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  Exhibit 10.18    
    

 BASE SALARY AND TARGET BONUS

FOR THE NAMED EXECUTIVE OFFICERS  

        The following table sets forth the current annual base salaries and target bonuses of the Chief Executive Officer and the other named
executive officers of Zale Corporation (the "Company"). 

								
	Name

 
	 	Base Salary 	 	Target Bonus % 	 
	 Neal L. Goldberg

Chief Executive Officer
	 	$	925,000	 	 	125	%
	 Theo Killion

President
	 	
$	

550,000	 	 	

75	
%
	 Rodney Carter

Executive Vice President, Chief Administrative Officer and Chief Financial Officer
	 	
$	

435,000	 	 	

60	
%
	 Gilbert Hollander

Executive Vice President, Chief Sourcing and Supply Chain Officer
	 	
$	

400,000	 	 	

60	
%
	 Steve Larkin

Executive Vice President, Chief Marketing and E-Commerce Officer
	 	
$	

340,000	 	 	

37.5	
%

        For
additional information regarding the compensation of the Company's executive officers, please refer to the information under the headings "Executive Compensation" in the Company's
definitive Proxy Statement on Schedule 14A, as filed with the Securities and Exchange Commission. 

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Exhibit 10.18EXHIBIT 10.10

 

 

June 26,
2008

 

Brent
Olthoff

HF
Financial Corp.

P.O.
Box 5000

Sioux
Falls, SD 57117 – 5000

 

Dear
Brent:

 

I
am pleased to confirm First Tennessee Bank National Association’s reaffirmation
of HF Financial Corp’s Six Million Dollar ($6,000,000.00) Revolving Line of
Credit facility.  The line will mature on September 30, 2008.  The
short maturity will allow FTN Financial the opportunity to perform an on-site
due diligence of Home Federal Bank (Bank). Once complete, FTN Financial will
submit a request to renew the line for a full one year.

 

In
the interim, the Line of credit may be used for: i) capital infusion to its subsidiaries
to support growth and/or other liquidity needs. Interest on the outstanding balance
will be payable quarterly at a variable rate per annum on the outstanding balance.
The variable rate of interest shall be a 1/4% discount to First Tennessee Bank’s Base Rate, which is currently
5.00%.  Thus, your borrowing rate today would equal 4.75%. Again, the
maturity date of the commitment is September 30, 2008.

 

The
line will continue to be governed by the following covenants:

 

·                  ROA >= 0.60%
(Consolidated Basis)

·                  Leverage Ratio
>= 6.00% (Bank)

·                  NPLs/TLs <2.50%
(Consolidated Basis)

 

Please
keep in mind that these covenants will be tested on a quarterly basis.  A
portion of the bank’s stock will be required to secure the loan if Borrower and/or
Bank is in default of one or all covenants governing the Line of Credit. This
will only apply if the line is funded.

 

Brent,
it is a pleasure of First Tennessee Bank to provide this commitment to your
institution. I will be in touch in the coming weeks in order to schedule a due
diligence trip.  Please do not hesitate to call if you have any
questions.

 

Sincerely,

 

 

	
  /s/ David
  House

  	
   

  
	
  David
  House

  	
   

  
	
  Vice
  President

  	
   

  
	
  Correspondent
  ServicesExhibit 4.1

 

FORM OF
INDENTURE

 

	
   

  	
   

  	
  ,

  	
   

  	
   

  

 

 

Among

 

Novartis
Capital Corporation

as
Issuer

 

Novartis
Securities Investment Ltd.

as
Issuer

 

Novartis
Finance S.A.

as
Issuer

 

Novartis
AG

as
Guarantor

 

and

 

HSBC
Bank USA, National Association

as
Trustee

 

 

Allen & Overy LLP

 

 

CONTENTS

 

	
  Clause

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and
  Incorporation by Reference

  	
  1

  
	
   

  	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
  1.2

  	
  Incorporation by Reference
  of Trust Indenture Act

  	
  5

  
	
   

  	
  1.3

  	
  Rules of Construction

  	
  5

  
	
  2.

  	
  The Securities

  	
  5

  
	
   

  	
  2.1

  	
  Form of Securities

  	
  5

  
	
   

  	
  2.2

  	
  Execution, Authentication,
  Delivery and Dating

  	
  6

  
	
   

  	
  2.3

  	
  Amount Unlimited; Issuable
  in Series

  	
  7

  
	
   

  	
  2.4

  	
  Denominations

  	
  9

  
	
   

  	
  2.5

  	
  Registrar and Paying Agent;
  Agents Generally

  	
  9

  
	
   

  	
  2.6

  	
  Paying Agent to Hold Money
  in Trust

  	
  10

  
	
   

  	
  2.7

  	
  Transfer and Exchange

  	
  11

  
	
   

  	
  2.8

  	
  Replacement Securities

  	
  13

  
	
   

  	
  2.9

  	
  Outstanding Securities

  	
  13

  
	
   

  	
  2.10

  	
  Temporary Securities

  	
  14

  
	
   

  	
  2.11

  	
  Cancellation

  	
  14

  
	
   

  	
  2.12

  	
  Persons Deemed Owners

  	
  15

  
	
   

  	
  2.13

  	
  Payment of Interest;
  Defaulted Interest

  	
  15

  
	
   

  	
  2.14

  	
  Computation of Interest

  	
  16

  
	
   

  	
  2.15

  	
  Series May Include
  Tranches

  	
  16

  
	
   

  	
  2.16

  	
  CUSIP and CINS Numbers

  	
  16

  
	
  3.

  	
  Redemption

  	
  16

  
	
   

  	
  3.1

  	
  Applicability of Article

  	
  16

  
	
   

  	
  3.2

  	
  Notice of Redemption;
  Partial Redemptions

  	
  17

  
	
   

  	
  3.3

  	
  Payment of Securities Called
  for Redemption

  	
  18

  
	
   

  	
  3.4

  	
  Exclusion of Certain
  Securities from Eligibility for Selection for Redemption

  	
  19

  
	
   

  	
  3.5

  	
  Mandatory and Optional
  Sinking Funds

  	
  19

  
	
  4.

  	
  Covenants

  	
  21

  
	
   

  	
  4.1

  	
  Payment of Securities

  	
  21

  
	
   

  	
  4.2

  	
  Maintenance of Office or
  Agency

  	
  22

  
	
   

  	
  4.3

  	
  Certificate to Trustee

  	
  22

  
	
   

  	
  4.4

  	
  Limitation on Liens

  	
  22

  
	
   

  	
  4.5

  	
  Payment of Additional
  Amounts

  	
  23

  
	
   

  	
  4.6

  	
  Waiver of Certain Covenants

  	
  24

  
	
   

  	
  4.7

  	
  Calculation of Original
  Issue Discount

  	
  24

  
	
   

  	
  4.8

  	
  Reports by the Company and
  the Guarantor

  	
  25

  
	
  5.

  	
  Consolidation, Merger, Sale,
  Lease or Conveyance

  	
  25

  
	
   

  	
  5.1

  	
  When the Company
  May Merge, Etc.

  	
  25

  
	
   

  	
  5.2

  	
  Successor Company
  Substituted

  	
  26

  
	
   

  	
  5.3

  	
  When the Guarantor
  May Merge, Etc.

  	
  26

  
	
   

  	
  5.4

  	
  Successor Guarantor
  Substituted

  	
  27

  
	
  6.

  	
  The Guarantee

  	
  27

  
	
   

  	
  6.1

  	
  Guarantee

  	
  27

  
	
  7.

  	
  Default and Remedies

  	
  29

  
	
   

  	
  7.1

  	
  Events of Default

  	
  29

  

 

 

	
   

  	
  7.2

  	
  Acceleration

  	
  31

  
	
   

  	
  7.3

  	
  Other Remedies

  	
  32

  
	
   

  	
  7.4

  	
  Waiver of Past Defaults

  	
  32

  
	
   

  	
  7.5

  	
  Control by Majority

  	
  33

  
	
   

  	
  7.6

  	
  Limitation on Suits

  	
  33

  
	
   

  	
  7.7

  	
  Rights of Holder to Receive
  Payment

  	
  33

  
	
   

  	
  7.8

  	
  Collection Suit by Trustee

  	
  34

  
	
   

  	
  7.9

  	
  Trustee May File Proofs
  of Claim

  	
  34

  
	
   

  	
  7.10

  	
  Application of Proceeds

  	
  34

  
	
   

  	
  7.11

  	
  Restoration of Rights and
  Remedies

  	
  35

  
	
   

  	
  7.12

  	
  Undertaking for Costs

  	
  35

  
	
   

  	
  7.13

  	
  Rights and Remedies
  Cumulative

  	
  35

  
	
   

  	
  7.14

  	
  Delay or Omission Not Waiver

  	
  36

  
	
  8.

  	
  Trustee

  	
  36

  
	
   

  	
  8.1

  	
  General

  	
  36

  
	
   

  	
  8.2

  	
  Certain Rights of Trustee

  	
  36

  
	
   

  	
  8.3

  	
  Individual Rights of Trustee

  	
  38

  
	
   

  	
  8.4

  	
  Trustee’s Disclaimer

  	
  38

  
	
   

  	
  8.5

  	
  Notice of Default

  	
  38

  
	
   

  	
  8.6

  	
  Reports by Trustee to
  Holders

  	
  38

  
	
   

  	
  8.7

  	
  Compensation and Indemnity

  	
  39

  
	
   

  	
  8.8

  	
  Replacement of Trustee

  	
  39

  
	
   

  	
  8.9

  	
  Successor Trustee by Merger,
  Etc.

  	
  40

  
	
   

  	
  8.10

  	
  Eligibility

  	
  41

  
	
   

  	
  8.11

  	
  Money Held in Trust

  	
  41

  
	
   

  	
  8.12

  	
  Conflicting Interests

  	
  41

  
	
   

  	
  8.13

  	
  Communication by Holders
  with Other Holders

  	
  41

  
	
  9.

  	
  Discharge of Indenture;
  Defeasance

  	
  41

  
	
   

  	
  9.1

  	
  Discharge; Defeasance within
  One Year of Payment

  	
  41

  
	
   

  	
  9.2

  	
  Defeasance

  	
  42

  
	
   

  	
  9.3

  	
  Covenant Defeasance

  	
  43

  
	
   

  	
  9.4

  	
  Application of Trust Money

  	
  44

  
	
   

  	
  9.5

  	
  Repayment to Company and
  Guarantor

  	
  44

  
	
  10.

  	
  Amendments, Supplements and
  Waivers

  	
  45

  
	
   

  	
  10.1

  	
  Without Consent of Holders

  	
  45

  
	
   

  	
  10.2

  	
  With Consent of Holders

  	
  45

  
	
   

  	
  10.3

  	
  Revocation and Effect of
  Consent

  	
  47

  
	
   

  	
  10.4

  	
  Notation on or Exchange of
  Securities

  	
  47

  
	
   

  	
  10.5

  	
  Trustee to Sign Amendments,
  Etc.

  	
  47

  
	
   

  	
  10.6

  	
  Conformity with Trust
  Indenture Act

  	
  48

  
	
  11.

  	
  Miscellaneous

  	
  48

  
	
   

  	
  11.1

  	
  Trust Indenture Act of 1939

  	
  48

  
	
   

  	
  11.2

  	
  Notices

  	
  48

  
	
   

  	
  11.3

  	
  Certificate and Opinion as
  to Conditions Precedent

  	
  49

  
	
   

  	
  11.4

  	
  Statements Required in
  Certificate or Opinion

  	
  50

  
	
   

  	
  11.5

  	
  Evidence of Ownership

  	
  50

  
	
   

  	
  11.6

  	
  Rules by Trustee,
  Paying Agent or Registrar

  	
  50

  
	
   

  	
  11.7

  	
  Payment Date other than a
  Business Day

  	
  50

  
	
   

  	
  11.8

  	
  Governing Law; Waiver of
  Jury Trial

  	
  51

  

 

 

	
   

  	
  11.9

  	
  No Adverse Interpretation of
  Other Agreements

  	
  51

  
	
   

  	
  11.10

  	
  Successors

  	
  51

  
	
   

  	
  11.11

  	
  Duplicate Originals

  	
  51

  
	
   

  	
  11.12

  	
  Separability

  	
  51

  
	
   

  	
  11.13

  	
  Table of Contents, Headings,
  Etc.

  	
  51

  
	
   

  	
  11.14

  	
  Incorporators,
  Stockholders, Officers and Directors of Company Exempt from Individual
  Liability

  	
  51

  
	
   

  	
  11.15

  	
  Judgment Currency

  	
  52

  

 

 

CROSS-REFERENCE
TABLE

 

	
  Trust
  Indenture Act Section

  	
   

  	
  Indenture
  Section

  
	
   

  	
   

  	
   

  
	
  310(a)(1)

  	
   

  	
  8.10

  
	
  (a)(2)

  	
   

  	
  8.10

  
	
  (a)(3)

  	
   

  	
  Not Applicable

  
	
  (a)(4)

  	
   

  	
  Not Applicable

  
	
  (a)(5)

  	
   

  	
  8.10

  
	
  (b)

  	
   

  	
  8.3, 8.12

  
	
  (c)

  	
   

  	
  Not Applicable

  
	
  311(a)

  	
   

  	
  8.3

  
	
  (b)

  	
   

  	
  8.3

  
	
  (c)

  	
   

  	
  Not Applicable

  
	
  312(a)

  	
   

  	
  2.5

  
	
  (b)

  	
   

  	
  8.13

  
	
  (c)

  	
   

  	
  8.13

  
	
  313(a)

  	
   

  	
  8.6

  
	
  (b)(1)

  	
   

  	
  Not Applicable

  
	
  (b)(2)

  	
   

  	
  8.6

  
	
  (c)

  	
   

  	
  8.6

  
	
  (d)

  	
   

  	
  8.6

  
	
  314(a)(1)

  	
   

  	
  4.8

  
	
  (a)(2)

  	
   

  	
  4.8

  
	
  (a)(3)

  	
   

  	
  4.8

  
	
  (a)(4)

  	
   

  	
  4.3

  
	
  (b)

  	
   

  	
  Not Applicable

  
	
  (c)(1)

  	
   

  	
  11.3

  
	
  (c)(2)

  	
   

  	
  11.3

  
	
  (c)(3)

  	
   

  	
  Not Applicable

  
	
  (d)

  	
   

  	
  Not Applicable

  
	
  (e)

  	
   

  	
  11.4

  
	
  315(a)(1)

  	
   

  	
  8.1

  
	
  (a)(2)

  	
   

  	
  8.2

  
	
  (b)

  	
   

  	
  8.5

  
	
  (c)

  	
   

  	
  8.1

  
	
  (d)

  	
   

  	
  8.1

  
	
  (e)

  	
   

  	
  7.2

  
	
  316(a)(1)(A)

  	
   

  	
  7.5

  
	
  (a)(1)(B)

  	
   

  	
  7.4

  
	
  (a)(2)

  	
   

  	
  Not Applicable

  
	
  (a)(last
  sentence)

  	
   

  	
  2.9

  
	
  (b)

  	
   

  	
  7.7

  
	
  (c)

  	
   

  	
  Not Applicable

  
	
  317(a)(1)

  	
   

  	
  7.8

  
	
  (a)(2)

  	
   

  	
  7.9

  
	
  (b)

  	
   

  	
  2.6

  
	
  318(a)

  	
   

  	
  1.2

  

 

Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be a part of the Indenture.

 

Section 318(c) of
the Trust Indenture Act provides that the provisions of Sections 310 to and
including 317 of the Trust Indenture Act are a part of and govern every
qualified indenture, whether or not physically contained therein.

 

 

	
  INDENTURE dated as of

  	
   

  	
  ,

  	
   

  	
   

  

 

 

AMONG:

 

(1)                                 Novartis Capital Corporation, a
corporation organized under the laws of the State of Delaware;

 

(2)                                 Novartis Securities Investment Ltd.,  a limited liability company organized under the laws of
Bermuda;

 

(3)                                 Novartis Finance S.A.,  a public limited liability company (société
anonyme) incorporated under the laws of the Grand-Duchy of
Luxembourg, having its registered office at 20, rue Eugène Ruppert, L-2453
Luxembourg, and registered with the Luxembourg trade and companies register
under number B. 141.096;

 

(4)                                 Novartis AG, a stock corporation (Aktiengesellschaft) incorporated under the laws of
Switzerland, as guarantor (the Guarantor); and

 

(5)                                 HSBC Bank USA, National Association, a
national banking association duly organized and existing under the laws of the
United States of America, as trustee (the Trustee).

 

RECITALS:

 

WHEREAS:

 

(A)                             Each of Novartis Capital Corporation, Novartis Securities Investment
Ltd. and Novartis Finance S.A. has duly authorized the execution and delivery
of this Indenture to provide for the issuance from time to time of its debt
securities (the Securities), which are to be
issued in one or more series up to such principal amount or amounts as may from
time to time be authorized in accordance with the terms of this Indenture;

 

(B)                               The Guarantor has duly authorized the execution and delivery of this
Indenture to provide for its guarantee of the Securities; and

 

(C)                               All things necessary to make this Indenture a valid agreement of
Novartis Capital Corporation, Novartis Securities Investment Ltd., Novartis
Finance S.A. and the Guarantor, in accordance with its terms, have been done;

 

(D)                              For the purpose of this Indenture, the Company
means either Novartis Capital Corporation, Novartis Securities Investment Ltd.
or Novartis Finance S.A., as the case may be, in its capacity as issuer of the
Securities.

 

NOW,
THEREFORE:

 

In
consideration of the premises and the purchase of the Securities by the holders
thereof, the parties hereto mutually covenant and agree for the equal and
proportionate benefit of the respective holders from time to time of the
Securities or of any and all series thereof as follows:

 

1.                                      DEFINITIONS AND INCORPORATION BY REFERENCE

 

1.1                               Definitions

 

Additional
Amounts has the meaning specified in Section 4.5.

 

1

 

Agent means any Registrar, Paying Agent, transfer agent or Authenticating
Agent.

 

Authenticating
Agent has the meaning specified in Section 2.2.

