Slide 1

How Project Management can add value to contract negotiations Lessons Learned from a clean up project Robert Gallmann, Senior Legal Counsel NOVARTIS Pharma AG

Slide 2

Waste water treatment plant operated by JV in France (red circle) Plant lies on the border of Switzerland in short distance to the Novartis Campus (orange circle) as well as the city of Basel and the river Rhine.

Slide 3

Plant was built on an site polluted with a pesticide called lindane Lindane is a highly toxic and cancerogene substance. Original polluter went bankrupt

Slide 4

Decision to shut down the plant and have the site cleaned up by a consortium of contractors. Approx 200000 m 3 of earth need to be removed and treated, cost exceed EUR 100 Mio. Contract had to be drafted, negotiated and signed within less than three months.

Slide 5

A Remediation / Clean of a site is an unique, complex and long term project involving various business functions and external contractors, subcontractors and providers. It is therefore key to apply project management techniques: Phase 1 Initiation & Analysis Risk Assessment Phase 2 Plannning & Organization Contract Drafting Phase 3 Coordination & Execution Contract Negotiations Phase 4 Completion & Controlling Contract Execution

Slide 6

Phase 1 - Risk Management 6 | Robert Gallmann REFS Lunch & Learn - Business Use Only What may go wrong, will go wrong Fully understand risks of project and potential scenarios (e.g. hazardous risks and potential emissions of lindane). Be aware of cross border aspects (different laws & jurisdictions) and interfaces between different contractors/subcontractors. Evaluate risk scenarios in terms of potential impact and probability Look for ways to avoid, prevent or mitigate the risks

Slide 7

Contents Whats this layout for? Formatting for contents slide this slide has slightly different spacing between lines to emphasise topics Risk Impact Frequent (10% - 100%) Often (1% - 10%) Probability Occasionally (0.1% - 1%) Seldom (0.01% 0.1%) Unlikely (0.001% 0.01%) Almost impossible (0.0001% - 0.0010%) Low USD 5 Mio Risk List of possible risk scenarios: operational/technical, financial, legal/compliance, reputational strategic risks Example 1 Analysis and Evaluation of risks

Slide 8

Phase 2 - Contract Drafting 8 Who fails to plan, plans to fail Early involvement of all stakeholders is key form project team Assing role and responsibilities of team members - make sure you get buy-in Agree on clear objectives and measurable deliverables of project draft contract reflecting objectives, deliverables and risks Plan negotiation roadmap, organize ressources and ensure availabilities of functional leads | Robert Gallmann REFS Lunch & Learn - Business Use Only

Slide 9

9 Contractor to send comments to first draft contract forward to complete team July 10, 2014 First round of face-to-face negotiations with Contractor(s) (full day / complete team) Novartis to send second draft contract with remaining comments to Contractor July 16, 2014 Second Round of face-to-face negotiations with Contractor(s) (full day / complete team) Novartis to send third draft contract with remaining comments to Contractor July 23, 2014 Final round of face-to-face negotiations with Contractor(s) (full day / complete team) Contract approval & signing* Alignement Meeting of Negotiation Team Week 28 July 7.-11. Week 29 July 14.-18. Week 30 July 21-25. Week 27 July 4. Robert Gallmann REFS Lunch & Learn - Business Use Only Example 2 - Negotiation Roadmap

Slide 10

Phase 3 - Contract Negotiations 10 | Robert Gallmann REFS Lunch & Learn - Business Use Only Leadership is action, not position Address also uncomfortable topics such as liabilities, dispute resolution and exit strategy (termination for cause & convenience, obligations of parties in case of termination etc.) align and coordinate internal position Make sure that each function appoints a functional lead who is empowered to take decisions All functional lead must assume responsibility for result of negotiations and sign-off final contract (approval procedure)

Slide 11

| Presentation Title | Presenter Name | Date | Subject | Business Use Only11 Example 3 - Contract Sign-off / internal Approval

Slide 12

Phase 4 - Contract Execution 12 | Robert Gallmann REFS Lunch & Learn - Business Use Only Dont declare victory too early Monitor contract execution & control deliverables Set up a claims management team Continue to manage risks after contract signing Dont ignore problems - address issues immediately

Slide 13

Project Manager Liaision to Authorities Finance Project Lead HSE LegalCommunication STEERING COMMITTEE Consortium General Planner Claims Management Example 4 Project Organization