section 13 hereof, and (iii) the owner of
the Shares exchanged for Excess Shares shall return Share certificates to the
Company.  Such exchange shall be effective as of the close of business on the
business day prior to the date of the Event even if the certificates for the
Shares exchanged for Excess Shares are returned to the Company at a later date.
If, after the exchange of any such Shares, the Company would still be a PHC or
FPHC, any Individual or Individuals whose ownership of Shares in the Company

                                    Page 23
<PAGE>

increased as a result of the Event and who is among the five Individuals who
caused the Company to become a PHC or a FPHC, shall exchange Shares on a pro
rata basis for an equal number of Excess Shares until the Company is not a PHC
or FPHC.  In determining which Shares are exchanged, Shares owned directly by
such Individual or Individuals shall be exchanged before other Shares not
directly owned are exchanged.  The board of directors shall determine in good
faith which particular Shares are to be exchanged pursuant to the foregoing
provisions.

     (C)  If an Event occurs that would cause German Tax Residents to own Shares
in excess of the German Ownership Limit, such Shares that would cause such
excess shall be exchanged for an equal number of Excess Shares to the extent
necessary to eliminate such excess.  The Board of Directors shall determine in
good faith which particular shares are to be exchanged pursuant to the foregoing
sentence.  Such exchange shall be effective as of the close of business on the
business day prior to the date of the Event.

     (D)  If an Event occurs that would cause a Person (other than an Excluded
Holder) to become a United States Shareholder then (i) except as provided in
Section 11 of this Article 10, Shares that would cause the Person to become such
a United States Shareholder (rounded-up to the next whole share) shall be
exchanged for an equal number of Excess Shares to the extent necessary to
eliminate such status (ii) such Excess Shares shall be transferred to the Excess
Shares Fiduciary as provided in Section 13 hereof, and (iii) the owner of the
Shares exchanged for Excess Shares shall return Share certificates to the
Company.  Such exchange shall be effective as of the close of business on the
business day prior to the date of the Event even if the certificates for the
Shares exchanged for Excess Shares are returned to the Company at a later date.
The board of directors shall determine in good faith which particular Shares are
to be exchanged pursuant to the foregoing provisions.

Section 4.   Prevention of Transfer.
             ----------------------

Any Transfers or purported Transfers in violation of Section 2 herein and any
Event or purported Event that would result in a violation of Section 2 herein
shall, in each case, automatically result in the designation and treatment
described in Section 3 herein.  If the board of directors shall at any time
determine in good faith that a Person intends to acquire or has attempted to
acquire Beneficial Ownership that would result in violation of Section 2 herein,
the board of directors shall take such action as it deems advisable to refuse to
give effect to or to prevent such Transfer, including refusal to effect such
Transfer on the books of the Company or proceedings to enjoin such Transfer.

Section 5.   Notice to Company.
             -----------------

Any Person who acquires or attempts to acquire Shares in violation of Section 2
herein, or any Person who is a transferee or participant in an Event such that
Excess Shares result under Section 3 herein, shall immediately give written
notice thereof to the Company.  Persons required to give notice under this
Section 5 shall provide the Company such other information as the Company may

                                    Page 24
<PAGE>

reasonably request in order to allow the Company to apply the ownership, voting
and transfer restriction of this Article 9.

Section 6.   Information Reporting.
             ---------------------

Every Beneficial Owner of 5% or more of the number or value of outstanding
Shares of any class of the Company shall provide to the Company information as
the Company may reasonably request in order to allow the Company to apply the
ownership, voting and transfer restrictions of this Article 10.

Section 7.   Other Action by Board.
             ---------------------

In addition to the powers enumerated herein, the board of directors shall be
empowered to take such other action as it deems necessary or advisable to
protect the Company and the interests of its stockholders by preventing the
Company from becoming a PHC, a FPHC, or a CFC or being subject to adverse tax
treatment in Germany.  No application of this Section 7 shall preclude the
settlement of any transaction entered into through the facilities of any stock
exchange.

Section 8.   Ambiguities.
             -----------

In the case of an ambiguity in the meaning or application of any of the
provisions of this Article 10, including any definition contained in Section 1,
the board of directors shall have the power to determine the application of the
provisions of this Article 10 with respect to any situation based on the facts
known to it.

Section 9.   Increase or Decrease in Ownership Limit.
             ---------------------------------------

Subject to the limitations provided in Section 10 of this Article 9, the board
of directors may from time to time increase or decrease the Ownership Limit or
the German Ownership Limit.  If any decrease is a result of a retroactive change
in existing law that would require a decrease to prevent either PHC, FPHC, or
CFC status or adverse tax treatment in Germany, such decrease may be retroactive
to the extent necessary to preclude such status or treatment.  Any other
decrease may be only made prospectively as to subsequent holders.