 

Board
Resolution means one or more
resolutions of the board of directors of the Company, the Guarantor or any
authorized committee of the Company or the Guarantor, certified by the
secretary or an assistant secretary of the Company or the Guarantor, as the
case may be, to have been duly adopted and to be in full force and effect on
the date of certification, and delivered to the Trustee.

 

Business
Day means, with respect to any Security, unless
otherwise specified, any day that is not a Saturday, a Sunday or a day on which
banking institutions are authorized or required by law, regulation or executive
order to be closed, in the City of New York, in Luxembourg, Luxembourg, in
Zurich, Switzerland or the city (or in any of the cities, if more than one) in
which amounts are payable, as specified in the form of such Security.

 

Commission means the Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act or, if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

 

Company means each party named as such in the recitals of this Indenture until
a successor replaces such party pursuant to Article 5 of this Indenture,
and thereafter means the successor.

 

Corporate
Trust Office means the principal office
of the Trustee in the Borough of Manhattan, The City of New York, New York at
which at any particular time its corporate trust business shall be administered
which office as of the date hereof is located at 452 Fifth Avenue, New York, New York 10018, Attention: Corporate Trust
and Loan Agency.

 

Default means any event that is, or after notice or passage of time or both
would be, an Event of Default.

 

Depositary means, with respect to the Securities of any series issuable or issued
in the form of one or more Global Securities, the Person designated as
Depositary by the Company pursuant to Sections 2.3 and 2.5 until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter Depositary
shall mean or include each Person who is then a Depositary hereunder, and if at
any time there is more than one such Person, Depositary
as used with respect to the Securities of any such series shall mean the
Depositary with respect to the Global Securities of that series.

 

Dollar and $ mean a U.S. Dollar or other
equivalent unit in such coin or currency of the United States of America as at
the time shall be the legal tender for the payment of public and private debts.

 

Event
of Default has the meaning specified
in Section 7.1.

 

Exchange
Act means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder by the
Commission.

 

Global
Security means a Security evidencing
all or a part of a series of Securities, issued to the Depositary for such
series in accordance with Section 2.2, and bearing the legend prescribed
in Section 2.2.

 

2

 

Guarantee means the guarantee of the Guarantor as endorsed on each Security
authenticated and delivered pursuant to this Indenture and shall include the
guarantee of the Guarantor set forth in Section 6.1 of this Indenture and
shall include all other obligations and covenants of the Guarantor contained in
this Indenture and any Securities.

 

Guarantor means the party named as such in the first paragraph of this Indenture
until a successor replaces it pursuant to Article 5 of this Indenture and
thereafter means the successor.

 

Holder means the registered holder of any Security.

 

Indebtedness
means any indebtedness for monies borrowed or raised including, without
limitation, any debenture, note, bond or like security.

 

Indenture means this Indenture as originally executed or as it may be amended or
supplemented from time to time by one or more indentures supplemental to this
Indenture entered into pursuant to the applicable provisions of this Indenture
and shall include the forms and terms of the Securities of each series
established as contemplated pursuant to Sections 2.1 and 2.3.

 

Liens has the meaning specified in Section 4.4.

 

Luxembourg means the Grand-Duchy of Luxembourg.

 

Officer means, with respect to the Company and the Guarantor, any director or
officer thereof, including the Company Secretary.

 

Officer’s
Certificate means a certificate
executed by any Officer of the Company or of the Guarantor, as the case may be,
complying with Section 11.4 and delivered to the Trustee.  Each such certificate shall comply with Section 314
of the Trust Indenture Act and include (except as otherwise expressly provided
in this Indenture) the statements provided in Section 11.4.

 

Opinion
of Counsel means a written opinion
signed by legal counsel, who may be an employee of or counsel to the Company or
to the Guarantor, or to both, satisfactory to the Trustee and complying with Section 11.4.  Each such opinion shall comply with Section 314
of the Trust Indenture Act and include the statements provided in Section 11.4,
if and to the extent required thereby.

 

Original
Issue Discount Security means any Security
that provides for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the maturity thereof pursuant
to Section 7.2.

 

Paying
Agent has the meaning specified in Section 2.5.

 

Periodic
Offering means an offering of
Securities of a series from time to time, the specific terms of which Securities,
including, without limitation, the rate or rates of interest, if any, thereon,
the stated maturity or maturities thereof and the redemption provisions, if
any, with respect thereto, are to be determined by the Company or its agents
upon the issuance of such Securities.

 

Person means an individual, a corporation, a partnership, a limited liability
company, an association, a trust or any other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.

 

3

 

Principal of a Security means the principal amount of, and, unless the context
indicates otherwise, includes any premium payable on, such Security.

 

Record
Date has the meaning specified in Section 2.13.

 

Registrar has the meaning specified in Section 2.5.

 

Relevant Indebtedness
means any loan or other indebtedness in the form of, or represented or
evidenced by, bonds, debentures, notes or other securities that are or are
capable of being quoted, listed or traded on any stock exchange or in any
securities market or over-the-counter market.

 

Relevant
Taxing Jurisdiction has the meaning specified
in Section 4.5.

 

Responsible
Officer, when used with respect to the Trustee, means
any vice president, any assistant vice president, any assistant secretary, any
assistant treasurer, any trust officer, any assistant trust officer or any
other officer of the Trustee, in each case, located in the Corporate Trust and
Loan Agency office of the Trustee, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject
and who shall have direct responsibility for the administration of this Indenture.

 

Securities means any of the securities, as defined in the first paragraph of the
recitals hereof, that are authenticated and delivered under this Indenture and,
unless the context indicates otherwise, shall include any coupon appertaining
thereto.

 

Security
Register has the meaning specified
in Section 2.5.

 

Subsidiary means an entity a majority of the interests or a majority of the
outstanding voting stock of which is owned, directly or indirectly, by the
Guarantor or by one or more other Subsidiaries of the Guarantor.  For the purposes of this definition, Voting Stock means stock having voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.

 

Trust
Indenture Act means the Trust Indenture
Act of 1939, as it may be amended from time to time.

 

Trustee means the party named as such in the first paragraph of this Indenture
until a successor replaces it in accordance with the provisions of Article 8
and thereafter means such successor.

 

U.S.
Government Obligations means securities
that are (a) direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or (b) obligations
of an agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit obligation by
the United States of America, and shall also include a depositary receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of
the holder of a depositary receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of interest on or principal of the U.S. Government Obligation evidenced by such
depositary receipt.

 

4

 

Yield
to Maturity means, as the context may
require, the yield to maturity (a) on a series of Securities or (b) if
the Securities of a series are issuable from time to time, on a Security of
such series, calculated at the time of issuance of such series in the case of
clause (a) or at the time of issuance of such Security of such series in
the case of clause (b), or, if applicable, at the most recent redetermination
of interest on such series or on such Security, and calculated in accordance
with the constant interest method or such other accepted financial practice as
is specified in the terms of such Security.

 

1.2                               Incorporation by Reference of Trust Indenture Act

 

Whenever
this Indenture refers to a provision of the Trust Indenture Act, the provision
is incorporated by reference in and made a part of this Indenture.  All terms used in this Indenture that are
defined by the Trust Indenture Act, defined by reference in the Trust Indenture
Act to another statute or defined by a rule of the Commission and not
otherwise defined herein have the meanings assigned to them therein.  If any provision of this Indenture limits,
qualifies or conflicts with another provision hereof that is required to be
included in this Indenture by any of the provisions of the Trust Indenture Act,
such required provision shall control.

 

1.3                               Rules of Construction

 

Unless the context otherwise requires:

 

(a)                                  an accounting term not otherwise defined has the meaning assigned to it
in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board or such other generally accepted
accounting principles under which the Guarantor may in the future prepare its
financial statements;

 

(b)                                 words in the singular include the plural, and words in the plural
include the singular;

 

(c)                                  “herein,” “hereof” and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision;

 

(d)                                 all references to Sections or Articles refer to Sections or Articles of
this Indenture unless otherwise indicated.

 

2.                                      THE SECURITIES

 

2.1                               Form of Securities

 

The
Securities of each series shall be substantially in such form or forms (not
inconsistent with this Indenture) as shall be established by or pursuant to one
or more Board Resolutions of the Company or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have imprinted or otherwise reproduced thereon such legend or
legends or endorsements, not inconsistent with the provisions of this
Indenture, as may be required to comply with any law, or with any rules of
any securities exchange or usage, all as may be determined by the Officers
executing such Securities as evidenced by their execution of the Securities.

 

5

 

2.2                               Execution, Authentication, Delivery and Dating

 

The
Securities shall be executed by an Officer of the Company by facsimile or
manual signature; and the Guarantees with respect to the Securities shall be
executed by an Officer of the Guarantor by facsimile or manual signature.  If an Officer whose signature is on a
Security or the Guarantee no longer holds that office at the time the Security
or the Guarantee is authenticated, the Security or the Guarantee, as the case
may be, shall nevertheless be valid.

 

The
Trustee may appoint an authenticating agent acceptable to the Company (the Authenticating Agent) to authenticate Securities.  The Authenticating Agent may authenticate
Securities whenever the Trustee may do so. 
Each reference in this Indenture to authentication by the Trustee
includes authentication by such Authenticating Agent.

 

A
Security shall not be valid until the Trustee or Authenticating Agent manually
signs the certificate of authentication on the Security.  The signature shall be conclusive evidence
that the Security has been authenticated under this Indenture.

 

At
any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company, with the Guarantee of the Guarantor endorsed thereon, to the Trustee
for authentication, together with a written request for the authentication and
delivery of such Securities and the applicable documents referred to below in
this Section 2.2, and the Trustee shall thereupon authenticate and deliver
such Securities.  In authenticating such
Securities, the Trustee shall be entitled to receive and shall be fully
protected in relying upon:

 

(a)                                  any Board Resolution of the Company and/or executed supplemental
indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the forms
and terms of the Securities of that series were established;

 

(b)                                 an Officer’s Certificate of the Company and an Officer’s Certificate of
the Guarantor certifying as to the forms and terms of the Securities of that
series and the Guarantee thereof and stating that the form or forms and terms
of such Securities have been, or will be when established in accordance with
such procedures as shall be referred to therein, established in compliance with
this Indenture; and

 

(c)                                  an Opinion of Counsel to the Company and the Guarantor substantially to
the effect that the Securities of that series and the Guarantee thereof have
been duly authorized and, when executed and authenticated, or in the case of
the Guarantee, when the Securities on which the Guarantee shall have been
endorsed shall have been authenticated, in accordance with the provisions of
the Indenture and delivered to and duly paid for by the purchasers thereof on
the date of such opinion, will be entitled to the benefits of the Indenture and
will be valid and binding obligations of the Company and the Guarantor,
respectively, enforceable against the Company and the Guarantor, respectively,
in accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting
creditors’ rights generally, general principles of equity, and such other
matters as shall be specified therein.

 

Notwithstanding
the provisions of the preceding paragraph, if not all Securities of any series
are to be issued at one time, it shall not be necessary to deliver an Officer’s
Certificate or an Opinion of Counsel otherwise required pursuant to the
preceding two paragraphs at the time of issuance of each Security of 

 

6

 

such
series, but such certificate and opinion, with appropriate modifications to
cover such future issuances, shall be delivered at or before the time of
issuance of the first Security of such series.

 

Each
Security shall be dated the date of its authentication.

 

If
the Company shall establish pursuant to Section 2.3 that the Securities of
a series or a portion thereof are to be issued in the form of one or more
Global Securities, then the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Global Securities, having a Guarantee
executed by the Guarantor endorsed thereon, that (a) shall represent and
shall be denominated in an amount equal to the aggregate principal amount of
all of the Securities of such series issued in such form and not yet canceled, (b) shall
be registered in the name of the Depositary for such Global Security or
Securities or the nominee of such Depositary, (c) shall be delivered by
the Trustee to such Depositary or its custodian or pursuant to such Depositary’s
instructions, and (d) shall bear a legend substantially to the following
effect:

 

“Unless
and until it is exchanged in whole or in part for Securities in definitive
registered form, this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.”

 

2.3                               Amount Unlimited; Issuable in Series

 

The
aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is unlimited.

 

The
Securities may be issued in one or more series. 
There shall be established in or pursuant to a Board Resolution of the
Company or one or more indentures supplemental hereto, prior to the initial
issuance of Securities of any series, any or all of the following, as
applicable:

 

(a)                                  the title of the Securities of the series, which shall distinguish the
Securities of that series from the Securities of all other series;

 

(b)                                 the aggregate principal amount of the Securities of the series to be
authenticated and delivered under this Indenture and any limitation on the
ability of the Company to increase such aggregate principal amount after the
initial issuance of the Securities of that series (except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, or upon redemption of, other Securities of that series
pursuant hereto);

 

(c)                                  the date or dates on which the Principal of the Securities of the series
shall be payable;

 

(d)                                 the percentage of the aggregate principal amount of the Securities of
the series at which the Securities shall be issued and whether the Securities
will be Original Issue Discount Securities and any special tax considerations
relating thereto;

 

(e)                                 (i)             the rate or rates (which may be fixed or variable) per annum at which
the Securities of the series shall bear interest, if any;

 

(ii)                                  the date or dates from which such interest shall accrue, on which such
interest shall be payable and on which a record shall be taken for the
determination of Holders to whom interest is payable; and/or

 

7

 

(iii)                               the method by which such rate or rates or date or dates shall be
determined;

 

(f)                                    if other than as provided in Section 4.2, the place or places where
(i) the Principal of, interest on and any Additional Amounts in respect of
Securities of the series shall be payable, (ii) any Securities of the
series may be surrendered for transfer or exchange, and (iii) notices or
demands to or upon the Company and the Guarantor in respect of the Securities
of the series and this Indenture may be served;

 

(g)                                 the right, if any, of the Company to redeem Securities of the series, in
whole or in part, at its option and the period or periods within which, the
price or prices at which and any terms and conditions upon which Securities of
that series may be so redeemed, pursuant to any sinking fund or otherwise;

 

(h)                                 the obligation, if any, of the Company to redeem, purchase or repay
Securities of the series pursuant to any mandatory redemption, sinking fund or
analogous provisions or at the option of a Holder thereof and the price or
prices at which and the period or periods within which and any of the terms and
conditions upon which Securities of that series shall be redeemed, purchased or
repaid, in whole or in part, pursuant to such obligation;

 

(i)                                     if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which Securities of the series shall be issuable;

 

(j)                                     if other than the entire principal amount thereof, the portion of the
principal amount of Securities of the series that shall be payable upon
declaration of acceleration of the maturity thereof;

 

(k)                                  if other than Dollars, the currency or currencies in which payment of
the Principal of or interest on or any Additional Amounts in respect of
Securities of the series shall be payable or in which Securities of that series
shall be denominated, and any other terms and conditions relating thereto;

 

(l)                                     if other than the currency in which the Securities of the series are
denominated, the currency in which payment of the Principal of or interest on
the Securities of the series shall be payable or if the amount of payments of
Principal of and/or interest on the Securities of that series may be determined
with reference to an index based on a currency other than that in which the
Securities of the series are denominated, the manner in which such amounts
shall be determined;

 

(m)                               if payment of the Principal of and interest on the Securities of the
series shall be payable in currency or currencies other than Dollars, the
manner in which any such currency shall be valued against other currencies in
which any other Securities shall be payable;

 

(n)                                 whether and under what circumstances the Company will pay Additional
Amounts on the Securities of the series in respect of any tax, assessment or
governmental charge withheld or deducted and, if so, whether the Company will
have the option to redeem such Securities rather than pay such Additional
Amounts;

 

(o)                                 if the Securities of the series are to be issuable in definitive form
(whether upon original issue or upon exchange of a temporary Security of that
series) only upon receipt of certain certificates or other documents or
satisfaction of other conditions, the form and terms of such certificates, documents
or conditions;

 

8

 

(p)                                 any trustees, depositaries, Authenticating Agents, Paying Agents,
transfer agents or the Registrar or any other Agents with respect to the
Securities of the series;

 

(q)                                 provisions, if any, for the defeasance of the Securities of the series
(including provisions permitting defeasance of less than all Securities of the
series), which provisions may be in addition to, in substitution for, or in
modification of (or any combination of the foregoing) the provisions of Article 9;

 

(r)                                    if the Securities of the series are issuable in whole or in part as one
or more Global Securities, the identity of the Depositary for such Global
Security or Securities;

 

(s)                                  any deletions from, modifications of or additions to the Events of
Default or covenants with respect to the Securities of the series; and

 

(t)                                    any other terms of the Securities of the series (which terms shall not
be inconsistent with the provisions of this Indenture).

 

All
Securities of any one series shall be substantially identical, except as to
date and denomination, except in the case of any Periodic Offering and except
as may otherwise be provided by or pursuant to the Board Resolution referred to
above or as set forth in any indenture supplemental hereto.  All Securities of any one series need not be
issued at the same time and may be issued from time to time, consistent with
the terms of this Indenture, if so provided by or pursuant to such Board
Resolution or in any such indenture supplemental hereto, and any forms and
terms of Securities to be issued from time to time may be completed and
established from time to time prior to the issuance thereof by procedures
described in such Board Resolution or supplemental indenture.  Unless otherwise provided, a series of
Securities may be re-opened, without the consent of the Holders, for issuances
of additional Securities of such series.

 

2.4                               Denominations

 

The
Securities of each series shall be issuable in denominations established as
contemplated by Section 2.3.  With
respect to Securities of any series denominated in Dollars, in the absence of
any such provisions with respect to Securities of such series, Securities of
such series, other than Securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof.

 

The
Securities of each series shall be numbered, lettered or otherwise
distinguished in such manner as the Officer of the Company executing the same
may determine, as evidenced by his or her execution thereof.

 

2.5                               Registrar and Paying Agent; Agents Generally

 

The
Company shall maintain an office or agency where Securities may be presented
for registration, registration of transfer or exchange (the Registrar) and the Company and the Guarantor shall maintain
an office or agency where Securities may be presented for payment or where, in
the case of the Guarantor, Securities may be presented for payment under the
Guarantees endorsed thereon (the Paying Agent), which
in each case shall be in the Borough of Manhattan, The City of New York.  The Company shall cause the Registrar to keep
a register of the Securities and of their registration, transfer and exchange
and the name and address of each of the Holders (the Security
Register).  The Company 

 

9

 

and
the Guarantor may have one or more additional Paying Agents or transfer agents
with respect to any series.

 

The
Company shall enter into an appropriate agency agreement with any Agent that is
not a party to this Indenture.  The
agreement shall implement the provisions of this Indenture and the Trust
Indenture Act that relate to such Agent. 
The Company shall give prompt written notice to the Trustee of the name
and address of any Agent and any change in the name or address of an
Agent.  If the Company fails to maintain
a Registrar or if the Company or the Guarantor fails to maintain a Paying
Agent, the Trustee shall act as Registrar and Paying Agent.  The Company or the Guarantor may remove any
Agent appointed by it upon written notice to such Agent and the Trustee;
provided that no such removal shall become effective until (a) the
acceptance of an appointment by a successor Agent to such Agent as evidenced by
an appropriate agency agreement entered into by the Company or the Guarantor
and such successor Agent and delivered to the Trustee or (b) notification
to the Trustee that the Trustee shall serve as such Agent until the appointment
of a successor Agent in accordance with clause (a) of this proviso.  The Company, the Guarantor or any affiliate
of the Company or the Guarantor may act as Paying Agent or Registrar; provided
that neither the Company, the Guarantor nor any such affiliate shall act as
Paying Agent in connection with the defeasance of the Securities or the
discharge of this Indenture under Article 9.

 

The
Company initially appoints the Trustee as Registrar and Authenticating Agent,
and the Company and the Guarantor initially appoint the Trustee as Paying Agent.  If, at any time, the Trustee is not the
Registrar, the Registrar shall make available to the Trustee ten days prior to
each interest payment date and at such other times as the Trustee may
reasonably request the names and addresses of the Holders as they appear in the
Security Register.  The Company initially
appoints DTC as Depositary for the Global Securities.

 

In
the case of Global Securities issued by Novartis Finance S.A., the Company must
keep an up-to-date version of the register of the Securities in registered form
pursuant to article 84 of the Luxembourg act dated August 10, 1915 on
commercial companies, as amended.  In the
case of a discrepancy between the register kept at the Registrar’s office (or
any Agent’s office where a register is being kept) and the register kept at the
Company’s registered office, the register kept at the Company’s registered
office shall prevail for Luxembourg law purposes.  Certificates representing Global Securities
in registered form may be issued by the Company but they do not constitute
conclusive evidence.  Ownership of the
Global Securities issued in registered form by the Company passes solely upon
the registration of the transfer in the register of the holders of the Global
Securities held at the Company’s registered office.

 

Subject
to applicable laws and regulations, the Registrar undertakes to make an
up-to-date, complete and accurate copy of the register available, at all
reasonable times during office hours, to the Company, the Paying Agent or any
person authorized by any of them or the Holder of any Securities in registered
form for inspection and for the taking of copies or extracts.

 

2.6                               Paying Agent to Hold Money in Trust

 

Not
later than 10:00 a.m., New York City time, on each due date of any
Principal of or interest on any Securities, the Company shall deposit with the
Paying Agent money in immediately available funds sufficient to pay such
Principal or interest.  The Company shall
require each Paying Agent other than the Trustee to agree in writing that such
Paying Agent shall hold in trust for the benefit of the Holders of such
Securities or the Trustee all money held by the Paying Agent for the payment of
Principal of and interest on such Securities and shall promptly notify the
Trustee in writing of any default in making any such payment.  The Company at any time may require a Paying
Agent to pay all money held by it to the 

 

10

 

Trustee
and account for any funds disbursed, and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed.  Upon
doing so, the Paying Agent shall have no further liability for the money so
paid over to the Trustee.  If the
Company, the Guarantor or any affiliate of the Company or the Guarantor acts as
Paying Agent, it will, on or before each due date of any Principal of or interest
on any Securities, segregate and hold in a separate trust fund for the benefit
of the Holders thereof a sum of money sufficient to pay such Principal or
interest so becoming due until such sum of money shall be paid to such Holders
or otherwise disposed of as provided in this Indenture, and will promptly
notify the Trustee in writing of its action or failure to act as required by
this Section 2.6.

 

The
Trustee shall have no obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this Indenture or
under applicable law with respect to any transfer of any interest in any
Security (including any transfers between or among Depositary participants or
beneficial owners of interests in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.

 

Neither
the Trustee nor any Agent shall have any responsibility for any actions taken
or not taken by the Depositary.

 

2.7                               Transfer and Exchange

 

Upon
surrender for registration of transfer of any Security of any series at any
agency of the Company maintained for such purpose in accordance with Section 2.5,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Securities of the same series, of any authorized denominations and of a like
aggregate principal amount.

 

At
the option of the Holder thereof, Securities of any series (other than a Global
Security, except as set forth below) may be exchanged for a Security or
Securities of such series and tenor having authorized denominations and an
equal aggregate principal amount, upon surrender of such Securities to be
exchanged at the agency of the Company maintained for such purpose in
accordance with Section 2.5. 
Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities,
having a Guarantee executed by the Guarantor endorsed thereon, that the Holder
making the exchange is entitled to receive.

 

All
Securities presented for registration of transfer, exchange, redemption or
payment shall be duly endorsed by, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, the Guarantor and
the Trustee duly executed by the Holder or his or her attorney duly authorized
in writing.

 

The
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any exchange or
registration of transfer of Securities. 
No service charge shall be made for any such transaction.

 

Notwithstanding
any other provision of this Section 2.7, unless and until it is exchanged
in whole or in part for Securities in definitive registered form, a Global
Security representing all or a portion of the Securities of a series may not be
transferred except as a whole by the Depositary for such series to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or
another nominee 

 

11

 

of
such Depositary or by such Depositary or any such nominee to a successor
Depositary for such series or a nominee of such successor Depositary.

 

If
at any time the Depositary for any Global Securities of any series notifies the
Company that it is unwilling or unable to continue as Depositary for such
Global Securities or if at any time the Depositary for such Global Securities
shall no longer be eligible under applicable law to act as Depositary, the
Company shall appoint a successor Depositary eligible under applicable law with
respect to such Global Securities.  If:

 

(a)                                  a successor Depositary eligible under applicable law for such Global
Securities is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility;

 

(b)                                 an Event of Default has occurred and is continuing and the beneficial
owners representing a majority in principal amount of the applicable series of
Securities represented by such Global Securities advise the Depositary to cease
acting as depositary for such Global Securities; or

 

(c)                                  the Company, in its sole discretion, determines at any time that any
Securities of any series issued or issuable in the form of one or more Global
Securities shall no longer be represented by such Global Securities;

 

then
the Company will execute, and the Trustee, upon receipt of the Company’s order
for the authentication and delivery of definitive Securities of such series and
tenor, will authenticate and make available for delivery Securities of such series
and tenor, in any authorized denominations, in an aggregate principal amount
equal to the principal amount of such Global Securities, having a Guarantee
executed by the Guarantor endorsed thereon, in exchange for such Global
Securities.

 

Any
time the Securities of any series are not in the form of Global Securities
pursuant to the preceding paragraph, the Company agrees to supply the Trustee
with a reasonable supply of certificated Securities, having a Guarantee
executed by the Guarantor endorsed thereon, without the legend required by Section 2.2
and the Trustee agrees to hold such Securities in safekeeping until
authenticated and delivered pursuant to the terms of this Indenture.

 

If
established by the Company pursuant to Section 2.3 with respect to any
Global Security, the Depositary for such Global Security may surrender such
Global Security in exchange in whole or in part for Securities of the same
series and tenor in definitive form on such terms as are acceptable to the
Company and such Depositary.  Thereupon,
the Company shall execute, and the Trustee shall authenticate and deliver,
without service charge:

 

(i)                                     to the Person specified by such Depositary new Securities of the same
series and tenor, having a Guarantee executed by the Guarantor endorsed
thereon, of any authorized denominations as requested by such Person, in an
aggregate principal amount equal to and in exchange for such Person’s
beneficial interest in the Global Security; and

 

(ii)                                  to such Depositary a new Global Security, having a Guarantee executed by
the Guarantor endorsed thereon, in a denomination equal to the difference, if
any, between the principal amount of the surrendered Global Security and the
aggregate principal amount of Securities authenticated and delivered pursuant to
clause (i) above.

 

12

 

Securities
issued in exchange for a Global Security, having a Guarantee executed by the
Guarantor endorsed thereon, pursuant to this Section 2.7 shall be
registered in such names and in such authorized denominations as the Depositary
for such Global Security, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee or an agent of the
Company or the Trustee in writing.  The
Trustee or such agent shall deliver such Securities to or as directed in
writing by the Persons in whose names such Securities are so registered.

 

All
Securities (including the Guarantee endorsed thereon) issued upon any transfer
or exchange of Securities shall be valid obligations of the Company and the
Guarantor, evidencing the same debt, and entitled to the same benefits under
this Indenture and the Guarantee endorsed thereon, as the Securities
surrendered upon such transfer or exchange.

 

The
Registrar shall not be required (a) to issue, register the transfer of or
exchange Securities of any series if such Securities may be among those
selected for redemption during a period beginning 15 days before the
selection of Securities to be redeemed and ending on the day of mailing of the
relevant notice of redemption, (b) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except, in the
case of any Security to be redeemed in part, the portion thereof not to be
redeemed, or (c) to issue, register the transfer of or exchange any
Security that has been surrendered for repayment at the option of the Holder,
except the portion, if any, of such Security not to be so repaid.

 

2.8                               Replacement Securities

 

If a
defaced or mutilated Security of any series is surrendered to the Trustee or if
a Holder claims that its Security of any series has been lost, destroyed or
wrongfully taken and presents to the Trustee, the Company, the Guarantor and
any Agent evidence to their satisfaction of the loss, destruction or wrongful
taking of such Security, the Company shall issue and the Trustee shall
authenticate a replacement Security of such series and tenor and principal
amount, having a Guarantee executed by the Guarantor endorsed thereon, bearing a
number not contemporaneously outstanding. 
An indemnity bond must be furnished that is sufficient in the judgment
of the Trustee, the Company and the Guarantor to protect the Trustee, the
Company, the Guarantor and any Agent from any loss that any of them may suffer
if a Security is replaced.  The Company
may charge such Holder for its expenses and the expenses of the Trustee
(including without limitation attorneys’ fees and expenses) in replacing a
Security.  In case any such mutilated,
defaced, lost, destroyed or wrongfully taken Security has become or is about to
become due and payable, the Company and the Guarantor in their discretion may
pay such Security instead of issuing a new Security (with the Guarantee
endorsed thereon) in replacement thereof.

 

Every
replacement Security (including the Guarantee endorsed thereon) is an
additional obligation of the Company and the Guarantor and shall be entitled to
the benefits of this Indenture equally and proportionately with any and all
other Securities of such series and the Guarantee endorsed thereon duly
authenticated and delivered hereunder.

 

To
the extent permitted by law, the foregoing provisions of this Section 2.8
are exclusive with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities.

 

2.9                               Outstanding Securities

 

Securities
outstanding at any time are all Securities that have been authenticated by the
Trustee except for those Securities it has canceled, those Securities delivered
to it for cancellation, those paid pursuant to Section 2.8 and those
Securities described in this Section 2.9 as not outstanding.

 

13

 

If a
Security is replaced pursuant to Section 2.8, it ceases to be outstanding
unless and until the Trustee, the Company and the Guarantor receive proof
satisfactory to them that the replaced Security is held by a holder in due
course.

 

If
the Paying Agent (other than the Company, the Guarantor or an affiliate of the
Company or the Guarantor) holds on the maturity date or any redemption date or
date for repurchase of the Securities money sufficient to pay Securities
payable or to be redeemed or repurchased on such date, then on and after such
date such Securities shall cease to be outstanding and interest on them shall
cease to accrue.

 

A
Security does not cease to be outstanding because the Company, the Guarantor or
one of the affiliates of the Company or the Guarantor holds such Security,
provided, however, that, in determining whether the Holders of the requisite
principal amount of the outstanding Securities shall have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company, the Guarantor or any affiliate of the Company
or the Guarantor shall be disregarded and deemed not to be outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities as to which a Responsible Officer of the Trustee has received
written notice to be so owned shall be so disregarded.  Any Securities so owned which are pledged by
the Company, the Guarantor, or any affiliate of the Company or the Guarantor,
as security for loans or other obligations, otherwise than to another such
affiliate of the Company or the Guarantor, shall be deemed to be outstanding,
if the pledgee is entitled pursuant to the terms of its pledge agreement and is
free to exercise in its discretion the right to vote such securities,
uncontrolled by the Company, the Guarantor or any such affiliate.

 

2.10                        Temporary Securities

 

Until
definitive Securities of any series are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities of such series,
having the Guarantee of the Guarantor endorsed thereon.  Temporary Securities of any series shall be
substantially in the form of definitive Securities of such series, but may have
insertions, substitutions, omissions and other variations determined to be
appropriate by the Officers of the Company and the Guarantor executing the
temporary Securities or the Guarantee endorsed thereon, as evidenced by their
execution of such temporary Securities or Guarantee, as applicable.  If temporary Securities of any series are
issued, the Company will cause definitive Securities of such series, having the
Guarantee of the Guarantor endorsed thereon to be prepared without unreasonable
delay.  After the preparation of
definitive Securities of any series, the temporary Securities of such series
shall be exchangeable for definitive Securities of such series and tenor upon
surrender of such temporary Securities at the office or agency of the Company
designated for such purpose pursuant to Section 4.2, without charge to the
Holder.  Upon surrender for cancellation
of any one or more temporary Securities of any series the Company shall execute
and the Trustee shall authenticate and make available for delivery in exchange
therefor a like principal amount of definitive Securities of such series and
tenor and authorized denominations, having a Guarantee executed by the
Guarantor endorsed thereon.  Until so
exchanged, the temporary Securities of any series shall be entitled to the same
benefits under this Indenture as definitive Securities of such series.

 

2.11                        Cancellation

 

The
Company or the Guarantor at any time may deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder,
which the Company or the Guarantor may have acquired in any manner whatsoever,
and may deliver to the Trustee for cancellation any Securities previously
authenticated hereunder which the Company has not issued and sold.  The Registrar, any transfer agent and the
Paying Agent shall forward to the Trustee any Securities surrendered to them
for 

 

14

 

transfer,
exchange or payment.  The Trustee shall
cancel all Securities surrendered for transfer, exchange, payment or
cancellation and shall deliver such canceled Securities to the Company or the
Guarantor, as applicable.  The Company
may not issue new Securities to replace Securities it has paid in full or
delivered to the Trustee for cancellation, except as expressly permitted by
this Indenture.

 

2.12                        Persons Deemed Owners

 

Prior
to due presentment of a Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in
whose name such Security is registered as the owner of such Security for the
purpose of receiving payment of Principal of and (subject to Section 2.13)
interest on such Security and for all other purposes whatsoever, whether or not
such Security be overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the contrary.

 

None
of the Company, the Trustee, any Paying Agent or the Security Registrar will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.

 

Notwithstanding
the foregoing, with respect to any Global Security, nothing herein shall
prevent the Company, the Trustee, or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by any Depositary, as a Holder, with respect to such Global Security
or impair, as between such depositary and owners of beneficial interests in
such Global Security, the operation of customary practices governing the
exercise of the rights of such Depositary (or its nominee) as Holder of such
Global Security.

 

2.13                        Payment of Interest; Defaulted Interest

 

(a)                                  The Securities of each series shall bear interest, if any, from the
date, and such interest shall be payable on the dates, established as
contemplated by Section 2.3.  The
person in whose name any Security of any series is registered at the close of
business on any Record Date applicable to a particular series with respect to
any interest payment date for such series shall be entitled to receive the
interest, if any, payable on such interest payment date notwithstanding any
transfer or exchange of such Security subsequent to the Record Date and prior
to such interest payment date, except if and to the extent the Company shall
default in the payment of the interest due on such interest payment date for
such series, in which case the provisions of Section 2.13(b) shall
apply.  The term Record Date
as used with respect to any interest payment date (except a date for payment of
defaulted interest) for the Securities of any series shall mean the date
specified as such in the terms of the Securities of such series established as
contemplated by Section 2.3, or, if no such date is so established, the
15th day next preceding such interest payment date, whether or not such Record
Date is a Business Day.

 

(b)                                 If the Company defaults in a payment of interest on the Securities, it
shall pay, or shall deposit with the Paying Agent money in immediately
available funds sufficient to pay, the defaulted interest plus (to the extent
lawful) any interest payable on the defaulted interest (as may be specified in
the terms thereof, established pursuant to Section 2.3) to the Persons who
are Holders on a subsequent special record date, which shall mean the 15th day
next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day.  At least 15 days before such special record
date, the Company shall mail to each Holder and to the Trustee a notice that
states the special record date, the payment date and the amount of defaulted
interest to be paid.

 

15

 

2.14                       Computation of Interest

 

Except as otherwise specified pursuant to Section 2.3
for Securities of any series, interest on the Securities of each series shall
be computed on the basis of a 360-day year of twelve 30-day months.

 

2.15                       Series May Include Tranches

 

A series of Securities may include one or more
tranches of Securities, including Securities issued in a Periodic
Offering.  The Securities of different
tranches may have one or more different terms, including authentication dates
and public offering prices, but all the Securities within each such tranche
shall have identical terms, including authentication date and public offering
price.  Notwithstanding any other
provision of this Indenture, with respect to Sections 2.2 (other than the
fourth paragraph thereof) through 2.4, 2.7, 2.8, 2.10, 3.1 through 3.5, 4.2,
7.1 through 7.14, 9.1 through 9.5 and 10.2, if any series of Securities
includes more than one tranche, all provisions of such Sections applicable to
any series of Securities shall be deemed equally applicable to each tranche of
any series of Securities in the same manner as though originally designated a
series unless otherwise provided with respect to such series or tranche
pursuant to Section 2.3.  In
particular, and without limiting the scope of the next preceding sentence, any
of the provisions of such Sections which provide for or permit action to be
taken with respect to a series of Securities shall also be deemed to provide
for and permit such action to be taken instead only with respect to Securities
of one or more tranches within that series (and such provisions shall be deemed
satisfied thereby), even if no comparable action is taken with respect to
Securities in the remaining tranches of that series.