Section 10.  Ownership Limitations.
             ---------------------

     (A)  Notwithstanding any contrary provision contained in this Article 10,
the board of directors may exempt a Person or Event from the Ownership Limit or
the German Ownership Limit on such terms and conditions as the board of
directors may deem appropriate.

     (B)  Notwithstanding any contrary provision contained in this Article 10,
if an Event occurs that would cause German Tax Residents collectively to
directly or indirectly (whether through a subsidiary, trust arrangement or
otherwise) own Shares in excess of the German Ownership Limit

                                    Page 25
<PAGE>

or would cause the Company to become a CFC, PHC or an FPHC, the board of
directors may exempt such Event or the Persons involved or both from the
application of Sections 2 and 3 and any other applicable sections of this
Article 10 on such terms and conditions as the board of directors may deem
appropriate.

Section 11.  Waivers by the Board.
             --------------------

     (A)  Notwithstanding any contrary provision contained in this Article 10,
the board of directors may exempt a Person or Event from the Ownership Limit or
the German Ownership Limit on such terms and conditions as the board of
directors may deem appropriate.

     (B)  Notwithstanding any contrary provision contained in this Article 10,
if an Event occurs that would cause German Tax Residents collectively to
directly or indirectly (whether through a subsidiary, trust arrangement or
otherwise) own Shares in excess of the German Ownership Limit or would cause the
Company to become a CFC, PHC or an FPHC, the board of directors may exempt such
Event or the Persons involved or both from the application of Sections 2 and 3
and any other applicable sections of this Article 10 on such terms and
conditions as the board of directors may deem appropriate.

Section 12.  Severability.
             ------------

If any provision of this Article 9 or any application of any such provision is
determined to be void, invalid or unenforceable by any court having jurisdiction
over the issue, the validity and enforceability of the remaining provisions
shall be affected only to the extent necessary to comply with the determination
of such court.

Section 13.  Transfer of Excess Shares.
             -------------------------

Any Excess Shares shall be deemed as of the date of their exchange for shares to
have been transferred to the Excess Shares Fiduciary, as a fiduciary for the
exclusive benefit of the Charitable Beneficiary or Charitable Beneficiaries
having an interest in such Excess Shares.  The Purported Record Transferee shall
have no rights in such Excess Shares except as provided in Sections 14 and 16
herein.

Section 14.  Distributions on Excess Shares.
             ------------------------------

Any distributions (whether taxable as a dividend, return of capital or
otherwise) on Excess Shares arising on or after the date such Shares may be
classified as Excess Shares shall be payable by the Purported Record Transferee
to the Excess Shares Fiduciary for the benefit of the Charitable Beneficiary.
Upon liquidation, dissolution or winding up, the Purported Record Transferee
shall receive (i) the lesser of (1) the price paid by the Purported Record
Transferee for the Shares, or if the Purported Record Transferee did not give
value for the Shares, the Market Price of the Shares on the day of the event
causing the Shares to become Excess Shares, and (2) the price received by the

                                    Page 26
<PAGE>

Excess Shares Fiduciary from the redemption (under this Section 14) or Transfer
(under Section 16 herein) of the Shares minus (ii) any distribution payable but
not yet paid by the Purported Record Transferee to the Excess Shares Fiduciary
(in the aggregate, the "Settlement Amount").

Section 15.  Voting of Excess Shares.
             -----------------------

The Excess Shares Fiduciary shall be entitled to vote the Excess Shares for the
benefit of the Charitable Beneficiary on any matter.

Section 16.  Sale and Transferability of Excess Shares.
             -----------------------------------------

Excess Shares shall be transferable only as provided in this Section 16.  The
Company shall place a broker's order to sell any Excess Shares for cash.  Such
Shares shall be sold to the Person who makes and pays the highest offer for such
Shares and whose Beneficial Ownership of such Shares will not violate Sections 2
or 3 herein.  The proceeds of the sale shall be payable to the Excess Shares
Fiduciary, which shall pay the Settlement Amount (as defined in Section 14
herein) to the Purported Record Transferee and the remainder to the Charitable
Beneficiary.

If any of the foregoing restrictions on Transfer of Excess Shares is determined
to be void, invalid or unenforceable by any court of competent jurisdiction,
then the Purported Record Transferee may be deemed, at the option of the
Company, to have acted as an agent of the Company in acquiring such Excess
Shares and to hold such Excess Shares on behalf of the Company.

Section 17.  Underwritten Offerings.
             ----------------------

The Ownership Limit shall not apply to the acquisition of Shares or rights,
options or warrants for, or securities convertible into, Shares by an
underwriter in a public offering, provided that the underwriter makes a timely
distribution of such Shares or rights, options or warrants for, or securities
convertible into, Shares.