 

2.16                       CUSIP and CINS Numbers

 

The Company in issuing the Securities may use CUSIP
and CINS numbers (if then generally in use), and the Trustee shall use CUSIP
numbers or CINS numbers, as the case may be, in notices of redemption or
exchange as a convenience to Holders and no representation shall be made as to
the correctness of such numbers either as printed on the Securities or as
contained in any notice of redemption or exchange.

 

3.                                     REDEMPTION

 

3.1                              Applicability of Article

 

Securities of any series that are redeemable before
their maturity shall be redeemable in accordance with their terms and (except
as otherwise specified as contemplated by Section 2.3 for Securities of
any series) in accordance with this Article 3.  The provisions of this Article 3 shall
be applicable to the Securities of any series, in whole but not in part, if,
with respect to such series:

 

(a)                                 the Company determines that, as a result of any change in or amendment
to the laws or any regulations or rulings promulgated thereunder of a Relevant
Taxing Jurisdiction, or any change in the application or official
interpretation of such laws, regulations or rulings, or any change in the
application or official interpretation of, or any execution of or amendment to,
any treaty or treaties affecting taxation to which any such jurisdiction is a
party, which change, execution or amendment becomes effective on or after the
issue date or such other date specified in the Securities of such series:

 

(i)                                    the Company would be required to pay Additional Amounts (as defined in Section 4.5)
with respect to such series of Securities on the next succeeding interest
payment date 

 

16

 

and the payment of such Additional Amounts cannot be
avoided by the use of reasonable measures available to the Company or the
Guarantor; or

 

(ii)                                 withholding tax has been or would be required to be withheld with
respect to interest income received or receivable by the Company directly from
the Guarantor (or any affiliate) and such withholding tax obligation cannot be
avoided by the use of reasonable measures available to the Company or the
Guarantor (or any affiliate); or

 

(b)                                the Company determines, based upon an opinion of independent counsel
selected by the Company that, as a result of any action taken by any
legislative body of, taxing authority of, or any action brought in a court of
competent jurisdiction in, a Relevant Taxing Jurisdiction (whether or not such
action was taken or brought with respect to the Company or the Guarantor),
which action is taken or brought on or after the issue date or such other date
specified in the Securities of such series, there is a substantial probability
that the circumstances described in subsection (a) above would exist;
provided, however, that no such notice of redemption may be given earlier than
90 days prior to the earliest date on which the Company would be obligated to
pay such Additional Amounts.  The Company
or the Guarantor will also pay to each Holder, or make available for payment to
each such Holder, on the redemption date any Additional Amounts resulting from
the payment of such redemption price.

 

3.2                              Notice of Redemption; Partial Redemptions

 

Prior to the delivery of any notice of redemption, the
Company or the Guarantor will deliver to the Trustee an Officer’s Certificate
stating that the Company is entitled to effect a redemption and setting forth a
statement of facts showing that the conditions precedent of the right so to
redeem have occurred.  Any notice of
redemption will be irrevocable once the Company delivers it to the Trustee.

 

Notice of redemption to the Holders of Securities of
any series to be redeemed as a whole or in part at the option of the Company
shall be given by mailing notice of such redemption by first class mail,
postage prepaid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to such Holders of Securities of such series at their last
addresses as they shall appear upon the Security Register of the Company.  Any notice that is mailed in the manner
herein provided shall be conclusively presumed to have been duly given, whether
or not the Holder receives the notice. 
Failure to give notice by mail, or any defect in the notice to the
Holder of any Security of a series designated for redemption as a whole or in
part, shall not affect the validity of the proceedings for the redemption of
any other Security of such series.

 

The notice of redemption to each such Holder shall
state:

 

(a)                                 the principal amount of each Security of such series held by such Holder
to be redeemed;

 

(b)                                the CUSIP or CINS numbers, as the case may be, of the Securities to be
redeemed;

 

(c)                                 the date fixed for redemption;

 

(d)                                the redemption price;

 

(e)                                 the place or places of payment;

 

(f)                                   that payment will be made upon presentation and surrender of such
Securities;

 

17

 

(g)                                that such redemption is pursuant to the mandatory or optional sinking
fund, or both, if such be the case;

 

(h)                                that interest accrued to the date fixed for redemption will be paid as
specified in such notice; and

 

(i)                                    that on and after said date interest thereon or on the portions thereof
to be redeemed will cease to accrue.

 

In case any Security of a series is to be redeemed in
part only, the notice of redemption shall state the portion of the principal
amount thereof to be redeemed and shall state that on and after the date fixed
for redemption, upon surrender of such Security, a new Security or Securities
of such series and tenor in principal amount equal to the unredeemed portion
thereof will be issued.

 

The notice of redemption of Securities of any series
to be redeemed at the option of the Company shall be given by the Company or,
at the Company’s written request delivered at least 15 days before the date
such notice is to be given (unless a shorter period shall be acceptable to the
Trustee), by the Trustee in the name and at the expense of the Company.

 

On or before 10:00 a.m., New York City time, on
the redemption date specified in the notice of redemption given as provided in
this Section 3.2, the Company will deposit with the Trustee or with one or
more Paying Agents (or, if the Company is acting as its own Paying Agent, set
aside, segregate and hold in trust as provided in Section 2.6) an amount
of money sufficient to redeem on the redemption date all the Securities of such
series so called for redemption at the appropriate redemption price, together
with accrued interest to the date fixed for redemption.  If all of the outstanding Securities of a
series are to be redeemed, the Company will deliver to the Trustee at least 45
days prior to the redemption date an Officer’s Certificate stating that all
such Securities are to be redeemed.

 

If less than all the outstanding Securities of a
series are to be redeemed, the Company will deliver to the Trustee at least 45
days prior to the redemption date an Officer’s Certificate stating the
aggregate principal amount of such Securities to be redeemed.  If less than all the Securities of a series
are to be redeemed, the Trustee shall select, pro rata,
by lot or in such manner as it and the Company shall deem appropriate and fair,
Securities of such series to be redeemed in whole or in part.  Securities may be redeemed in part in
multiples equal to the minimum authorized denomination for Securities of such
series or any multiple thereof.  The
Trustee shall promptly notify the Company and the Guarantor in writing of the
Securities of such series selected for redemption and, in the case of any
Securities of such series selected for partial redemption, the principal amount
thereof to be redeemed.  For all purposes
of this Indenture, unless the context otherwise requires, all provisions
relating to the redemption of Securities shall relate, in the case of any
Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.

 

3.3                              Payment of Securities Called for Redemption

 

If notice of redemption has been given as above
provided, the Securities or portions of Securities specified in such notice
shall become due and payable on the date and at the place stated in such notice
at the applicable redemption price, together with interest accrued to the date
fixed for redemption, and on and after such date (unless the Company shall
default in the payment of such Securities at the redemption price, together
with interest accrued to such date) interest on the Securities or portions of
Securities so called for redemption shall cease to accrue and, except as
provided in Sections 8.11 and 9.4, such Securities shall cease from and after
the date fixed for redemption to be entitled to any benefit 

 

18

 

under this Indenture, and the Holders thereof shall
have no right in respect of such Securities except the right to receive the
redemption price thereof and unpaid interest to the date fixed for redemption.

 

On presentation and surrender of such Securities at a
place of payment specified in the notice of redemption, such Securities shall
be paid and redeemed by the Company at the applicable redemption price,
together with interest accrued thereon to the redemption date; provided that
payment of interest becoming due on or prior to the redemption date shall be
payable to the Holders of such Securities registered as such on the relevant
Record Date subject to the terms and provisions of Sections 2.5 and 2.13
hereof.  If any Security called for
redemption shall not be so paid upon surrender thereof for redemption, the
Principal shall, until paid or duly provided for, bear interest from the date
fixed for redemption at the rate of interest or Yield to Maturity (in the case
of an Original Issue Discount Security) borne by such Security.

 

Upon presentation of any Security of any series
redeemed in part only, the Company shall execute and the Trustee shall
authenticate and make available for delivery to or on the order of the Holder
thereof, at the expense of the Company, a new Security or Securities of such
series and tenor, each having a Guarantee executed by the Guarantor endorsed
thereon, of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented.

 

3.4                              Exclusion of Certain Securities from Eligibility for Selection for
Redemption

 

Securities shall be excluded from eligibility for
selection for redemption if they are identified by registration and certificate
number in a written statement signed by an Officer of the Company and delivered
to the Trustee at least 60 days prior to the last date on which notice of
redemption may be given as being owned of record and beneficially, and not
pledged or hypothecated, by either (a) the Company, (b) the Guarantor
or (c) an entity specifically identified in such written statement as
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or the Guarantor.

 

3.5                              Mandatory and Optional Sinking Funds

 

The minimum amount of any sinking fund payment
provided for by the terms of the Securities of any series is herein referred to
as a mandatory sinking fund payment,
and any payment in excess of such minimum amount provided for by the terms of
the Securities of any series is herein referred to as an optional sinking fund payment.  The date on which a sinking fund payment is
to be made is herein referred to as the sinking
fund payment date.

 

In lieu of making all or any part of any mandatory
sinking fund payment with respect to any series of Securities in cash, the
Company may at its option (a) deliver to the Trustee Securities of such
series theretofore purchased or otherwise acquired (except through a mandatory
sinking fund payment) by the Company or receive credit for Securities of such
series (not previously so credited) theretofore purchased or otherwise acquired
(except as aforesaid) by the Company and delivered to the Trustee for
cancellation pursuant to Section 2.11, (b) receive credit for
optional sinking fund payments (not previously so credited) made pursuant to
this Section 3.5, or (c) receive credit for Securities of such series
(not previously so credited) redeemed by the Company through any optional
sinking fund payment.  Securities so
delivered or credited shall be received or credited by the Trustee at the
sinking fund redemption price specified in such Securities.

 

On or before the 60th day next preceding each sinking
fund payment date for any series, or such shorter period as shall be acceptable
to the Trustee, the Company will deliver to the Trustee an Officer’s 

 

19

 

Certificate (a) specifying the portion of the
mandatory sinking fund payment to be satisfied by payment of cash and the
portion to be satisfied by credit of specified Securities of such series and
the basis for such credit, (b) stating that none of the specified
Securities of such series has theretofore been so credited, (c) stating
that no Defaults in the payment of interest or Events of Default with respect
to such series have occurred (which have not been waived or cured) and are
continuing and (d) stating whether or not the Company intends to exercise
its right to make an optional sinking fund payment with respect to such series
and, if so, specifying the amount of such optional sinking fund payment which
the Company intends to pay on or before the next succeeding sinking fund
payment date.  Any Securities of such
series to be credited and required to be delivered to the Trustee in order for
the Company to be entitled to credit therefor as aforesaid that have not
theretofore been delivered to the Trustee shall be delivered for cancellation
pursuant to Section 2.11 to the Trustee with such Officer’s Certificate
(or reasonably promptly thereafter if acceptable to the Trustee).  Such Officer’s Certificate shall be
irrevocable and, upon its receipt by the Trustee, the Company shall become
unconditionally obligated to make all the cash payments or delivery of
Securities therein referred to, if any, on or before the next succeeding
sinking fund payment date.  Failure of
the Company, on or before any such 60th day, to deliver such Officer’s
Certificate and Securities specified in this paragraph, if any, shall not
constitute a default but shall constitute, on and as of such date, the
irrevocable election of the Company (i) that the mandatory sinking fund
payment for such series due on the next succeeding sinking fund payment date
shall be paid entirely in cash without the option to deliver or credit
Securities of such series in respect thereof and (ii) that the Company
will make no optional sinking fund payment with respect to such series as
provided in this Section 3.5.

 

If the sinking fund payment or payments (mandatory or
optional or both) to be made in cash on the next succeeding sinking fund
payment date plus any unused balance of any preceding sinking fund payments
made in cash shall exceed $50,000 (or a lesser sum if the Company shall so
request with respect to the Securities of any series), such cash shall be
applied on the next succeeding sinking fund payment date to the redemption of
Securities of such series at the sinking fund redemption price thereof together
with accrued interest thereon to the date fixed for redemption.  If such amount shall be $50,000 (or such
lesser sum) or less and the Company makes no such request then it shall be
carried over until a sum in excess of $50,000 (or such lesser sum) is
available.  The Trustee shall select, in
the manner provided in Section 3.2, for redemption on such sinking fund
payment date a sufficient principal amount of Securities of such series to
absorb said cash, as nearly as may be, and shall (if requested in writing by
the Company) inform the Company of the serial numbers of the Securities of such
series (or portions thereof) so selected. 
Securities shall be excluded from eligibility for redemption under this Section 3.5
if they are identified by registration and certificate number in an Officer’s
Certificate delivered to the Trustee at least 60 days prior to the sinking fund
payment date as being owned of record and beneficially, and not pledged or
hypothecated, by either (a) the Company, (b) the Guarantor or (c) an
entity specifically identified in such Officer’s Certificate as directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or the Guarantor. 
The Trustee, in the name and at the expense of the Company (or the
Company, if it shall so request the Trustee in writing) shall cause notice of
redemption of the Securities of such series to be given in substantially the
manner provided in Section 3.2 (and with the effect provided in Section 3.3)
for the redemption of Securities of such series in part at the option of the
Company.  The amount of any sinking fund
payments not so applied or allocated to the redemption of Securities of such
series shall be added to the next cash sinking fund payment for such series
and, together with such payment, shall be applied in accordance with the
provisions of this Section 3.5.  Any
and all sinking fund moneys held on the stated maturity date of the Securities
of any particular series (or earlier, if such maturity is accelerated), which
are not held for the payment or redemption of particular Securities of such
series shall be applied, 

 

20

 

together with other moneys, if necessary, sufficient
for the purpose, to the payment of the Principal of, and interest on, the
Securities of such series at maturity.

 

On or before 10:00 a.m., New York City time, on
each sinking fund payment date, the Company shall pay to the Trustee in cash or
shall otherwise provide for the payment of all interest accrued to the date
fixed for redemption on Securities to be redeemed on the next following sinking
fund payment date.  The Trustee shall not
redeem or cause to be redeemed any Securities of a series with sinking fund
moneys or mail any notice of redemption of Securities of such series by
operation of the sinking fund during the continuance of a Default in payment of
interest on such Securities or of any Event of Default except that, where the
mailing of notice of redemption of any Securities shall theretofore have been
made, the Trustee shall redeem or cause to be redeemed such Securities,
provided that it shall have received from the Company a sum sufficient for such
redemption.  Except as aforesaid, any
moneys in the sinking fund for such series at the time when any such Default or
Event of Default shall occur, and any moneys thereafter paid into the sinking
fund, shall, during the continuance of such default or Event of Default, be
deemed to have been collected under Article 7 and held for the payment of
all such Securities.  In case such Event
of Default shall have been waived as provided in Section 7.4 or the
Default cured on or before the 60th day preceding the sinking fund payment date
in any year, such moneys shall thereafter be applied on the next succeeding
sinking fund payment date in accordance with this Section 3.5 to the
redemption of such Securities.

 

4.                                     COVENANTS

 

4.1                              Payment of Securities

 

The Company shall pay the Principal of and interest on
and any Additional Amounts payable in respect of the Securities by 10:00 a.m.
on the dates and in the manner provided in the Securities and this
Indenture.  The interest on Securities
(together with any additional amounts payable pursuant to the terms of such
Securities) shall be payable only to the Holders thereof and at the option of
the Company may be paid by mailing checks for such interest payable to or upon
the written order of such Holders at their last addresses as they appear on the
Security Register.

 

Notwithstanding any provisions of this Indenture and
the Securities of any series to the contrary, if the Company and a Holder of
any Security so agree or if expressly provided pursuant to Section 2.3,
payments of interest on, and any portion of the Principal of, such Holder’s
Security (other than interest payable at maturity or on any redemption or
repayment date or the final payment of Principal on such Security) shall be
made by the Paying Agent, upon receipt from the Company of immediately
available funds by 11:00 a.m., New York City time (or such other time as
may be agreed to between the Company and the Paying Agent), directly to the
Holder of such Security (by Federal funds wire transfer or otherwise) if the
Holder has delivered written instructions to the Trustee 15 days prior to such
payment date requesting that such payment will be so made and designating the
bank account to which such payments shall be so made and in the case of
payments of Principal surrenders the same to the Trustee in exchange for a
Security or Securities aggregating the same principal amount as the unredeemed
principal amount of the Securities surrendered. 
The Trustee shall be entitled to rely on the last instruction delivered
by the Holder pursuant to this Section 4.1 unless a new instruction is
delivered 15 days prior to a payment date. 
The Company will indemnify and hold each of the Trustee and any Paying
Agent harmless against any loss, liability or expense (including attorneys’
fees) resulting from any act or omission to act on the part of the Company or
any such Holder in connection with any such agreement or from making any
payment in accordance with any such agreement.

 

21

 

The Company shall pay interest on overdue Principal,
and interest on overdue installments of interest, to the extent lawful, at the
rate per annum specified in the Securities.

 

4.2                              Maintenance of Office or Agency

 

The Company will maintain in the Borough of Manhattan,
The City of New York, an office or agency where Securities may be surrendered
for registration of transfer or exchange or for presentation for payment and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served; and the Guarantor will maintain in the
Borough of Manhattan, The City of New York, an office or agency where
Securities may be presented for payment under the Guarantees endorsed thereon
and where notices and demands to or upon the Guarantor in respect of the Guarantee
and this Indenture may be served.  The
Company and the Guarantor hereby initially designate the Corporate Trust Office
of the Trustee, located in the Borough of Manhattan, The City of New York, as
such office or agency of the Company and the Guarantor.  The Company and the Guarantor will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency.  If
at any time the Company or the Guarantor shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 11.2.

 

The Company and the Guarantor may also from time to
time designate one or more other offices or agencies where the Securities of
any series may be presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided that no such designation
or rescission shall in any manner relieve either the Company or the Guarantor
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York  for such
purposes.  The Company or the Guarantor,
as applicable, will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.

 

4.3                              Certificate to Trustee

 

Each of the Company and the Guarantor will furnish to
the Trustee annually, within 120 days after the end of each fiscal year (which
is December 31), a brief certificate (which need not contain the
statements required by Section 11.4) from its principal executive,
financial or accounting officer as to his or her knowledge of the compliance of
the Company or the Guarantor, as the case may be, with all conditions and
covenants under this Indenture (such compliance to be determined without regard
to any period of grace or requirement of notice provided under this Indenture)
and, in the event of any default specifying such default and the nature and
status thereof of which such person may have knowledge.