Article 11.--Calculation of Net Asset Value per Share

The net asset value per Share, other than a Preferred Share, in the Company
shall be expressed in United States Dollars and shall be determined as of any
Valuation Day.  It shall be the number obtained in dividing (i) the net assets
of the Company, being the value of the assets less the liabilities, decreased by
the Original Contribution Amount of all outstanding Preferred Shares and by all
dividends accrued and unpaid thereon, on any such Valuation Day, (ii) by the
number of Shares, other than Preferred Shares, then outstanding in the Company,
less the number of any Shares redeemed by the Company and not disposed of by the
Company, in accordance with the rules set forth below.  The net asset value per
Share my be rounded up or down to the nearest unit of the relevant currency as
the board of directors shall determine.  If since the time of determination of
the net asset value there has been a material change in the quotations in the
markets on which a substantial portion of the investments of the Company are
dealt in or quoted, the Company may, in

                                    Page 27
<PAGE>

order to safeguard the interests of the shareholders and the Company, cancel the
first valuation and carry out a second valuation.

The valuation of the net asset value per Share, other than a Preferred Share,
shall be made in the following manner

I. Subject to Part III of this Article 10, the assets of the Company shall
include:

1)   properties and property rights registered in the name of the Company;

2)   shareholdings in and convertible and other debt of real estate companies;

3)   all cash on hand or on deposit, including any interest accrued thereon;

4)   all bills and demand notes receivable and accounts receivable (including
proceeds of securities sold but not delivered);

5)   all bonds, time notes, shares, stock, debentures, debenture stocks,
subscription rights, warrants, options and other securities, financial
instruments and similar assets owned or contracted for by the Company (provided
that the Company may make adjustments in a manner not inconsistent with
paragraph d) below with regards to fluctuations in the market value of
securities caused by trading ex-dividends, ex-rights, or by similar practices);

6)   all stock, stock dividends, cash dividends and cash distributions
receivable by the Company to the extent information thereon is reasonably
available to the Company;

7)   all interest accrued on any interest-bearing assets owned by the Company
except to the extent that the same is included or reflected in the principal
amount of such asset;

8)   the preliminary expenses of the Company, including the cost of issuing and
distributing Shares of the Company, insofar as the same have not been written
off;

9)   all other assets of any kind and nature including expenses paid in advance.

The value of such assets shall be determined as follows:

a)   Real estate will be valued at their estimated investment value (current
appraisal value including all costs of acquisition).

b)   The securities of real estate companies which are listed on a stock
exchange or dealt in on another regulated market, operating regularly,
recognised and open to the public (a "Regulated Market"), will be valued on the
basis of the last available publicised stock exchange or market value.

                                    Page 28
<PAGE>

c)   The securities of real estate companies which are not listed on a stock
exchange nor dealt in on another Regulated Market will be valued on the basis of
the probable net realization value estimated with prudence and in good faith by
the board of directors (generally using cost, unless events demonstrate that a
lower or higher value is more accurate).

d)   The value of any cash on hand or on deposit, bills and demand notes and
accounts receivable, prepaid expenses, cash dividends and interest declared or
accrued as aforesaid and not yet received shall be deemed to be the full amount
thereof, unless in any case the same is unlikely to be paid or received in full,
in which case the value thereof shall be arrived at after making such discount
as the Company may consider appropriate in such case to reflect the true value
thereof.

e)   All other securities and other assets, including debt securities,
restricted securities and securities for which no market quotation is available,
are valued on the basis of dealer--supplied quotations or by a pricing service
approved by the board of directors or, to the extent such prices are not deemed
to be representative of market values, such securities and other assets shall be
valued at fair value as determined in good faith pursuant to procedures
established by the board of directors.  Money market instruments held by the
Company with a remaining maturity of ninety days or less will be valued by the
amortized cost method, which approximates market value.

For the appraisal of the value of properties and property rights registered in
the name of the Company, and in privately-held real estate companies in which
the Company holds more than 50% of the outstanding voting stock, the Company
shall appoint an independent real estate appraiser to value such interest.  Any
such valuation may be established at the year end and used throughout the
following year unless there is a change in the general economic situation or in
the condition of the relevant properties or property rights which requires new
valuations to be carried out under the same conditions as the annual valuations.
The Company may deviate from such valuation if deemed in the interest of the
Company and its shareholders.

The value of all assets and liabilities not expressed in United States Dollars
will be converted into United States Dollars at the rate of exchange ruling in
Luxembourg on the relevant Valuation Day.  If such quotations are not available,
the rate of exchange will be determined in good faith by or under procedures
established by the board of directors.

The board of directors, in its discretion, may permit some other method of
valuation to be used, if it considers that such valuation better reflects the
fair value of any asset of the Company.

II. Subject to Part III of this Article 10, the liabilities of the Company shall
include:

1)   all loans and other indebtedness for borrowed money (including convertible
debt), bills and accounts payable;

                                    Page 29
<PAGE>

2)   all accrued interest on such loans and other indebtedness for borrowed
money (including accrued fees for commitment for such loans and other
indebtedness);

3)   all accrued or payable expenses (including administrative expenses,
advisory fees, including incentive fees, if any, custodian fees, and corporate
agents' fees);

4)   all known liabilities, present and future, including all matured
contractual obligations for payments of money or property, including the amount
of any unpaid distributions declared by the Company, where the Valuation Day
falls on the record date for determination of the person entitled thereto or is
subsequent thereto;

5)   an appropriate provision for future taxes based on capital and income to
the Valuation Day, as determined from time to time by the Company, and other
reserves (if any) authorized and approved by the board of directors, as well as
such amount (if any) as the board of directors may consider to be an appropriate
allowance in respect of any contingent liabilities of the Company;

6)   all other liabilities of the Company of whatsoever kind and nature
reflected in accordance with Luxembourg law and U.S. GAAP.  In determining the
amount of such liabilities the Company shall take into account all expenses
payable by the Company which may comprise, as more fully described in the Sales
Documents, formation expenses, fees payable to its advisors, including
performance related fees, if any, fees and expenses payable to its accountants,
custodian and its correspondents, domiciliary, administrative, registrar and
transfer agents, any paying agent, any distributors and permanent
representatives in places of registration, as well as any other agent employed
by the Company, the remuneration of the directors and their reasonable out-of-
pocket expenses, insurance coverage and reasonable travelling costs in
connection with board meetings, fees and expenses for legal and auditing
services (including due diligence expenses relating to potential investments),
any fees and expenses involved in registering and maintaining the registration
of the Company with any Governmental agencies or stock exchanges in the Grand
Duchy of Luxembourg and in any other country, reporting and publishing expenses,
including the cost of preparing, printing, advertising and distributing
prospectuses, explanatory memoranda, periodical reports or registration
statements, the cost of printing certificates, and the costs of any reports to
shareholders, expenses incurred in determining the Company's net asset value,
the cost of convening and holding shareholders' and board of directors'
meetings, all taxes, duties, governmental and similar charges, and all other
operating expenses, including the cost of buying and selling assets, the cost of
publishing the issue and redemption prices, if any, interest, bank charges,
currency conversion costs, and brokerage, postage, telephone and telex.  The
Company may accrue administrative and other expenses of a regular or recurring
nature based on an estimated amount rateably for yearly or other periods.

                                    Page 30
<PAGE>

III. For the purpose of this Article 10:

1)   Shares of the Company to be redeemed (if any) under Article 8 hereof shall
be treated as existing and taken into account until the date fixed for
redemption and from such time and until paid by the Company the price therefor
shall be deemed to be a liability of the Company;

2)   Shares to be issued by the Company shall be treated as being in issue as
from the date of issue;

3)   if the Market Price (as defined in Article 9) for the Shares on the
Valuation Day on which such valuation is made exceeds the stated conversion
price for any outstanding convertible debt securities of the Company, the
indebtedness evidenced by such convertible debt securities (and any accrued and
unpaid interest thereon which is not payable upon conversion of such debt
securities pursuant to the terms thereof) shall not be treated as a liability of
the Company and the Shares issuable pursuant to such convertible debt securities
shall be treated as being in issue;

4)   if the Market Price (as defined in Article 9) for the Shares on the
Valuation Day on which such valuation is made is less than or equal to the
stated conversion price for any outstanding convertible debt securities of the
Company, the indebtedness evidenced by such convertible debt securities of the
Company shall be treated as a liability of the Company in an amount equal to the
principal amount of the indebtedness outstanding plus all accrued and unpaid
interest thereon;

5)   all investments, cash balances and other assets expressed in currencies
other than the currency in which the net asset value for the Company is
calculated shall be valued after taking into account the market rate or rates of
exchange in force at the date and time for determination of the net asset value
of Shares; and

6)   where on any Valuation Day the Company has contracted to:

--purchase any asset, the value of the consideration to be paid for such asset
shall be shown as a liability of the Company and the value of the asset to be
acquired shall be shown as an asset of the Company;

--sell any asset, the value of the consideration to be received for such asset
shall be shown as an asset of the Company and the asset to be delivered shall
not be included in the assets of the Company;

provided, however, that if the exact value or nature of such consideration or
such asset is not known on such Valuation Day, then its value shall be estimated
by the Company, provided, further, that in the case of purchases and sales of
assets on a Regulated Market, the principles set forth in this paragraph 6)
shall be given effect from the day which is one business day after the trade
date of the relevant purchase or sale (being the date that the relevant broker
executes the order for such purchase or sale).