 

4.4                              Limitation on Liens

 

So long as any Securities are outstanding, neither the
Company nor the Guarantor shall create or have outstanding any mortgage,
pledge, lien, charge or other security interest (collectively, Liens) upon the whole or any part of its assets, present or
future (including any uncalled capital), in order to secure any existing or
future Relevant Indebtedness or to secure any guarantee or indemnity in respect
thereof without in any such case at the same time securing the Securities
equally and ratably with such Relevant Indebtedness (or any guarantee or
indemnity in respect thereof) or creating such other security as shall be
approved by the Company and/or the Guarantor (as the case may be) and by the
Holders of a majority in Principal (or, if any Securities are Original Issue
Discount Securities, such portion of the Principal as may then be accelerated
under Section 7.2) of the outstanding Securities of all series affected
(all such series voting as one class).

 

22

 

Such restrictions on Liens shall not apply to:

 

(a)                                 Liens arising by operation of law; or

 

(b)                                Liens on the assets of any Person existing at the time such Person is
merged with or into or amalgamated or consolidated with the Guarantor.

 

4.5                              Payment of Additional Amounts

 

All payments of Principal and interest in respect of
the Securities shall be free and clear of and without withholding or deduction
for  or on account of any and all present or future
taxes, duties, assessments or governmental charges of any nature imposed,
levied collected, withheld or assessed by or on behalf of (a) the
government of Switzerland or of any political subdivision of Switzerland or by
any authority or agency therein or thereof having the power to tax, (b) the
government of the jurisdiction of organization of the Company or of any
political subdivision or territory or possession of such jurisdiction or by any
authority or agency therein or thereof having the power to tax or (c) the
government of any jurisdiction from or through which a payment on a Security or
Guarantee is made or any political subdivision or territory or possession of
such jurisdiction or by any authority or agency therein or thereof having power
to tax (each jurisdiction listed in clauses (a), (b) and (c), a Relevant Taxing Jurisdiction and all such
taxes, duties, assessments or governmental charges collectively, Taxes), except to the extent such Taxes are required to be
withheld or deducted by law or by the interpretation or administration
thereof.  If either the Company or the
Guarantor is so required to withhold or deduct any amount for or on account of
Taxes from any payment made in respect of the Securities, the Company or the
Guarantor, as the case may be, shall pay such additional amounts (Additional Amounts) as may be necessary such that the net
amount received by each Holder (including such Additional Amounts) after such
withholding or deduction shall not be less than the amount such Holder would
have received if the Taxes had not been withheld or deducted; provided that no
Additional Amounts will be payable with respect to Taxes:

 

(a)                                 that would not have been imposed but for the existence of any present or
former connection between such Holder or beneficial owner of the Securities (or
between a fiduciary, settlor, beneficiary, member or shareholder of, or
possessor of a power over, such Holder or beneficial owner, if such Holder or
beneficial owner is an estate, trust, partnership or corporation) and a
Relevant Taxing Jurisdiction, including, without limitation, such Holder or
beneficial owner (or such fiduciary, settlor, beneficiary, member, shareholder
or possessor) being or having been a citizen or resident thereof or treated as
a resident thereof or domiciled thereof or a national thereof or being or
having been present or engaged in trade or business therein or having or having
had a permanent establishment therein;

 

(b)                                that are estate, inheritance, gift, sales, transfer, personal property,
wealth or similar taxes, duties, assessments or other governmental charges;

 

(c)                                 that are payable other than by withholding from payments of Principal of
or interest on the Securities;

 

(d)                                that would not have been imposed but for the failure of the applicable
recipient of such payment to make a declaration of non-residence or other
similar claim for exemption to the relevant tax authority or comply with any
certification, identification, information, documentation or other reporting
requirement to the extent such compliance is required by applicable law or
administrative practice or an applicable treaty as a precondition to exemption
from, or reduction in, the rate of deduction or withholding of such Taxes;

 

23

 

(e)                                 that are imposed on a payment to an individual or a residual entity and
are required to be made pursuant to (i) the European Council Directive
2003/48/EC (or any amendment thereof) on the taxation of savings income in the
form of interest payments (the EU Savings
Directive) or the agreement of October 26, 2004 entered into by
the EU and Switzerland on the taxation of savings income by way of a
withholding tax system and voluntary declaration in the case of transactions
between parties in the EU member states and Switzerland (the Agreement), or any law implementing or
complying with, or introduced in order to conform to, the EU Savings Directive
or the Agreement, or (ii) the Luxembourg law of December 23, 2005
relating to interest payments made or ascribed to or for the benefit of an
individual beneficial owner tax resident in Luxembourg (as amended);

 

(f)                                   that would not have been imposed but for the presentation of a Security
(where presentation is required) for payment on a date more than 30 days after
the date on which such payment first became due and payable or the date on
which payment thereof was duly provided for, whichever occurred later;

 

(g)                                to the extent the amount of Taxes could have been reduced if
presentation for payment of the relevant Securities had been made to a paying
agent other than the paying agent to which the presentation was made; or

 

(h)                                any combination of the foregoing clauses (a) through (g);

 

nor shall Additional Amounts be paid with respect to
any payment of the Principal of or interest on any Security to any such Holder
who is a fiduciary or a partnership or a beneficial owner who is other than the
sole beneficial owner of such payment to the extent a beneficiary or settlor
with respect to such fiduciary or a member of such partnership or a beneficial
owner would not have been entitled to such Additional Amounts had it been the
Holder of the Security.

 

The Company shall maintain, in respect of Securities
of each series outstanding, at least one Paying Agent located outside
Switzerland.  In the event that a Paying
Agent with respect to Securities of a particular series is maintained in any
member state of the European Union, the Company shall maintain a Paying Agent
in at least one member state that will not be obliged to withhold or deduct
taxes pursuant to the EU Savings Directive.

 

4.6                              Waiver of Certain Covenants

 

The Company or the Guarantor may omit in any
particular instance with respect to any series of Securities to comply with any
term, provision or condition set forth in Section 4.2 or Section 4.4
if before or after the time for such compliance the Holders of at least a
majority in principal amount of all outstanding Securities of such series
either waive such compliance in such instance or generally waive compliance
with such covenant or condition, but no such waiver shall extend to or affect
such covenant or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company or the
Guarantor and the duties of the Trustee in respect of any such term, provision
or condition shall remain in full force and effect.

 

4.7                              Calculation of Original Issue Discount

 

The Company shall direct the Trustee to prepare and file
any form required to be submitted by the Company with the Internal Revenue
Service and the Holders of the Securities relating to original issue discount,
including, without limitation, Form 1099-OID and Form 8281 or any
successor forms.  The 

 

24

 

Company shall provide to the Trustee on a timely basis
(and in no case later than 30 days before the relevant filing date), such
information as the Trustee reasonably requests to enable the Trustee to
complete such forms.  The Company shall
sign any forms prepared by the Trustee to the extent the Company is required to
sign such forms and the Trustee shall file such forms in a timely manner with
the appropriate persons following receipt thereof from the Company.

 

4.8                              Reports by the Company and the Guarantor

 

The Company and the Guarantor shall:

 

(a)                                 file with the Trustee, within 15 days after the Company or the
Guarantor, as the case may be, is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which
the Company or the Guarantor may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or,
if the Company or the Guarantor is not required to file information, documents
or reports pursuant to either of such Sections, then it will file with the
Trustee, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules and
regulations; provided that if the Company or the Guarantor fails to file with the
Trustee an annual report on Form 20-F by February 15 of each year, the Trustee
agrees that, on or about that date and without incurring any liability for
itself for the timely filing thereof, it may inform that Company or the
Guarantor, as the case may be, that the filing has not been received;

 

(b)                                file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company
and the Guarantor, as the case may be, with the conditions and covenants of
this Indenture as may be required from time to time by such rules and
regulations; and

 

(c)                                 transmit or cause to be transmitted by mail to the Holders, as their
names and addresses appear in the Security Register, within 30 days after the
filing thereof with the Trustee, in the manner and to the extent provided in Section 313(c) of
the Trust Indenture Act, such summaries of any information, documents and
reports required to be filed by the Company or the Guarantor, as the case may
be, pursuant to paragraphs (a) and (b) of this Section 4.8 as
may be required by rules and regulations prescribed from time to time by
the Commission; and the Trustee hereby agrees, solely for the convenience of
the Company or the Guarantor, as the case may be, that it shall, on behalf of
and at the expense of the Company, transmit any such documents or reports that
it receives from either of the Company or the Guarantor under this Section 4.8
to the Holders.

 

5.                                     CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE

 

5.1                              When the Company May Merge, Etc.

 

The Company shall not consolidate with, merge with or
into, or sell, lease, convey or otherwise dispose of all or substantially all
of its property and assets to (as an entirety or substantially as an entirety
in one transaction or a series of related transactions), any Person (other than
with or into the Guarantor) or permit any Person to merge with or into the
Company unless:

 

(a)                                 either (i) the Company shall be the continuing Person or (ii) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or that acquired or leased such property and assets of
the Company shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of the Company on all of the
Securities and under this Indenture;

 

25

 

(b)                                the continuing Person is organized and validly existing under the laws
of the jurisdiction of organization of the Company or Switzerland or is
organized and validly existing under the laws of a jurisdiction that is a
member country of the Organization for Economic Co-operation and Development
(or any successor thereto) and, if such continuing Person is not organized and
validly existing under the laws of the jurisdiction of organization of the
Company or Switzerland, such continuing Person shall agree in such supplemental
indenture to be bound by a covenant comparable to that described in Section 4.5
with respect to taxes imposed in the continuing Person’s jurisdiction of
organization, and such continuing Person shall benefit from a redemption option
comparable to that described in Article 3 in the event of changes in taxes
in such jurisdiction after the date of such consolidation, merger or sale, in
each case in form and substance satisfactory to the Trustee;

 

(c)                                 the Company shall have delivered to the Trustee an Officer’s
Certificate, and, if the Company shall not be the continuing Person, an Opinion
of Counsel, in each case stating that such consolidation, merger or transfer
and such supplemental indenture complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been complied
with and that such supplemental indenture constitutes the legal, valid and
binding obligation of the Company or such successor enforceable against such
Person in accordance with its terms, subject to customary exceptions; and

 

(d)                                the Company shall have delivered to the Trustee an Officer’s Certificate
to the effect that immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing.

 

5.2                              Successor Company Substituted

 

Upon any consolidation or merger, or any sale, lease,
conveyance or other disposition of all or substantially all of the property and
assets of the Company in accordance with Section 5.1 of this Indenture,
the successor Person formed by such consolidation or into which the Company is
merged or to which such sale, lease, conveyance or other disposition is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein.

 

5.3                              When the Guarantor May Merge, Etc.

 

The Guarantor shall not consolidate with, merge with
or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets to (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions), any Person (other than with or into the Company) or permit any
Person to merge with or into the Guarantor unless:

 

(a)                                 either (i) the Guarantor shall be the continuing Person or (ii) the
Person (if other than the Guarantor) formed by such consolidation or into which
the Guarantor is merged or that acquired or leased such property and assets of
the Guarantor shall expressly assume, by a supplemental indenture, executed and
delivered to the Company and to the Trustee, all of the obligations of the
Guarantor on the Guarantee and under this Indenture;

 

(b)                                the continuing Person is organized and validly existing under the laws
of the United States or Switzerland or is organized and validly existing under
the laws of a jurisdiction that is a member country of the Organization for
Economic Co-operation and Development (or any successor thereto) and, if such
continuing Person is not organized and validly existing under the laws of 

 

26

 

the United States or Switzerland, such continuing
Person shall agree in such supplemental indenture to be bound by a covenant
comparable to that described in Section 4.5 with respect to taxes imposed
in the continuing Person’s jurisdiction of organization, and such continuing
Person shall benefit from a redemption option comparable to that described in Article 3
in the event of changes in taxes in such jurisdiction after the date of such
consolidation, merger or sale, in each case in form and substance satisfactory
to the Trustee;

 

(c)                                 the Guarantor shall have delivered to the Trustee an Officer’s
Certificate, and, if the Guarantor shall not be the continuing Person, an
Opinion of Counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision and that
all conditions precedent provided for herein relating to such transaction have
been complied with and that such supplemental indenture constitutes the legal,
valid and binding obligation of the Guarantor or such successor enforceable
against such Person in accordance with its terms, subject to customary
exceptions; and

 

(d)                                the Guarantor shall have delivered to the Trustee an Officer’s
Certificate to the effect that immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.

 

5.4                              Successor Guarantor Substituted

 

Upon any consolidation or merger, or any sale, lease,
conveyance or other disposition of all or substantially all of the property and
assets of the Guarantor in accordance with Section 5.3 of this Indenture,
the successor Person formed by such consolidation or into which the Guarantor
is merged or to which such sale, lease, conveyance or other disposition is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Guarantor under this Indenture with the same effect as if such
successor Person had been named as the Guarantor herein.

 

6.                                     THE GUARANTEE

 

6.1                              Guarantee

 

The Guarantor by its execution of this Indenture
hereby agrees with each Holder of the Securities authenticated and delivered by
the Trustee, and with the Trustee, on behalf of each such Holder, to be
unconditionally bound by the terms and provisions of the Guarantee with respect
to such Securities and authorizes the Trustee to confirm such Guarantee to the
Holder of each such Security by its execution and delivery of each such
Security, with such Guarantee endorsed thereon, authenticated and delivered by
the Trustee.

 

The Guarantee to be endorsed on the Securities shall
be in substantially the form set forth below:

 

“GUARANTEE OF NOVARTIS AG

 

For value received, Novartis AG, a stock corporation (Aktiengesellschaft) incorporated under the laws of
Switzerland, having its principal executive offices at Lichtstrasse 35,
CH-4056, Basel, Switzerland (the Guarantor,
which term includes any Person as a successor Guarantor under the Indenture
referred to in the Security upon which this Guarantee is endorsed), hereby
fully and unconditionally guarantees to the Holder of the Security upon which
this Guarantee is endorsed and to the Trustee on behalf of each such Holder the
due and punctual payment of the Principal of, interest on and any Additional
Amounts payable in respect of such Security and the due and punctual payment of
the sinking fund or analogous 

 

27

 

payments referred to therein, if any, when and as the
same shall become due and payable, whether on the stated maturity date, by
declaration of acceleration, call for redemption or otherwise, according to the
terms thereof and of the Indenture referred to therein.  In case of the failure of [Novartis
Capital Corporation, a corporation organized under the laws of the State of
Delaware][Novartis Securities Investment Ltd., a limited liability company
organized under the laws of Bermuda][Novartis Finance S.A., a public limited
liability company (société anonyme)
incorporated under the laws of the Grand-Duchy of Luxembourg] (the Company, which term includes any
successor Person under such Indenture), to punctually make any such payment of
Principal, interest or Additional Amounts or any such sinking fund or analogous
payment, the Guarantor hereby agrees to cause any such payment to be made
punctually when and as the same shall become due and payable, whether on the
stated maturity date or by declaration of acceleration, call for redemption or
otherwise, and as if such payment were made by the Company.

 

The indebtedness evidenced by this Guarantee is ranked
equally and pari passu with all other unsecured and
unsubordinated indebtedness of the Guarantor.

 

The Guarantor hereby agrees that its obligations
hereunder shall be absolute and unconditional, irrespective of, and shall be
unaffected by, any invalidity, irregularity or unenforceability of such
Security or such Indenture, any failure to enforce the provisions of such
Security or such Indenture, or any waiver, modification or indulgence granted
to the Company with respect thereto, by the Holder of such Security or the
Trustee or any other circumstance that may otherwise constitute a legal or
equitable discharge of a guarantor; provided, however, that, notwithstanding
the foregoing, no such waiver, modification or indulgence shall, without the
consent of the Guarantor, increase the Principal of such Security, or increase
the interest rate thereon, or alter the stated maturity date thereof, or
increase the Principal of any Original Issue Discount Security that would be
due and payable upon a declaration of acceleration of the maturity thereof
pursuant to Article 7 of such Indenture. 
The Guarantor hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of merger or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest
or notice with respect to such Security or the indebtedness evidenced thereby
or with respect to any sinking fund or analogous payment required under such
Security and all demands whatsoever, and covenants that this Guarantee will not
be discharged except by payment in full of the Principal of, interest on and Additional
Amounts payable in respect of such Security. 
This Guarantee is a guarantee of payment and not of collection.

 

The Guarantor shall be subrogated to all rights of the
Holder of such Security and the Trustee against the Company in respect of any
amounts paid to such Holder by the Guarantor pursuant to the provisions of this
Guarantee; provided, however, that the Guarantor shall not be entitled to
enforce, or to receive any payments arising out of or based upon such right of
subrogation until the Principal of, interest on and Additional Amounts payable
in respect of all Securities of the same series issued under such Indenture
shall have been paid in full.

 

No reference herein to such Indenture and no provision
of such Indenture shall alter or impair the guarantees of the Guarantor, which
are absolute and unconditional, of the due and punctual payment of the
Principal of, interest on and Additional Amounts payable in respect of, and any
sinking fund or analogous payments with respect to, the Security upon which
this Guarantee is endorsed.

 

This Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication of such Security shall have
been manually executed by or on behalf of the Trustee under such Indenture.

 

28

 

All terms used in this Guarantee that are defined in
such Indenture shall have the meanings assigned to them in such Indenture.

 

This Guarantee shall be governed by and construed in
accordance with the laws of the State of New York.

 

IN WITNESS whereof, the Guarantor has
caused this Guarantee to be duly executed this
         th day of
              .

 

 

Novartis AG,

 

as the Guarantor

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title: ”

  	
   

  

 

7.                                     DEFAULT AND REMEDIES

 

7.1                              Events of Default

 

An Event of Default
shall mean any one of the following events with respect to the Securities of a
series:

 

(a)                                 default in the payment of all or any part of the Principal of any
Security of such series when the same becomes due and payable at maturity, upon
acceleration, redemption or mandatory repurchase, including as a sinking fund
installment, or otherwise, and such default continues for more than two
Business Days;

 

(b)                                default in the payment of any interest on or any Additional Amounts
payable in respect of any Security of such series when the same becomes due and
payable, and such default continues for a period of 30 days;

 

(c)                                 default or breach of any other covenant or agreement of the Company or
the Guarantor in this Indenture with respect to any Security of such series
(other than a covenant or agreement a default in whose performance or whose
breach is specifically dealt with elsewhere in this Section 7.1), and such
default or breach continues for a period of 90 days after there has been given
to the Company and the Guarantor by the Trustee or to the Company, the
Guarantor and the Trustee by the Holders of 25% or more in aggregate principal
amount of the Securities of such series a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a “Notice of Default” hereunder;

 

(d)                                (i) any Indebtedness of, or guaranteed by, the Company or the
Guarantor is not paid at its stated maturity or (as the case may be) within any
originally applicable grace period; or (ii) any such Indebtedness, or
guarantee, of the Company or the Guarantor (as the case may be) becomes due 

 

29

 

and payable prior to its stated maturity by reason of
an event of default (howsoever described); provided that (x) the amount of Indebtedness referred to in
sub-paragraph (i) and/or sub-paragraph (ii) above individually or in
the aggregate exceeds $150,000,000 (or its equivalent in any other currency or
currencies); and (y) there shall not be deemed to be a default (i) where
the Company or the Guarantor in good faith claims a right of set-off or
otherwise contests its obligations to pay or (ii) if such acceleration is
annulled or such payment or repayment is made within 10 days after there has
been given to the Company and the Guarantor by the Trustee or to the Company,
the Guarantor and the Trustee by the Holders of 25% or more in aggregate
principal amount of the Securities of such series a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a “Notice of Default” hereunder;

 

(e)                                 an encumbrancer or a receiver or a person with similar functions
appointed for execution (in Switzerland a Sachwalter
or Konkursverwalter and in Luxembourg, a commissaire, juge-commissaire, liquidateur
or curateur) taking
possession of the whole or any substantial part of the assets or undertaking of
the Company or the Guarantor or a distress, execution or other process being
levied or enforced upon or sued out against a substantial part of the property
or assets of the Company or the Guarantor and not being paid, discharged,
removed or stayed within 30 days;

 

(f)                                   the Company or the Guarantor stopping payment or ceasing business (except
in each case in circumstances previously approved by the Holders of a majority
in Principal (or, if any Securities are Original Issue Discount Securities,
such portion of the Principal of the Securities of the relevant series as may
then be accelerated under Section 7.2) of the outstanding Securities of
all series affected (all such series voting as one class);

 

(g)                                the Company becoming bankrupt or insolvent or entering into a moratorium
or making a general assignment for the benefit of its creditors including,
in relation to Novartis Finance S.A., bankruptcy (faillite),
insolvency, its voluntary or judicial liquidation (liquidation
volontaire ou judiciaire), reprieve from payment (sursis de paiement), controlled management (gestion contrôlée), and composition with creditors (concordat préventif de faillite);

 

(h)                                the Guarantor becoming bankrupt or insolvent (or is obliged to notify
the court of its financial situation in accordance with Article 725 (2) of
the Swiss Code of Obligations) or entering into a moratorium (Stundung) or making arrangements with its
creditors (Nachlassvertrag);

 

(i)                                    an order being made or a resolution passed for the winding-up or
dissolution of the Company or the Guarantor except a winding-up or dissolution,
the terms of such winding-up or dissolution having previously been approved by
the Holders of a majority in Principal (or, if any Securities are Original
Issue Discount Securities, such portion of the Principal of the Securities of
the relevant series as may then be accelerated under Section 7.2) of the
outstanding Securities of all series affected (all such series voting as one
class);

 

(j)                                    if the Guarantee with respect to the relevant series of Securities
ceases to be, or is claimed by the Guarantor not to be, in full force and effect;
or

 

(k)                                 any other Event of Default established pursuant to Section 2.3 with
respect to the Securities of such series occurs.

 

30

 

7.2                              Acceleration

 

(a)                                 If an Event of Default described in Section 7.1(a) or (b) with
respect to the Securities of any series then outstanding occurs and is
continuing, then, and in each and every such case, except for any series of
Securities the Principal of which shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate Principal
of the Securities of any such affected series then outstanding hereunder (each
such series treated as a separate class) by notice in writing to the Company
and to the Guarantor (and to the Trustee if given by Holders) may declare the
entire Principal (or, if the Securities of any such series are Original Issue
Discount Securities, such portion of the Principal as may be specified in the
terms of such series established pursuant to Section 2.3) of all
Securities of such affected series, and the interest accrued thereon, if any,
to be due and payable immediately, and upon any such declaration the same shall
become immediately due and payable.

 

(b)                                If an Event of Default described in Section 7.1(c) or (k) with
respect to the Securities of one or more but not all series then outstanding
occurs and is continuing, then, and in each and every such case, except for any
series of Securities the Principal of which shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
Principal (or, if the Securities of any such series are Original Issue Discount
Securities, the amount thereof that may be accelerated under this Section 7.2)
of the Securities of all such affected series then outstanding hereunder
(treated as a single class) by notice in writing to the Company and to the
Guarantor (and to the Trustee if given by Holders) may declare the entire
Principal (or, if the Securities of any such series are Original Issue Discount
Securities, such portion of the Principal as may be specified in the terms of
such series established pursuant to Section 2.3) of all Securities of all
such affected series, and the interest accrued thereon, if any, to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable.

 

(c)                                 If an Event of Default described in Section 7.1(d), or in Section 7.1(c) or
(k) with respect to the Securities of all series then outstanding, occurs
and is continuing, then, and in each and every such case, except for any series
of Securities the Principal of which shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate Principal
(or, if the Securities of any outstanding series are Original Issue Discount
Securities, the amount thereof that may be accelerated under this Section 7.2)
of all Securities of any series then outstanding hereunder (treated as a single
class) by notice in writing to the Company and to the Guarantor (and to the
Trustee if given by Holders) may declare the entire Principal (or, if the
Securities of any such series are Original Issue Discount Securities, such
portion of the Principal as may be specified in the terms of such series established
pursuant to Section 2.3) of all Securities of any series then outstanding,
and the interest accrued thereon, if any, to be due and payable immediately,
and upon any such declaration the same shall become immediately due and
payable.

 

(d)                                If an Event of Default described in Section 7.1(e) through (j) occurs
and is continuing, then the Principal (or, if any Securities are Original Issue
Discount Securities, such portion of the Principal as may be specified in the
terms thereof established pursuant to Section 2.3) of all the Securities
then outstanding and interest accrued thereon, if any, shall be and become
immediately due and payable, without any notice or other action by any Holder
or the Trustee, to the full extent permitted by applicable law.

 

The foregoing provisions, however, are subject to the
condition that if, at any time after the Principal (or, if the Securities are
Original Issue Discount Securities, such portion of the Principal as may be
specified in the terms thereof established pursuant to Section 2.3) of the
Securities of any series (or of all the Securities, as the case may be) shall
have been so declared due and payable, and before any judgment or decree for
the payment of the moneys due shall have been obtained or entered as hereinafter
provided, 

 

31

 

the Company or the Guarantor shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all the Securities of each such series (or of all the Securities,
as the case may be) and the Principal of any and all Securities of each such
series (or of all the Securities, as the case may be) that shall have become
due otherwise than by acceleration (with interest upon such Principal and, to
the extent that payment of such interest is enforceable under applicable law,
on overdue installments of interest, at the same rate as the rate of interest
or Yield to Maturity (in the case of Original Issue Discount Securities)
specified in the Securities of each such series to the date of such payment or
deposit) and such amount as shall be sufficient to cover all amounts owing to
the Trustee under Section 8.7, and if any and all Events of Default under
this Indenture, other than the non-payment of the Principal of Securities that
shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided herein, then and in every such case the Holders
of a majority in aggregate principal amount of all the then outstanding
Securities of all such series that have been accelerated (voting as a single
class), by written notice to the Company, to the Guarantor and to the Trustee,
may waive all defaults with respect to all such series (or with respect to all
the Securities, as the case may be) and rescind and annul such declaration and
its consequences, but no such waiver or rescission and annulment shall extend
to or shall affect any subsequent default or shall impair any right consequent
thereon.

 

For all purposes under this Indenture, if a portion of
the Principal of any Original Issue Discount Securities shall have been
accelerated and declared due and payable pursuant to the provisions hereof,
then, from and after such declaration, unless such declaration has been
rescinded and annulled, the Principal of such Original Issue Discount
Securities shall be deemed, for all purposes hereunder, to be such portion of
the Principal thereof as shall be due and payable as a result of such
acceleration, and payment of such portion of the Principal thereof as shall be
due and payable as a result of such acceleration, together with interest, if
any, thereon and all other amounts owing thereunder, shall constitute payment
in full of such Original Issue Discount Securities.

 

7.3                              Other Remedies

 

If a payment default or an Event of Default with
respect to the Securities of any series occurs and is continuing, the Trustee
may pursue, in its own name or as trustee of an express trust, any available
remedy by proceeding at law or in equity to collect the payment of Principal of
and interest on the Securities of such series or to enforce the performance of
any provision of the Securities of such series or this Indenture.

 

The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of them in the
proceeding.

 

7.4                              Waiver of Past Defaults

 

Subject to Sections 7.2, 7.7 and 10.2, the Holders of
at least a majority in principal amount (or, if the Securities are Original
Issue Discount Securities, the amount thereof that may be accelerated under Section 7.2)
of the outstanding Securities of all series affected (voting as a single
class), by notice to the Trustee, may waive an existing Default or Event of
Default with respect to the Securities of such series and its consequences,
except a Default in the payment of Principal of or interest on any Security as
specified in Section 7.1(a) or (b) or in respect of a covenant
or provision of this Indenture that cannot be modified or amended without the
consent of the Holder of each outstanding Security affected.  Upon any such waiver, such Default shall
cease to exist, and any Event of Default with respect to the Securities of such
series arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; 

 

32

 

but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.

 

7.5                              Control by Majority

 

Subject to Sections 8.1 and 8.2(e), the Holders of at
least a majority in aggregate principal amount (or, if any Securities are
Original Issue Discount Securities, the amount thereof that may be accelerated
under Section 7.2) of the outstanding Securities of all series affected
(voting as a single class) may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Securities of such series
by this Indenture; provided, that the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that may involve the
Trustee in personal liability or that the Trustee determines in good faith may
be unduly prejudicial to the rights of Holders not joining in the giving of
such direction; and provided further, that the Trustee may take any other
action it deems proper that is not inconsistent with any directions received
from Holders of Securities pursuant to this Section 7.5.

 

7.6                               Limitation on Suits

 

No Holder of any Security of any series may institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
Securities of such series, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:

 

(a)                                 such Holder has previously given to the Trustee written notice of a
continuing Event of Default with respect to the Securities of such series;

 

(b)                                the Holders of at least 25% in aggregate principal amount of outstanding
Securities of all such series affected shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;

 

(c)                                 such Holder or Holders have offered to the Trustee indemnity reasonably
satisfactory to the Trustee against any costs, liabilities or expenses to be
incurred in compliance with such request;

 

(d)                                the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and

 

(e)                                 during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Securities of all such affected series have
not given the Trustee a direction that is inconsistent with such written
request.

 

A Holder may not use this Indenture to prejudice the
rights of another Holder or to obtain a preference or priority over such other
Holder.

 

7.7                              Rights of Holder to Receive Payment

 

Notwithstanding any other provision of this Indenture,
the right of any Holder of a Security to receive payment of Principal of,
interest on or Additional Amounts payable in respect of such Holder’s Security
on or after the respective due dates expressed on such Security, or to bring
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.

 

33

 

7.8                              Collection Suit by Trustee

 

If an Event of Default with respect to the Securities
of any series in payment of Principal or interest specified in Section 7.1(a) or
(b) occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company and the Guarantor
for the whole amount (or such portion thereof as specified in the terms
established pursuant to Section 2.3 of Original Issue Discount Securities)
of Principal of, and accrued interest remaining unpaid on, together with
interest on overdue Principal of, and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest on, the
Securities of such series, in each case at the rate or Yield to Maturity (in
the case of Original Issue Discount Securities) specified in such Securities,
and such further amount as shall be sufficient to cover all amounts owing the
Trustee under Section 8.7.

 

7.9                              Trustee May File Proofs of Claim

 

The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for amounts due the Trustee under Section 8.7)
and the Holders allowed in any judicial proceedings relative to the Company (or
any other obligor on the Securities), the Guarantor, the creditors of the
Company or the Guarantor, or the property of the Company or the Guarantor and
shall be entitled and empowered to collect and receive any moneys, securities
or other property payable or deliverable upon conversion or exchange of the
Securities or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it under Section 8.7.  Nothing herein contained shall be deemed to
empower the Trustee to authorize or consent to, or accept or adopt on behalf of
any Holder, any plan of reorganization, arrangement, adjustment or composition
affecting the Securities, the Guarantee or the rights of any Holder under the
Securities or the Guarantee, or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.

 

7.10                       Application of Proceeds

 

Any moneys collected by the Trustee pursuant to this Article 7
in respect of the Securities of any series shall be applied in the following
order at the date or dates fixed by the Trustee and, in case of the
distribution of such moneys on account of Principal, interest or Additional
Amounts, if any, upon presentation of the several Securities in respect of
which moneys have been collected and noting thereon the payment, or issuing
Securities of such series and tenor in reduced principal amounts in exchange
for the presented Securities of such series and tenor if only partially paid,
or upon surrender thereof if fully paid:

 

(a)                                 To the payment of all amounts due the Trustee under Section 8.7
applicable to the Securities of such series in respect of which moneys have
been collected;

 

(b)                                In case the Principal of the Securities of such series in respect of
which moneys have been collected shall not have become and be then due and
payable, to the payment of interest on and Additional Amounts, if any, in
respect of the Securities of such series in default in the order of the
maturity of the installments of such interest and Additional Amounts, if any,
with interest (to the extent that such interest has been collected by the
Trustee) upon the overdue installments of interest and Additional Amounts, if
any, at the same rate as the rate of interest or Yield to Maturity (in the case
of Original Issue Discount Securities) specified in such Securities, such 

 

34

 

payments to be made ratably to the persons entitled
thereto, without discrimination or preference;

 

(c)                                 In case the Principal of the Securities of such series in respect of
which moneys have been collected shall have become and shall be then due and
payable, to the payment of the whole amount then owing and unpaid upon all the
Securities of such series for Principal, interest and Additional Amounts, if
any, with interest upon the overdue Principal, and (to the extent that such
interest has been collected by the Trustee) upon overdue installments of
interest at the same rate as the rate of interest or Yield to Maturity (in the
case of Original Issue Discount Securities) specified in the Securities of such
series; and in case such moneys shall be insufficient to pay in full the whole
amount so due and unpaid upon the Securities of such series, then to the
payment of such Principal and interest or Yield to Maturity, without preference
or priority of Principal over interest or Yield to Maturity, or of interest or
Yield to Maturity over Principal, or of any installment of interest over any
other installment of interest, or of any Security of such series over any other
Security of such series, ratably to the aggregate of such Principal and accrued
and unpaid interest or Yield to Maturity; and

 

(d)                                To the payment of the remainder, if any, to the Company, or to the
extent the Trustee collects any amount pursuant to the Guarantee, the
Guarantor, or any other person lawfully entitled thereto.

 

7.11                       Restoration of Rights and Remedies

 

If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then, and in every such
case, subject to any determination in such proceeding, the Company, the
Guarantor, the Trustee and the Holders shall be restored to their former
positions hereunder and thereafter all rights and remedies of the Company, the
Guarantor, Trustee and the Holders shall continue as though no such proceeding
had been instituted.

 

7.12                       Undertaking for Costs

 

In any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, in either case in respect to the Securities of any
series, a court may require any party litigant in such suit (other than the
Trustee) to file an undertaking to pay the costs of the suit, and the court may
assess reasonable costs, including reasonable attorneys’ fees and expenses,
against any party litigant (other than the Trustee) in the suit having due
regard to the merits and good faith of the claims or defenses made by the party
litigant.  This Section 7.12 does
not apply to a suit by a Holder pursuant to Section 7.7 or a suit by
Holders of more than 10% in principal amount of the outstanding Securities of
such series.

 

7.13                       Rights and Remedies Cumulative

 

Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or wrongfully taken
Securities in Section 2.8, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

 

35

 

7.14                       Delay or Omission Not Waiver

 

No delay or omission of the Trustee or of any Holder
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein.  Every right and
remedy given by this Article 7 or by law to the Trustee or to the Holders
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders, as the case may be.

 

8.                                     TRUSTEE

 

8.1                              General

 

The duties and responsibilities of the Trustee shall
be as provided by the Trust Indenture Act and as set forth herein.  Notwithstanding the foregoing, no provision
of this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.  Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Article 8.  The
Trustee, prior to the occurrence of an Event of Default of which a Responsible
Officer of the Trustee has actual knowledge and after the curing of all Events
of Default that may have occurred, undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.  If an Event of Default to the
actual knowledge of a Responsible Officer of the Trustee has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.