                                    Page 31
<PAGE>

For the avoidance of doubt, the provisions of this Article 10 (including, in
particular, Part III hereof) are rules for determining net asset value per Share
and are not intended to affect the treatment for accounting or legal purposes of
the assets and liabilities of the Company, or any securities issued by the
Company.

Article 12.--Frequency and Temporary suspension of Calculation of Net Asset
Value per Share and of Issue of Shares

The net asset value per Share shall be calculated from time to time by the
Company (or any agent appointed by the Company) under the responsibility of the
board of directors provided the calculation is made at least once a year (at the
end of the financial year of the Company) as well as on each day by reference to
which the board of directors approves the pricing of an issue of Shares provided
that this is in compliance with applicable laws and regulations, such date or
time of calculation being referred to herein as the "Valuation Day."

The Company may suspend the determination of the net asset value per Share and
the issue of its Shares during:

a)   any period when any one of the principal markets or other stock exchanges
on which a substantial portion of the assets attributable to such Shares, from
time to time, are quoted is closed (otherwise than for ordinary holidays) or
during which dealings therein are restricted or suspended; or

b)   any period when, as a result of political, economic, military or monetary
events or any circumstances outside the control, responsibility and power of the
board of directors, or the existence of any state of affairs in the property
market, disposal of the assets owned by the Company attributable to such Shares
is not reasonably practicable without this being seriously detrimental to the
interests of shareholders or if in the opinion of the board of directors issue,
sale and/or redemption prices cannot fairly be calculated; or

c)   any breakdown in the means of communication normally employed in
determining the price of any of the investments or the current prices on any
market or other stock exchanges; or

d)   any period when the board of directors is unable to repatriate funds for
the purpose of making payments on the redemption of Shares to the holders
thereof or during which time any transfer of funds involved in the realisation
or acquisition of investments or payments due on redemption of such Shares, if
any, cannot in the opinion of the board of directors be effected at normal rates
of exchange; or

e)   any period when the net asset value of any subsidiary of the Company may
not be determined accurately; or

                                    Page 32
<PAGE>

f)   upon the publication of a notice convening a general meeting of
shareholders for the purpose of resolving to wind up the Company; or

g)   when for any other reason, the prices of any investments cannot be promptly
or accurately ascertained.

Any such suspension shall be publicized, if appropriate, by the Company and may
be notified to shareholders having made an application for subscription of
Shares for which the calculation of the net asset value has been suspended.

                                   Title III

                        ADMINISTRATION AND SUPERVISION

Article 13.--Directors

The Company shall be managed by a board of directors composed of not less than
three members, who need not be shareholders of the Company.  They shall be
elected for a term of 1 year.  The directors shall be elected by the
shareholders at a general meeting of shareholders; the latter shall further
determine the number of directors and their remuneration.

Directors shall be elected by the majority of the votes of the Shares present or
represented at a general meeting.

Any director may be removed with or without cause or be replaced at any time by
a resolution passed by a majority of the votes of the Shares present or
represented at a general meeting.

In the event of a vacancy in the office of director, the remaining directors may
temporarily fill such vacancy; the shareholders shall take a final decision
regarding such nomination at their next general meeting.

At all times the majority of the directors shall be residents in Europe.  All
meetings of the board of directors, other than occasional telephonic meetings,
shall take place in Europe.

Article 14.--Board Meetings

The board of directors shall choose from among its members a chairman, and may
choose from among its members one or more vice-chairmen.  It may also choose a
secretary, who need not be a director, who shall write and keep the minutes of
the meetings of the board of directors and of the shareholders.  The board of
directors shall meet upon call by the chairman or any two directors, at the
place indicated in the notice of meeting (but in no event in the United States
of America, its territories or possessions, or in the United Kingdom).

                                    Page 33
<PAGE>

The chairman shall preside at the meetings of the directors and of the
shareholders.  In his absence, the shareholders or the board members shall
decide by a majority vote that another director, or in case of a shareholders'
meeting, that any other person shall be in the chair of such meetings.

Resolutions of the board of directors shall be taken by a majority vote of the
directors present or represented; provided, however, that all transactions
between the Company and the Advisor or Security Capital Group Incorporated
("Security Capital Group") or any other subsidiary of Security Capital Group,
including purchases of securities of Security Capital Group (within a limit of
10% of the Company's assets) and any renewal of the Company's advisory agreement
with the Advisor shall also be approved by a majority of the independent
directors of the Company.  For purposes of this Article 13, "independent
director" shall mean a person other than an officer or employee of the Company
or Security Capital Group or its subsidiaries (including the Advisor) or any
other individual having a relationship which, in the opinion of the board of
directors, would interfere with the exercise of independent judgement in
carrying out the responsibilities of a director.

The board of directors may appoint any officers, including a general manager and
any assistant general managers as well as any other officers that the Company
deems necessary for the operation and management of the Company.  Such
appointments may be cancelled at any time by the board of directors.  The
officers need not be directors or shareholders of the Company. The officers
shall have the rights and duties conferred upon them by the board of directors.

Written notice of any meeting of the board of directors shall be given to all
directors at least twenty-four hours prior to the date set for such meeting,
except in circumstances of emergency, in which case the nature of such
circumstances shall be set forth in the notice of meeting.  This notice may be
waived by consent in writing, by telegram, telex, telefax or any other similar
means of communication.  Separate notice shall not be required for meetings held
at times and places fixed in a resolution adopted by the board of directors.

Any director may act at any meeting by appointing in writing, by telegram, telex
or telefax or any other similar means of communication another director as his
proxy.  A director may represent several of his colleagues.

Any director may participate in a meeting of the board of directors by
conference call or similar means of communications equipment whereby all persons
participating in the meeting can hear each other and participating in a meeting
by such means shall constitute presence in person at such meeting.

The directors may only act at duly convened meetings of the board of directors.

The board of directors can deliberate or act validly only if at least the
majority of the directors, or any other number of directors that the board may
determine, are present or represented.

                                    Page 34
<PAGE>

Resolutions of the board of directors will be recorded in minutes signed by the
chairman of the meeting.  Copies of extracts of such minutes to be produced in
judicial proceedings or elsewhere will be validly signed by the chairman of the
meeting or any director.

Resolutions in writing approved and signed by all directors shall have the same
effect as resolutions voted at the directors' meetings; each director shall
approve such resolution in writing, by telegram, telex, telefax or any other
similar means of communication.  All such resolutions shall form the record that
proves that such decision has been taken.

Article 15.--Powers of the Board of Directors

The board of directors is vested with the broadest powers to perform all acts of
disposition and administration within the Company's purpose, in compliance with
the investment policy as set out in the Sales Documents (as defined in Article
4) and as determined in Article 18 hereof.

All powers not expressly reserved by law or by the present Articles of
Incorporation to the general meeting of shareholders are in the competence of
the board.

Article 16.--Corporate Signature

Vis-a-vis third parties, the Company is validly bound by the sole signature of
any director or by the single or joint signature(s) of any person(s) to whom
authority has been delegated by the board of directors.

Article 17.--Delegation of Power

The board of directors of the Company may delegate its powers to conduct the
daily management and affairs of the Company (including the right to act as
authorized signatory for the Company) and its powers to carry out acts in
furtherance of the corporate policy and purpose to one or several physical
persons or corporate entities, which need not be members of the board, who shall
have the powers determined by the board of directors and who may, if the board
of directors so authorizes, sub-delegate their powers.

The board may also confer other special powers of attorney by notarial or
private proxy.

Article 18.--Investment Advisor

The board of directors of the Company have appointed as advisor Security Capital
U.S. Realty Management S.A. (the "Advisor"), a company organized and existing
under the laws of the Grand Duchy of Luxembourg, who shall supply the Company
with recommendation and advice with respect to the Company's investment policy
pursuant to Article 19 hereof, in particular for identifying and selecting
investment opportunities, advising on their purchase and sale and actively

                                    Page 35
<PAGE>

monitoring the progress of the Company's portfolio.  The board of directors
shall have the right to replace the Advisor or appoint additional advisors.

Article 19.--Investment Policies and Restrictions

The board of directors has the power to determine the investment policies and
strategies of the Company and the course of conduct of the management and
business affairs of the Company, within the restrictions as set forth in the
Sales Document issued by the board of directors and in compliance with
applicable laws and regulations.

Investments in real estate may be made by the Company either directly or
indirectly through subsidiaries or real estate companies as the board of
directors may from time to time decide. References in these Articles to
"investments" and "assets" shall mean, as appropriate, either investments made
and assets beneficially held directly or investments made and assets
beneficially held indirectly through the aforesaid subsidiaries and real estate
companies.

Article 20.--Conflict of Interest

No contract or other transaction between the Company and any other company or
firm shall be affected or invalidated by the fact that any one or more of the
directors or officers of the Company is interested in, or is a director,
associate, officer or employee of, such other company or firm.  Any director or
officer of the Company who serves as a director, officer or employee of any
company or firm with which the Company shall contract or otherwise engage in
business shall not, by reason of such affiliation with such other company or
firm, be prevented from considering and voting or acting upon any matters with
respect to such contract or other business.