 

8.2                              Certain Rights of Trustee

 

Subject to Sections 315(a) through (d) of
the Trust Indenture Act:

 

(a)                                 the Trustee may conclusively rely and shall be fully protected in acting
or refraining from acting upon any Officer’s Certificate, Opinion of Counsel,
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to have
been signed or presented by the proper person or persons.  The Trustee need not investigate any fact or
matter stated in the document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled, following reasonable notice, to make
reasonable examination of the books, records and premises of the Company or the
Guarantor, as the case may be, personally or by agent or attorney at the sole
cost of the Company or the Guarantor, as the case may be, and shall incur no
liability or additional liability of any kind by reason of such inquiry or
investigation;

 

(b)                                before the Trustee acts or refrains from acting, it may require an
Officer’s Certificate and/or an Opinion of Counsel, which shall conform to Section 11.4.  The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such certificate
or opinion.  Subject to Section 8.1,
whenever in the administration of the trusts of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or established
prior to taking or 

 

36

 

omitting to take any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence or bad faith on the part of the Trustee, be
deemed to be conclusively proved and established by an Officer’s Certificate
delivered to the Trustee, and such certificate, in the absence of negligence or
bad faith on the part of the Trustee, shall be full warrant to the Trustee for
any action taken, suffered or omitted to be taken by it under the provisions of
this Indenture upon the faith thereof;

 

(c)                                 the Trustee may act through its attorneys, agents, custodians and
nominees not regularly in its employ and shall not be responsible for the
misconduct or negligence of any agent, attorney, custodian and nominee
appointed with due care; provided that the Trustee shall be required to
terminate any such agent, attorney, custodian or nominee if it has actual
knowledge of any failure by such Person to perform its delegated duties;

 

(d)                                any request, direction, order or demand of the Company or the Guarantor
mentioned herein shall be sufficiently evidenced by an Officer’s Certificate
(unless other evidence in respect thereof be herein specifically prescribed),
and any Board Resolution may be evidenced to the Trustee by a copy thereof
certified by the secretary or an assistant secretary of the Company or the
Guarantor, as the case may be;

 

(e)                                 the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Holders, unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such request, order
or direction;

 

(f)                                   the Trustee shall not be liable for any action it takes or omits to take
in good faith that it believes to be authorized or within its rights or powers
or for any action it takes or omits to take in accordance with the direction of
the Holders in accordance with Section 7.5 relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture;

 

(g)                                the Trustee may consult with counsel of its selection and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted to be taken
by it hereunder in good faith and in reliance thereon;

 

(h)                                prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, Officer’s Certificate, Opinion of Counsel, Board Resolution,
statement, instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, or other paper or
document unless requested in writing so to do by the Holders of not less than a
majority in aggregate principal amount of the Securities of all series affected
then outstanding;

 

(i)                                    the rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and each agent, custodian and other Person employed to act
hereunder; and

 

(j)                                    the Trustee may request that the Company and the Guarantor deliver an
Officer’s Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take 

 

37

 

specified actions pursuant to this Indenture, which
Officer’s Certificate may be signed by any person authorized to sign an Officer’s
Certificate, including any person specified as so authorized in any such
certificate previously delivered and not superseded.

 

8.3                              Individual Rights of Trustee

 

The Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company and the Guarantor with the same rights it would have if it were not the
Trustee.  Any Agent may do the same with like
rights.  However, the Trustee is subject
to Sections 310(b) and 311 of the Trust Indenture Act.

 

8.4                              Trustee’s Disclaimer

 

The recitals contained herein and in the Securities
(except the Trustee’s certificate of authentication) shall be taken as
statements of the Company or the Guarantor and not of the Trustee, and the
Trustee assumes no responsibility for the correctness of the same.  Neither the Trustee nor any of its agents
makes any representation as to the validity or adequacy of this Indenture, the
Securities or the Guarantees, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate Securities
and perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility on Form T-1 supplied to the Company are true and
accurate.  Neither the Trustee nor any of
its agents shall be accountable for the Company’s or the Guarantor’s use or
application of the proceeds from the Securities or for moneys paid over to the
Company or the Guarantor pursuant to the Indenture.

 

8.5                              Notice of Default

 

If any Default with respect to the Securities of any
series occurs and is continuing and if such Default is known to a Responsible
Officer of the Trustee, the Trustee shall give to each Holder of Securities of
such series notice of such Default within 90 days after it occurs in the manner
and to the extent provided in Section 313(c) of the Trust Indenture
Act, unless such Default shall have been cured or waived before the mailing or
publication of such notice; provided, however, that, except in the case of a
Default in the payment of the Principal of, interest on or any Additional
Amounts with respect to any Security of such Series, or in the payment of any
sinking fund installment with respect to Securities of such series, the Trustee
shall be fully protected in withholding such notice if and so long as the board
of directors, the executive committee or a trust committee of directors and/or
responsible officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders; and provided
further that in the case of any default or breach of the character specified in
Section 7.1(c) with respect to Securities of such series, no such
notice to Holders shall be given until at least 60 days after the occurrence
thereof.

 

8.6                              Reports by Trustee to Holders

 

(a)                                 Within 60 days after each
                   ,
beginning with 
                   ,
2008, the Trustee shall mail to each Holder as and to the extent provided in
Trust Indenture Act Section 313(c) a brief report dated as of such
                   ,
if required by Trust Indenture Act Section 313(a).

 

(b)                                The Trustee shall transmit by mail to all Holders, as their names and
addresses appear in the Security Register, a brief report with respect to the
character and amount of any advances (and if the Trustee elects so to state,
the circumstances surrounding the making thereof) made by the Trustee (as such)
since the date of the last report transmitted pursuant to Subsection (a) of
this Section 8.6 (or if no such report 

 

38

 

has yet been so transmitted, since the date of
execution of this Indenture) for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities, on property or funds
held or collected by it as Trustee and which it has not previously reported
pursuant to this Subsection, if such advances remaining unpaid at any time
aggregate 10% or more of the principal amount of the Securities of such series
outstanding at such time, such report to be transmitted within 90 days after
such time.

 

A copy of each such report made pursuant to this Section 8.6
shall, at the time of such transmission to the Holders, be filed by the Trustee
with each stock exchange upon which any Securities are listed, with the
Commission and with the Company.  The
Company will promptly notify the Trustee when any Securities are listed on any
exchange or delisted therefrom.

 

8.7                              Compensation and Indemnity

 

The Company, or failing which, the Guarantor, shall
pay to the Trustee such compensation as shall be agreed upon in writing from
time to time for its services.  The
compensation of the Trustee shall not be limited by any law on compensation of
a trustee of an express trust.  The
Company, or failing which, the Guarantor, shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by the Trustee (including the reasonable expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith.

 

The Company, or failing which, the Guarantor, shall
indemnify the Trustee for, and hold it harmless against, any loss, liability,
claim, damage or expense, including taxes (other than income taxes), incurred
by it without negligence or bad faith on its part arising out of or in
connection with the acceptance or administration of this Indenture and the
Securities or the issuance of the Securities or a series thereof or the trusts
hereunder and the performance of its duties under this Indenture and the
Securities, including the costs and expenses of defending itself against or
investigating any claim asserted by any Person or liability in connection with
the exercise or performance of any of its powers or duties under this Indenture
and the Securities or in connection with enforcing the provisions of this Section 8.7.

 

The obligations of the Company and the Guarantor under
this Section 8.7 to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture or the rejection or termination of this Indenture under bankruptcy,
insolvency or similar law or the earlier resignation or removal of the
Trustee.  Such additional indebtedness
shall be a senior claim to that of the Securities upon all property and funds
held or collected by the Trustee as such, except funds held in trust for the
benefit of the Holders of particular Securities, and the Securities are hereby
subordinated to such senior claim.  If
the Trustee renders services and incurs expenses following an Event of Default
under Section 7.1(g) or (h) hereof, the parties hereto and the
Holders by their acceptance of the Securities hereby agree that such expenses
are intended to constitute expenses of administration under any bankruptcy,
insolvency or similar law.

 

8.8                              Replacement of Trustee

 

A resignation or removal of the Trustee as Trustee
with respect to the Securities of any series and appointment of a successor
Trustee as Trustee with respect to the Securities of any series shall become
effective only upon the successor Trustee’s acceptance of appointment as
provided in this Section 8.8.

 

39

 

The Trustee may resign as Trustee with respect to the
Securities of any series at any time by so notifying the Company and the
Guarantor in writing.  The Holders of a
majority in principal amount of the outstanding Securities of any series may
remove the Trustee as Trustee with respect to the Securities of such series by
so notifying the Trustee in writing and may appoint a successor Trustee with
respect thereto with the consent of the Company.  The Company may remove the Trustee as Trustee
with respect to the Securities of any series if: (a) the Trustee is no
longer eligible under Section 8.10 of this Indenture; (b) the Trustee
is adjudged a bankrupt or insolvent; (c) a receiver or other public
officer takes charge of the Trustee or its property; or (d) the Trustee
becomes incapable of acting.

 

If the Trustee resigns or is removed as Trustee with
respect to the Securities of any series, or if a vacancy exists in the office
of Trustee with respect to the Securities of any series for any reason, the
Company shall promptly appoint a successor Trustee with respect thereto.  Within one year after the successor Trustee
takes office, the Holders of a majority in principal amount of the outstanding
Securities of such series may appoint a successor Trustee in respect of such
Securities to replace the successor Trustee appointed by the Company.  If the successor Trustee with respect to the
Securities of any series does not deliver its written acceptance required by
the next succeeding paragraph of this Section 8.8 within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee (at the Company’s
expense), the Company or the Holders of a majority in principal amount of the
outstanding Securities of such series may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect thereto.

 

A successor Trustee with respect to the Securities of
any series shall deliver a written acceptance of its appointment to the
retiring Trustee, to the Company and to the Guarantor.  Immediately after the delivery of such
written acceptance, subject to the lien provided for in Section 8.7 and
subject to the payment of any and all amounts then due and owing to the
retiring Trustee, (a) the retiring Trustee shall transfer all property
held by it as Trustee in respect of the Securities of such series to the
successor Trustee, (b) the resignation or removal of the retiring Trustee
in respect of the Securities of such series shall become effective and (c) the
successor Trustee shall have all the rights, powers and duties of the Trustee
in respect of the Securities of such series under this Indenture.  A successor Trustee shall mail notice of its
succession to each Holder of Securities of such series.

 

Upon request of any such successor Trustee, the
Company and the Guarantor shall execute any and all instruments for more fully
and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts referred to in the preceding paragraph.

 

The Company shall give notice of any resignation and
any removal of the Trustee with respect to the Securities of any series and
each appointment of a successor Trustee in respect of the Securities of such
series to all Holders of Securities of such series.  Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.  Notwithstanding replacement of the Trustee
with respect to the Securities of any series pursuant to this Section 8.8,
the Company’s and the Guarantor’s obligations under Section 8.7 shall
continue for the benefit of the retiring Trustee.

 

8.9                              Successor Trustee by Merger, Etc.

 

If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation or national banking association, the resulting, surviving
or transferee corporation or national banking association without any further
act shall be the successor Trustee with the same effect as if the successor
Trustee had been named as the Trustee herein; provided that such successor
Trustee shall be otherwise qualified and eligible under this Article 8.

 

40

 

8.10                       Eligibility

 

This Indenture shall always have a Trustee who
satisfies the requirements of Trust Indenture Act Section 310(a).  The Trustee shall have a combined capital and
surplus of at least $50,000,000 as set forth in its most recent published
annual report of condition.

 

8.11                       Money Held in Trust

 

The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company.  Money held in trust by the
Trustee need not be segregated from other funds except to the extent required
by law and except for money held in trust under Article 9 of this
Indenture.

 

8.12                       Conflicting Interests

 

If the Trustee has or shall acquire a conflicting
interest within the meaning of Section 310(b) of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.

 

8.13                       Communication by Holders with Other Holders

 

Holders may communicate pursuant to Section 312(b) of
the Trust Indenture Act with other Holders with respect to their rights under
this Indenture or the Securities.  The
Company, the Guarantor, the Trustee, the Registrar and anyone else shall have
the protection of Section 312(c) of the Trust Indenture Act with
respect to such communications.

 

9.                                     DISCHARGE OF INDENTURE; DEFEASANCE

 

9.1                              Discharge; Defeasance within One Year of Payment

 

Except as otherwise provided in this Section 9.1,
the Company or the Guarantor may terminate the obligations of the Company and
the Guarantor under the Securities of any series, the Guarantee and this
Indenture with respect to Securities of such series if:

 

(a)                                 all Securities of such series previously authenticated and delivered
(other than destroyed, lost or wrongfully taken Securities of such series that
have been replaced or paid or Securities of such series that are paid pursuant
to Section 4.1 or Securities of such series for whose payment money or
securities have theretofore been held in trust and thereafter repaid to the
Company or the Guarantor, as provided in Section 9.5) have been delivered
to the Trustee for cancellation and the Company (or the Guarantor pursuant to
the Guarantee) has paid all sums payable by it hereunder; or

 

(b)                                (i)                                     the Securities of such series mature within one year or all of them are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption;

 

(ii)                                the Company or the Guarantor irrevocably deposits in trust with the
Trustee, as trust funds solely for the benefit of the Holders of such
Securities for that purpose, money or U.S. Government Obligations or a
combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent 

 

41

 

public accountants expressed in a written
certification thereof delivered to the Trustee), without consideration of any
reinvestment, to pay the Principal of and interest on the Securities of such
series to maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder; and

 

(iii)                             the Company delivers to the Trustee an Officer’s Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent provided
for herein relating to the satisfaction and discharge of this Indenture with
respect to the Securities of such series have been complied with.

 

With respect to the foregoing clause (a), only the
Company’s and the Guarantor’s obligations under Section 8.7 in respect of
the Securities of such series shall survive. 
With respect to the foregoing clause (b), only the obligations of the
Company and the Guarantor in Sections 2.2 through 2.12, 4.2, 8.7, 8.8, 9.4 and
9.5, as applicable, in respect of the Securities of such series and the
Guarantee thereof shall survive until such Securities of such series are no
longer outstanding.  Thereafter, only the
obligations of the Company and the Guarantor in Sections 8.7, 9.4 and 9.5, as
applicable, in respect of the Securities of such series and the Guarantee
thereof shall survive.  After any such
irrevocable deposit, the Trustee upon written request shall acknowledge in
writing the discharge of the obligations of the Company and the Guarantor under
the Securities of such series, the Guarantee thereof and this Indenture with
respect to the Securities of such series except for those surviving obligations
specified above.

 

9.2                              Defeasance

 

Except as provided below, the Company will be deemed
to have paid, and the Company and the Guarantor will be discharged from any and
all obligations in respect of, the Securities of any series and the Guarantee
thereof, and the provisions of this Indenture will no longer be in effect with
respect to the Securities of such series and the Guarantee thereof (and the
Trustee, at the expense of the Company and the Guarantor, shall execute proper
instruments acknowledging the same), provided that the following conditions
shall have been satisfied:

 

(a)                                 the Company or the Guarantor has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the Securities
of such series, for payment of the Principal of, interest on and any Additional
Amounts payable in respect of the Securities of such series, money or U.S.
Government Obligations or a combination thereof sufficient (unless such funds
consist solely of money, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee) without consideration of any reinvestment and after
payment of all federal, state and local taxes or other charges and assessments
in respect thereof payable by the Trustee, to pay and discharge the Principal
of, interest on and any Additional Amounts payable in respect of the
outstanding Securities of such series to maturity or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee), as
the case may be;

 

(b)                                such deposit will not result in a breach or violation of, or constitute
a Default under, this Indenture or any other material agreement or instrument
to which the Company or the Guarantor, as the case may be, is a party or by
which it is bound;

 

(c)                                 no Default with respect to the Securities of such series shall have
occurred and be continuing on the date of such deposit;

 

42

 

(d)                                the Company shall have delivered to the Trustee either (i) a ruling
directed to the Trustee received from the Internal Revenue Service to the
effect that the Holders of the Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
discharge under this Section 9.2 and will be subject to federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred or (ii) an
Opinion of Counsel to the same effect as the ruling described in clause (i) above;
and

 

(e)                                 the Company has delivered to the Trustee an Officer’s Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent provided
for herein relating to the defeasance contemplated by this Section 9.2 of
the Securities of such series have been complied with.

 

The obligations of the Company and the Guarantor in
Sections 2.2 through 2.12, 4.2, 8.7, 8.8, 9.4 and 9.5, as applicable, with
respect to the Securities of such series and the Guarantee thereof shall
survive until such Securities are no longer outstanding.  Thereafter, only the obligations of the
Company and the Guarantor in Sections 8.7 and 9.5, as applicable, shall survive.

 

The defeasance of obligations in respect of Securities
of any series by the Company and the Guarantor under this Section 9.2
shall be effective notwithstanding any prior covenant defeasance in respect of
Securities of such series by the Company or the Guarantor under Section 9.3.

 

9.3                              Covenant Defeasance

 

The Company and the Guarantor may omit to comply with
the covenants in Sections 4.3, 4.4, 4.5, 5.1 and 5.3 and any other covenant
relating to such series provided for in a Board Resolution or supplemental
indenture pursuant to Section 2.3 that may by its terms be defeased
pursuant to this Section 9.3, and such omission shall be deemed not to be
an Event of Default under Section 7.1(c) or (g), with respect to the
outstanding Securities of a series if:

 

(a)                                 the Company or the Guarantor has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the Securities
of such series, for payment of the Principal of, interest on and any Additional
Amounts payable in respect of the Securities of such series, money or U.S.
Government Obligations or a combination thereof in an amount sufficient (unless
such funds consist solely of money, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification thereof
delivered to the Trustee) without consideration of any reinvestment and after
payment of all federal, state and local taxes or other charges and assessments
in respect thereof payable by the Trustee, to pay and discharge the Principal
of, interest on and any Additional Amounts payable in respect of the
outstanding Securities of such series to maturity or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee), as
the case may be;

 

(b)                                such deposit will not result in a breach or violation of, or constitute
a Default under, this Indenture or any other material agreement or instrument
to which the Company or the Guarantor, as the case may be, is a party or by
which it is bound;

 

(c)                                 no Default with respect to the Securities of such series shall have
occurred and be continuing on the date of such deposit;

 

(d)                                the Company shall have delivered to the Trustee either (i) a ruling
directed to the Trustee received from the Internal Revenue Service to the
effect that such Holders will not recognize 

 

43

 

income, gain or loss for federal income tax purposes
as a result of such deposit and covenant defeasance and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred or (ii) an Opinion of Counsel to the same effect as the ruling
described in clause (i) above; and

 

(e)                                 the Company has delivered to the Trustee an Officer’s Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent provided
for herein relating to the covenant defeasance contemplated by this Section 9.3
of the Securities of such series have been complied with.