In the event that any director or officer of the Company may have in any
transaction of the Company an interest opposite to the interests of the Company,
such director or officer shall make known to the board of directors such
opposite interest and shall not consider or vote on any such transaction, and
such transaction and such director's or officer's interest therein shall be
reported to the next succeeding general meeting of shareholders.

The terms "opposite interest", as used in the preceding sentence, shall not
include any relationship with or without interest in any matter, position or
transaction involving the Advisor or its affiliates, the Custodian, as well as
any other person, company or entity as may from time to time be determined by
the board of directors in its discretion.

Article 21.--Indemnification of Directors and Officers

The Company shall indemnify any director or officer, and his heirs, executors
and administrators, against expenses reasonably incurred by him in connection
with any action, suit or proceeding to which he may be made a party by reason of
his being or having been a director or officer of the Company or, at its
request, of any other company of which the Company is a shareholder or a

                                    Page 36
<PAGE>

creditor and from which he is not entitled to be indemnified, except in relation
to matters as to which he shall be finally adjudged in such action, suit or
proceeding to be liable for gross negligence or misconduct; in the event of
settlement, indemnification shall be provided only in connection with such
matters covered by the settlement as to which the Company is advised by counsel
that the person to be indemnified did not commit such a breach of duty.  The
foregoing right of indemnification shall not exclude other rights to which he
may be entitled.  The Company shall advance litigation-related expenses to a
director or officer if the Company's legal counsel determines that
indemnification by the Company is likely and if the director or officer agrees
to repay any advance if he is determined not to be entitled to indemnification.

Article 22.--Auditors

The accounting data related in the annual report of the Company shall be
examined by the Auditors (reviseurs d'entreprises agrees) appointed by the
general meeting of shareholders and remunerated by the Company.

The Auditors shall fulfil all duties prescribed by the law of 30 March 1988 on
undertakings for collective investment.

The financial statements of the Company shall be expressed in United States
Dollars.

                                   Ttile IV

               GENERAL MEETINGS-ACCOUNTING YEAR -- DISTRIBUTIONS

Article 23.--Representation

The general meeting of shareholders shall represent the entire body of
shareholders of the Company. Its resolutions shall be binding upon all the
shareholders of the Company.

Article 24.--General Meetings

The general meeting of shareholders shall meet upon call by the board of
directors.

It may also be called upon the request of shareholders in compliance with
applicable law.

The annual general meeting shall be held in accordance with Luxembourg law at
Luxembourg-City at a place specified in the notice of meeting, on the last
Wednesday of June at 11.00 a.m.

If such day is a legal or a bank holiday in Luxembourg, the annual general
meeting shall be held on the next following business day at the same time.

                                    Page 37
<PAGE>

Other meetings of shareholders may be held at such places and times as may be
specified in the respective notices of meeting.

Shareholders shall meet upon call by the board of directors pursuant to a notice
setting forth the agenda sent at least eight days prior to the meeting to each
registered shareholder at the shareholder's address in the register of
shareholders.  The giving of such notice to registered shareholders need not be
justified to the meeting.  The agenda shall be prepared by the board of
directors except in the instance where the meeting is called on the written
demand of the shareholders in which instance the board of directors may prepare
a supplementary agenda.

The notice of meeting shall, in addition, be published as provided for by law in
the Memorial, Recueil Special des Societes et Associations, in one or more
Luxembourg newspapers, and in such other newspapers as the board of directors
may decide.

As all Shares are in registered form, notices to shareholders may be mailed by
registered mail, in which case no publications shall be necessary.

If all shareholders are present or represented and consider themselves as being
duly convened and informed of the agenda, the general meeting may take place
without notice of meeting.

The board of directors may determine all other conditions that must be fulfilled
by shareholders in order to attend any meeting of shareholders.

The business transacted at any meeting of the shareholders shall be limited to
the matters contained in the agenda (which shall include all matters required by
law) and business incidental to such matters.

The board of directors may fix in advance a date, not exceeding seventy-five
days, preceding the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, and to vote at, any
such meeting and in such case such shareholders and only such shareholders as
shall be shareholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting, notwithstanding any transfer of any
Shares on the register of shareholders after any such record date fixed as
aforesaid.

Article 25.--Quorum and Majority Conditions

Each Share is entitled to one vote, in compliance with Luxembourg law and these
Articles of Incorporation.  A shareholder may act at any meeting of shareholders
by giving a written proxy to another person, who need not be a shareholder and
who may be a director of the Company.

Unless otherwise provided by law or herein, resolutions of the general meeting
are passed by a simple majority of the shareholders present or represented and
voting.