 

9.4                              Application of Trust Money

 

Subject to Section 9.5, the Trustee or Paying
Agent shall hold in trust money or U.S. Government Obligations deposited with
it pursuant to Section 9.1, 9.2 or 9.3, as the case may be, in respect of
the Securities of any series and shall apply the deposited money and the
proceeds from deposited U.S. Government Obligations in accordance with the
Securities of such series and this Indenture to the payment of Principal of,
interest on and any Additional Amounts payable in respect of the Securities of
such series; but such money need not be segregated from other funds except to
the extent required by law.  The Company,
and failing which, the Guarantor, agrees to pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 9.1, 9.2 or
9.3 or the Principal or interest received in respect thereof other than any
such tax, fee or other charge that by law is for the account of the Holders of
outstanding Securities.

 

9.5                              Repayment to Company and Guarantor

 

Subject to Sections 8.7, 9.1, 9.2 and 9.3, the Trustee
and the Paying Agent shall promptly pay to the Company or to the Guarantor, as
the case may be, upon request set forth in an Officer’s Certificate any money
originally paid by a party making such request held by them at any time and not
required to make payments hereunder and thereupon shall be relieved from all
liability with respect to such money. 
The Trustee and the Paying Agent shall pay to the Company or to the
Guarantor, as the case may be, upon written request any money originally paid
by a party making such request held by them and required to make payments
hereunder that

 

(a)                                 remains unclaimed for two years; or

 

(b)                                in the opinion of a nationally recognized firm of independent public
accountants, expressed in a written certification thereof delivered to the
Trustee and Paying Agent, are in excess of the amount that would then be
required to be deposited to effect defeasance or covenant defeasance, as the
case may be, in accordance with this Article 9.

 

After payment to the Company or to the Guarantor,
Holders entitled to such money must look to the Company or to the Guarantor, as
the case may be, for payment as general creditors unless an applicable law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.

 

44

 

10.                              AMENDMENTS, SUPPLEMENTS AND WAIVERS

 

10.1                       Without Consent of Holders

 

The Company, the Guarantor and the Trustee may amend
or supplement this Indenture, the Guarantee or the Securities of any series
without notice to or the consent of any Holder:

 

(a)                                 to cure any ambiguity, defect or inconsistency in this Indenture; provided
that such amendments or supplements shall not materially and adversely affect
the interests of the Holders;

 

(b)                                to comply with Sections 5.1 and 5.3;

 

(c)                                 to comply with any requirements of the Commission in connection with the
qualification of this Indenture under the Trust Indenture Act;

 

(d)                                to evidence and provide for the acceptance of appointment hereunder with
respect to the Securities of any or all series by a successor Trustee;

 

(e)                                 to establish the form or forms or terms of Securities of any series or
of the coupons appertaining to such Securities as permitted by Section 2.3;

 

(f)                                   to provide for uncertificated Securities and to make all appropriate
changes for such purpose;

 

(g)                                to provide for a further guarantee from a third party on outstanding
Securities of any series and the Securities of any series that may be issued
under this Indenture;

 

(h)                                to change or eliminate any provision of this Indenture; provided that
any such change or elimination shall become effective only when there are no
outstanding Securities of any series created prior to the execution of such
supplemental indenture that is entitled to the benefit of such provision;

 

(i)                                    to supplement any of the provisions of this Indenture to such extent as
shall be necessary to permit or facilitate the defeasance and discharge of any
series of Securities pursuant to Sections 9.1, 9.2 and 9.3, provided that any
such action shall not adversely affect the interests of the Holders of such or
any other series of Securities in any material respect; or

 

(j)                                    to make any change that does not materially and adversely affect the
rights of any Holder.

 

10.2                       With Consent of Holders

 

Subject to Sections 7.4 and 7.7, without prior notice
to any Holders, the Company, the Guarantor and the Trustee may amend this
Indenture, the Guarantee and the Securities of any series with the written
consent of the Holders of a majority in Principal (or, if any Securities are
Original Issue Discount Securities, such portion of the Principal as may then
be accelerated under Section 7.2) of the outstanding Securities of all
series affected by such amendment (all such series voting as one class), and
the Holders of a majority in Principal (or, if any Securities are Original
Issue Discount Securities, such portion of the Principal as may then be
accelerated under Section 7.2) of the outstanding Securities of all series
affected thereby (all such series voting as one class) by written notice to the
Trustee may waive future compliance by the Company and the Guarantor with any provision
of this Indenture, the Guarantee or the Securities of such series.

 

45

 

Notwithstanding the provisions of this Section 10.2,
without the consent of each Holder affected thereby, an amendment or waiver,
including a waiver pursuant to Section 7.4, may not:

 

(a)                                 extend the stated maturity of the Principal of, or any sinking fund
obligation or any installment of interest on, such Holder’s Security, or reduce
the Principal thereof, the rate of interest thereon (including any amount in
respect of original issue discount), or the Additional Amounts payable in
respect thereof or adversely affect the rights of such Holder under any
mandatory redemption or repurchase provision or any right of redemption or
repurchase at the option of such Holder, or reduce the amount of the Principal
of an Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof pursuant to Section 7.2 or the amount
thereof provable in bankruptcy, insolvency or similar proceeding, or change any
place of payment where, or the currency in which, any Principal, interest thereon
or Additional Amounts payable in respect thereof is payable, modify any right
to convert or exchange such Holder’s Security for another security to the
detriment of the Holder, or impair the right to institute suit for the
enforcement of any such payment on or after the due date therefor;

 

(b)                                reduce the percentage in principal amount of outstanding Securities of
the relevant series the consent of whose Holders is required for any such
supplemental indenture, or for any waiver of compliance with certain provisions
of this Indenture or certain Defaults and their consequences provided for in
this Indenture, provided however, that this clause shall not be deemed to
require the consent of any Holder with respect to changes in the references to “the
Trustee” and concomitant changes in this Section 10.2;

 

(c)                                 waive a Default in the payment of Principal of or interest on any
Security of such Holder; or

 

(d)                                modify any of the provisions of this Section 10.2, except to
increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the Holder
of each outstanding Security affected thereby.

 

A supplemental indenture which changes or eliminates
any covenant or other provision of this Indenture which has expressly been
included solely for the benefit of one or more particular series of Securities,
or which modifies the rights of Holders of Securities of such series with
respect to such covenant or provision, shall be deemed not to affect the rights
under this Indenture of the Holders of Securities of any other series or of the
coupons appertaining to such Securities.

 

It shall not be necessary for the consent of any
Holder under this Section 10.2 to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.

 

After an amendment, supplement or waiver under this Section 10.2
becomes effective, the Company shall give to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver.  The Company will mail supplemental indentures
to Holders upon request.  Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.

 

The provisions of articles 86 to 94-8 of the Luxemburg
act dated August 10, 1985 on commercial companies, as amended, shall not
apply to the Securities of any series issued by Novartis Finance S.A.

 

46

 

10.3                       Revocation and Effect of Consent

 

Until an amendment or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the Security of the consenting Holder, even if notation of the
consent is not made on any Security. 
However, any such Holder or subsequent Holder may revoke the consent as
to its Security or portion of its Security. 
Such revocation shall be effective only if the Trustee receives the
notice of revocation before the date the amendment, supplement or waiver
becomes effective.  An amendment,
supplement or waiver shall become effective with respect to any Securities
affected thereby on receipt by the Trustee of written consents from the
requisite Holders of outstanding Securities affected thereby.

 

The Company may, but shall not be obligated to, fix a
record date (which may be not less than 10 nor more than 60 days prior to
the solicitation of consents) for the purpose of determining the Holders of the
Securities of any series affected entitled to consent to any amendment,
supplement or waiver.  If a record date
is fixed, then, notwithstanding the immediately preceding paragraph, those
Persons who were such Holders at such record date (or their duly designated
proxies) and only those Persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such Persons continue to be such Holders after such record date.  No such consent shall be valid or effective
for more than 90 days after such record date. 
After an amendment, supplement or waiver becomes effective with respect
to the Securities of any series affected thereby, it shall bind every Holder of
such Securities unless it is of the type described in any of clauses (a) through
(d) of Section 10.2.  In case
of an amendment or waiver of the type described in clauses (a) through (d) of
Section 10.2, the amendment or waiver shall bind each such Holder who has
consented to it and every subsequent Holder of a Security that evidences the
same indebtedness as the Security of the consenting Holder.

 

10.4                       Notation on or Exchange of Securities

 

If an amendment, supplement or waiver changes the
terms of any Security, the Trustee may require the Holder thereof to deliver it
to the Trustee.  The Trustee may place an
appropriate notation on the Security about the changed terms and return it to
the Holder and the Trustee may place an appropriate notation on any Security of
such series thereafter authenticated. 
Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security of the same series and tenor that reflects the changed terms.

 

10.5                       Trustee to Sign Amendments, Etc.

 

The Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating that the
execution of any amendment, supplement or waiver authorized pursuant to this Article 10
is authorized or permitted by this Indenture, stating that all requisite
consents have been obtained or that no consents are required and stating that
such supplemental indenture constitutes the legal, valid and binding obligation
of the Company and the Guarantor, enforceable against the Company and the
Guarantor in accordance with its terms, subject to customary exceptions.  Subject to the preceding sentence, the
Trustee shall sign such amendment, supplement or waiver if the same does not
adversely affect the rights of the Trustee. 
The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee’s own rights, duties
or immunities under this Indenture or otherwise.

 

47

 

10.6                       Conformity with Trust Indenture Act

 

Every supplemental indenture executed pursuant to this
Article 10 shall conform to the requirements of the Trust Indenture Act as
then in effect.

 

11.                              MISCELLANEOUS

 

11.1                       Trust Indenture Act of 1939

 

This Indenture shall incorporate and be governed by
the provisions of the Trust Indenture Act that are required to be part of and
to govern indentures qualified under the Trust Indenture Act.

 

11.2                       Notices

 

Any notice or communication shall be sufficiently
given if written and (a) if delivered in person, when received or (b) if
mailed by first class mail, five days after mailing, or (c) as between any
two of the Company, the Guarantor and the Trustee if sent by facsimile
transmission, when transmission is confirmed, in each case addressed as
follows:

 

if to the Company, as applicable, either to:

 

Novartis Capital Corporation

608
Fifth Avenue

New
York, New York 10020

 

	
  Telephone No.:

  	
  +1 212 307
  1122

  
	
  Facsimile No.:

  	
  +1 212 957
  8367

  
	
  Attention:

  	
  Company
  Secretary

  

 

or

 

Novartis Securities Investment Ltd.

131
Front Street

Hamilton,
HM 12, Bermuda

 

	
  Telephone No.:

  	
  +1 441 296 8025

  
	
  Facsimile No.:

  	
  +1 441 296 5083

  
	
  Attention:

  	
  Chairman of the Board of Directors

  

 

or

 

Novartis Finance S.A.

20,
rue Eugène Ruppert

L-2453
Luxembourg, Luxembourg

 

	
  Telephone No.:

  	
  +352 26 29 42 01

  
	
  Facsimile No.:

  	
  +352 26 29
  42 30

  
	
  Attention:

  	
  Chairman of the Board of Directors

  

 

48

 

in each case with a copy to the Guarantor at the
address indicated below

 

if to the Guarantor:

 

Novartis AG

Lichtstrasse
35

4056
Basel, Switzerland

 

	
  Telephone No.:

  	
  +41 61 324 1111

  
	
  Facsimile No.:

  	
  +41 61 324
  7826

  
	
  Attention:

  	
  Group General Counsel

  

 

if to the Trustee:

 

HSBC
Bank USA, National Association

452
Fifth Avenue

New
York, New York 10018

 

	
  Telephone No.:

  	
  +1 212 525 1363

  
	
  Facsimile No.:

  	
  +1 212 525 1300

  
	
  Attention:

  	
  Corporate Trust and Loan Agency

  

 

The Company, the Guarantor or the Trustee by written notice
to the other may designate additional or different addresses for subsequent
notices or communications.

 

Any notice or communication shall be sufficiently
given to Holders of Securities by mailing to such Holders at their addresses as
they shall appear on the Security Register. 
Notice mailed shall be sufficiently given if so mailed within the time
prescribed.  Copies of any such
communication or notice to a Holder shall also be mailed to the Trustee and
each Agent at the same time.

 

Failure to mail a notice or communication to a Holder
or any defect in it shall not affect its sufficiency with respect to other
Holders.  Except as otherwise provided in
this Indenture, if a notice or communication is mailed in the manner provided
in this Section 11.2, it is duly given, whether or not the addressee
receives it.

 

Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice.  Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.

 

In case it shall be impracticable to give notice as
herein contemplated, then such notification as shall be made with the approval
of the Trustee shall constitute a sufficient notification for every purpose
hereunder.

 

11.3                       Certificate and Opinion as to Conditions Precedent

 

Upon any request or application by the Company or the
Guarantor to the Trustee to take any action under this Indenture, the Company
or the Guarantor, as the case may be, shall furnish to the Trustee:

 

49

 

(a)                                 an Officer’s Certificate stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and

 

(b)                                an Opinion of Counsel stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.

 

11.4                       Statements Required in Certificate or Opinion

 

Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall include:

 

(a)                                 a statement that each person signing such certificate or opinion has
read such covenant or condition and the definitions herein relating thereto;

 

(b)                                a brief statement as to the nature and scope of the examination or
investigation upon which the statement or opinion contained in such certificate
or opinion is based;

 

(c)                                 a statement that, in the opinion of each such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

 

(d)                                a statement as to whether or not, in the opinion of each such person,
such condition or covenant has been complied with; provided, however, that,
with respect to matters of fact, an Opinion of Counsel may rely on an Officer’s
Certificate or certificates of public officials.

 

11.5                       Evidence of Ownership

 

The Company, the Guarantor, the Trustee and any agent
of the Company, the Guarantor, or the Trustee may deem and treat the person in
whose name any Security shall be registered upon the Security Register for such
series as the absolute owner of such Security (whether or not such Security
shall be overdue and notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on account of the Principal
of and, subject to the provisions of this Indenture, interest on such Security
and for all other purposes; and neither the Company, the Guarantor, the Trustee
nor any agent of the Company, the Guarantor or the Trustee shall be affected by
any notice to the contrary.

 

11.6                       Rules by Trustee, Paying Agent or Registrar

 

The Trustee may make reasonable rules for action
by or at a meeting of Holders.  The
Paying Agent or Registrar may make reasonable rules for its functions.

 

11.7                       Payment Date other than a Business Day

 

If any date for payment of Principal or interest on
any Security shall not be a Business Day at any place of payment, then payment
of Principal of or interest on such Security, as the case may be, need not be
made on such date, but may be made on the next succeeding Business Day at any
place of payment with the same force and effect as if made on such date and no
interest shall accrue in respect of such payment for the period from and after
such date.

 

50

 

11.8                       Governing Law; Waiver of Jury Trial

 

The laws of the State of New York shall govern this
Indenture, the Guarantee and the Securities. 
Each of the Company, the Guarantor and the Trustee hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Indenture, the Securities or the transactions contemplated hereby.

 

11.9                       No Adverse Interpretation of Other Agreements

 

This Indenture may not be used to interpret another
indenture or loan or debt agreement of the Company, the Guarantor or any
Subsidiary of the Company or the Guarantor. 
Any such indenture or agreement may not be used to interpret this
Indenture.

 

11.10                Successors

 

All agreements of the Company and the Guarantor in
this Indenture, the Guarantee and the Securities shall bind its
successors.  All agreements of the
Trustee in this Indenture shall bind its successors.

 

11.11                Duplicate
Originals

 

The parties may sign any number of copies of this
Indenture.  Each signed copy shall be an
original, but all of them together represent the same agreement.

 

11.12                Separability

 

In case any provision in this Indenture or in the
Securities shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

 

11.13                Table
of Contents, Headings, Etc.

 

The Table of Contents and headings of the Articles and
Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms and provisions hereof.

 

11.14                Incorporators,
Stockholders, Officers and Directors of Company Exempt from Individual
Liability

 

No recourse under or upon any obligation, covenant or
agreement contained in this Indenture or any indenture supplemental hereto, or
in any Security or any coupons appertaining thereto, or because of any
indebtedness evidenced thereby, shall be had against any incorporator, as such,
or against any past, present or future stockholder, officer, director or
employee, as such, of the Company, of the Guarantor or of any successor, either
directly or through the Company, the Guarantor or any successor, under any rule of
law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of the
Securities and the coupons appertaining thereto by the holders thereof and as
part of the consideration for the issue of the Securities and the coupons
appertaining thereto.

 

51

 

11.15                Judgment
Currency

 

The Company and the Guarantor severally agree, to the
fullest extent that they may effectively do so under applicable law, that (a) if
for the purpose of obtaining judgment in any court it is necessary to convert
the sum due in respect of the Principal of or interest on the Securities of any
series (the Required Currency) into a currency
in which a judgment will be rendered (the Judgment Currency),
the rate of exchange used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase in The City of New York the
Required Currency with the Judgment Currency on the day on which final
unappealable judgment is entered, unless such day is not a Business Day in The
City of New York, then, to the extent permitted by applicable law, the rate of
exchange used shall be the rate at which in accordance with normal banking
procedures the Trustee could purchase in The City of New York the Required
Currency with the Judgment Currency on the Business Day in The City of New York
preceding the day on which a final unappealable judgment is entered and (b) their
obligations under this Indenture to make payments in the Required Currency (i) shall
not be discharged or satisfied by any tender, or any recovery pursuant to any
judgment (whether or not entered in accordance with subsection (a)), in any
currency other than the Required Currency, except to the extent that such
tender or recovery shall result in the actual receipt, by the payee, of the
full amount of the Required Currency expressed to be payable in respect of such
payments, (ii) shall be enforceable as an alternative or additional cause
of action for the purpose of recovering in the Required Currency the amount, if
any, by which such actual receipt shall fall short of the full amount of the
Required Currency so expressed to be payable and (iii) shall not be
affected by judgment being obtained for any other sum due under this Indenture.

 

IN WITNESS whereof, the parties hereto
have caused this Indenture to be duly executed, all as of the date first
written above.

 

52

 

SIGNATORIES

 

	
  Novartis Capital Corporation,

  	
   

  
	
  as Issuer

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Novartis Securities Investment
  Ltd.,

  	
   

  
	
  as Issuer

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Novartis Finance S.A.,

  	
   

  
	
  as Issuer

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

1

 

	
  Novartis AG,

  	
   

  
	
  as Guarantor

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HSBC Bank USA, National
  Association,

  	
   

  
	
  as Trustee

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

2

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