                                    Page 38
<PAGE>

Article 26.--Accounting Year

The accounting year of the Company shall commence on the first day of January of
each year and shall terminate on the thirty-first day of December of the same
year.

Article 27.--Mandatory Capital Reserve-Dividends and Distributions

Five per cent of the annual net profits of the Company shall be allocated to the
reserve required by Luxembourg law.  This allocation shall cease to be required
as soon and so long as such surplus reserve equals or exceeds ten per cent of
the issued capital of the Company as stated in Article 5 hereof, as such capital
is increased or reduced from time to time as provided in Article 5 hereof.

The general meeting of shareholders shall determine how the balance of net
profits shall be disposed of and from time to time may declare, or authorize the
board of directors to pay, dividends and distributions in respect of such
amounts.  Subject to the provisions of Luxembourg law, the board of directors
may decide from time to time to pay interim dividends.  The general meeting of
shareholders, by conversion of net profits into capital and paid-in surplus, may
distribute stock dividends in lieu of cash dividends, or declare or authorize
the board of directors to pay, dividends and distributions in kind.

For the purpose of determining the net profits available for dividends and
distributions, the shareholders at the annual or any extraordinary general
meeting may require that realized and/or unrealized capital losses are set off
against the paid-in surplus of the Company.  Dividends and other distributions
may also be paid out of unappropriated net profit brought forward from prior
years.

Dividends and distributions declared may be paid in United States dollars or any
other currency selected by the board of directors, and may be paid at such times
as the board of directors may determine.  The board of directors may make a
final determination of the rate of exchange applicable to translate funds
available for such dividends or distributions into the currency of payment.

The payment of any dividends or distributions shall be made to shareholders at
the address indicated on the register of shareholders.  Any dividends or
distributions declared but not claimed by a shareholder within a period of five
years from the declaration thereof, shall be forfeited by the shareholder and
shall revert to the Company.  The board of directors shall have the power from
time to time to take all necessary action to perfect such reversion and to
authorize such action on behalf of the Company.  No interest will be paid on
dividends declared or distributions made by the Company but held by it for the
account of shareholders.

                                    Page 39
<PAGE>

                                    Title V

                               FINAL PROVISIONS

Article 28.--Custodian

To the extent required by law, the Company shall enter into a custody agreement
with a banking or saving institution as defined by the law of April 5, 1993 on
the financial sector (herein referred to as the "Custodian").

The Custodian shall fulfill the duties and responsibilities as provided for by
the law of 30 March 1988 on undertakings for collective investment.

If the Custodian desires to retire, the board of directors shall use its best
endeavors to find a successor custodian within two months of the effectiveness
of such retirement.  The directors may terminate the appointment of the
Custodian but shall not remove the Custodian unless and until a successor
custodian shall have been appointed to act in the place thereof.

Article 29.--Dissolution

The Company may at any time be dissolved by a resolution of the general meeting
subject to the quorum and majority requirements referred to in Article 30
hereof.

Whenever the net assets fall below two thirds of the minimum net assets as
prescribed by law, the equivalent in U.S. Dollars of EUR 1,240,000.-, the
question of the dissolution of the Company shall be referred to the general
meeting by the board of directors.  The general meeting, for which no quorum
shall be required, shall decide by the simple majority of the votes of the
Shares represented at the meeting.

The question of the dissolution of the Company shall further be referred to the
general meeting whenever the net assets fall below one fourth of the minimum net
assets as prescribed by law, the equivalent in U.S. Dollars of EUR 1,240,000.-;
in such an event, the general meeting shall be held without any quorum
requirements and the dissolution may be decided by shareholders holding one
fourth of the votes of the Shares represented at the meeting.

The meeting must be convened so that it is held within a period of forty days
from ascertainment that the net assets of the Company have fallen below two
thirds or one fourth of the legal minimum, as the case may be.

                                    Page 40
<PAGE>

Article 30.--Liquidation

Liquidation shall be carried out by one or several liquidators, who may be
physical persons or legal entities, appointed by the general meeting of
shareholders which shall determine their powers and their compensation.

Article 31.--Amendments to the Articles of Incorporation

These Articles of Incorporation may be amended by a general meeting of
shareholders subject to the quorum and majority requirements provided by the law
of 10 August 1915 on commercial companies, as amended.

Article 32.--Statements

Words importing a masculine gender also include the feminine gender and words
importing persons or shareholders also include corporations, partnerships,
associations and any other organized group of persons whether incorporated or
not.

Article 33.--Applicable Law

All matters not governed by these Articles of Incorporation shall be determined
in accordance with the law of 10 August 1915 on commercial companies and the law
of 30 March 1988 on undertakings for collective investment as such laws have
been or may be amended from time to time.

                                    Page 41

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